Why the Stress?
Being a small business owner creates a great deal of freedom, but that freedom comes with some cost. There are various ways to define the difficulties small business owners confront, but the term stress manages to cover a fair bit of the disadvantages small business owners face.
Risk and Return
As the sole owner and operator, all of the risk and all of the return rests on the shoulders of the small business owner. As a result, the small business owner has greater control of the process, but faces much greater consequences for failure and a higher vulnerability to chance. The upsides are higher, the downsides are lower. This basic principle of risk and return can generate a great deal of stress for people aiming high in their own start up ventures.
To be slightly more specific, Frank Knight and Peter Drucker define entrepreneurship in terms of risk-taking. They point out three types of uncertainty encountered by start up owners:
- Risk - Measured statistically and often planned for, risks are simply the probabilities of unfavorable outcomes compared to the desired objectives.
- Ambiguity - A risk that is not measurable, ambiguity is the scenario in which objectives and relative risks are known, but not the likelihood of an outcome.
- True Uncertainty - The worst of all is true uncertainty. The objective is known, but the context of risk is completely unknown.
Any of these three risk scenarios are stressful for many people, and it it is important to understand your own risk aversion before entering into a small business ownership situation.
Competencies Required
In addition to taking all of the risk, small business owners and entrepreneurs are also often tasked with wearing a lot of hats (i.e. working tons of different roles within the organization). As businesses grow, they often become more complex. As that complexity rises, small business owners rarely have the excess capital to invest in a proper team. As a result, they often end up trying to fill as many roles as possible. This requires both a great deal of energy, and a wide variety of competencies. Developing these skills and applying them every day can be both tiring and stressful.
Starting A Business
This is a simple chart that graphs the six steps a start up owner will go through in order to establish a small business. Ideating, concepting, committing, validating, scaling and establishing all require different competencies and capabilities, which the start up owner may have to accomplish herself (or with a small team).
Employees
Another source of stress is the simple fact that employees will be relying on the business owner (if it is a business with a small team). These employees will have needs the leader must fill, and the success of the organization will have a great impact on their job security. Worrying about oneself and one's success is one thing, but worrying about the livelihoods of the team is another entirely. This can be a great source of stress, depending on the situation.
Other Factors
While these are a few key contributors to stress, it is also worth noting the likelihood of inconsistent revenue (and therefore salary), personal liability (the risk of losing whatever start up capital the business owner invested), payroll, taxes, managing stakeholders (if applicable) and a wide variety of other responsibilities and tasks which can contribute a stressed mentality.
Small business owners therefore benefit greatly from a naturally calm disposition, comfort with uncertainty, and a natural knack for learning multiple competencies and balancing a wide array of responsibilities.