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Small Business Disadvantages

Financial risk

The financial resources needed to start and grow a business can be extensive. You may invest most of your savings or even go into debt to get started. If things don’t go well, you may face substantial financial loss. In addition, there’s no guaranteed income. Especially in the early years, the business doesn't generate enough cash to live on.


As a business owner, you are the business. You have to take care of competition, employees, bills, equipment breakdowns, customer problems....

They have less brand recognition

Brands like Coca-Cola and Nike are known nearly everywhere in the world. A small company won’t have the brand recognition it requires to easily gain more customers. Larger businesses enjoy this recognition, and can even increase it.

Their reputation must be developed from scratch and go through several growing pains before reaching anywhere near the level of a large business, which has already established its reputation.

They experience higher costs

They have lower bargaining power than the big players. This hampers their ability to lower the unit costs of their products. A large company does not face this problem.

Bad reviews can quickly become a risk

One of the best advertisements of your business is the Word of Mouth. Word of Mouth advertising is free, and incredibly effective. On the other side, a bad review can be the deciding factor when potential customers are not sure if they want to buy from you or from a competitor. So it can cost you a lot.

They have smaller budgets

They are typically faced by budget hurdles. They can’t afford the levels of research, marketing, and technology that large businesses enjoy.

They cannot compete on price

They cannot compete for prices with the big players. They are forced to charge higher prices.

Think twice before you start or run a Small Business if:

  • You do not work independently
  • When you risk yourself, your family, or your property
  • You are dependent on payments which you no longer receive as an entrepreneur
  • You are foreign to the industry
  • You want to trade common goods that are readily available everywhere
  • Your business model depends on advertising or sales on third-party platforms on the Internet