Is Starting a Company a Financial Risk?

person in suit reading paper about business

Many people are afraid to start their own company because they think that it is riskier than having a steady paycheck week to week. If the company’s income decreases by 50%, you lose half your money, right?

Actually, no. Most business owners that lose 50% of their income to the business lay off employees because they no longer have work for them to do. The owner makes the same amount of money or even more, because they now have a more efficient business. Even if the market significantly changes, your income as the business owner is practically guaranteed. This is only one of several reasons why starting your own business is a financially safer move than working for someone else.

Banks Love Giving Loans to Businesses

Banks want to give good loans that they know will be repaid. For this reason, banks prefer giving loans to businesses over individuals. This is because an individual worker or employee is financially riskier than a business.

Things can happen to individuals—maybe a loved one falls ill, and they need to move states. These things don’t happen with businesses. Even if a company loses people, a business has a strong tendency to just continue forward. This is why a bank is much more willing to invest in a business.

Think about your capacity versus a business’s capacity to make income. The banks know that businesses are better investments than individuals. But if you don’t believe me, let’s look at an example.

Client Example of the Benefits of Business Ownership

When one of my clients started owning a business, he had no idea what kind of money his company was going to make for that whole month. He knew that he would probably sell some product, but he didn’t know how much or what type of profit he could expect.

You would think if you were just starting as an entrepreneur, this would be extremely anxiety-provoking because as a W2 salaried employee, you’re guaranteed to make the same amount of money every month. However, this “guarantee” is actually an illusion. There is a habit and a pattern in salaried work that you can count on, but there is also a habit and pattern that you can count on in owning a business.

My client’s company made $24,893.00 in that month. That number grew over the next three years until in 2020, his business was making $2 million. This is not a miracle story. Nobody expects for this to happen, especially when you do not have experience owning or starting a business. But these stories happen regularly—all it takes is the faith to set aside societal illusions that tell you owning a business is a risk. Have no fear about starting a business right now.