Starting up a business encompasses several components and entities. It not only generates effects towards yourself and the ones who have immediate involvement but also echoes across to a larger scale - the community. Entrepreneurship brings forth positive and negative impacts to society as it is participated by multiple elements that make up your business. A good example is the accumulation of the national budget, which is highly dependent on the national economy's performance, where small businesses play a significant role. It is also worth noting that in the same manner, external factors can influence how you operate as a company and have the potential to produce lingering effects on your organization.
Most entrepreneurs without a formal background in business management engage themselves in the industry without a broad perspective of how businesses work. Most often than not, they hop right on to it with a single goal in mind: to build an avenue to create income. Coupled with the formed ideas, the spirit and excitement kicks-in. This kind of mentality and behavior is not a bad one to have. However, starting up a business has multiple demands that you are often not prepared for.
You can prepare yourself to perform better if you have a complete visual and understanding of what can happen to you and the community once you start involving yourself in this kind of activity. There are two outcomes that you can expect from this engagement: failure or Success, which has extensive effects on you as a company owner and the rest of the community. Read further to find out a more in-depth interpretation of what is bound to happen for you in starting up a business.
Let us begin first with the personal and community impact of business failure. Perse, your company, did not work out as planned, and it did not flourish into the kind of company you envisioned it to be. Here is an overview of what to expect:
The personal impact of business failure
- Loss of financial retirement – financial retirement is the act of stopping to work because one has enough funds to support them for the rest of their life. The main reason why you engage in entrepreneurship is to prepare for the future. According to a report given by Boston College Center for Retirement Research, less than half of Americans have enough to live and maintain their planned standard of living, which heavily relies on economic performance. Given that your income-generating activity failed to succeed, it takes away one opportunity of living comfortably when your retirement day comes. Aside from this, the incapacity to self-provide usually happens to people who use their savings to continuously keep their businesses afloat, which is a move you must avoid.
- Loss of Marriage/Relationship –with the amount of dedication you built in managing your business, you are expected to become so much invested in your passion. For entrepreneurs hardly separate business from personal relationships because business is something they love to do. With that kind of attachment, a failed business can produce adverse effects such as self-pity, anger, lack of motivation, and discouragement that harms the health of your relationship with the people around you that resulted from an unsuccessful business.
- Health and Emotional Issues – a failed business can be detrimental. It can take a toll on your overall health as it causes anxiety, depression, loss of appetite, stress, to name a few. There are a lot of sleepless nights trying to figure out how to bounce back from the mishaps in business. As per the conducted study of Advanced, a software firm, 65% of small business owners are suffering from mental health because of cash flow, tax, and failing profits.
More than that, as an entrepreneur, you do not only think of yourself but also the people who are dependent on you – your staff and family members. Meaning, you are accountable to them as far as the effects of your business failure are concerned. The gravity of this problem can be overwhelming, that it can damage your state of mind and body.
- Loss of Youthful Opportunities – building a business will teach you lessons that will be instilled in your being. However, you are to miss this if your business venture fails to do well, which has unfavorable effects on aspiring successful entrepreneurs, such as lack of leadership practices, independence, and relationship building.
Community impact of business failure
- Poverty – to fully operate a business, you need staff and employees to help you perform daily tasks. Building your team to run your company generates opportunities for other people to create their means of income. Aside from that, businesses also pay taxes, which is used to cover the basic needs of the mass and improve the public's quality of life in terms of health, housing projects, and food. The economy's performance greatly roots failed business, which entails a lack of financial resources that hinders you from paying out and taxes, leading to poverty. In the report of Goalkeepers in 2018, Extreme Poverty which is living on less than $1.90, has fallen to less than 10% of the world's population, wherein economic growth has a significant impact.
- Reduced Property Value – when businesses fail, this event negatively impacts a specific area's economic health and property value. An underperforming business means that there is not enough revenue coming in; hence it is more likely that entrepreneurs cannot afford to buy/lease a space. With a lesser demand, the lower these real estate properties cost to make them more affordable. Furthermore, real estate prices are highly dependable on the state of the economy as it is driven by the size of the population, interest rates, job growth, law of demand and supply and other economic indicators.
- Empty Buildings - companies require spaces they can use to function and operate. With the demand for office spaces, more land developers invest in structuring office buildings. However, businesses that fail to thrive result in a shortage of funds which means that operating expenses of an office space/building can be affected. According to the U.S. Bank, 82% of small businesses fail because of mismanaged cash flow. Poor budget allocation for sustaining a space/building, unpaid utility bills, and liens lead to location abandonment that turns into a hangout place for drug and prostitution activities.
- Increased Crime – Based on Harvard Business Review, a study in 2010 suggests that a physical operating business provides $30,000 worth of social benefit due to larceny prevention it gives. On the other hand, the closure of mixed-used areas due to business failure can increase the crime rate. Because of the physical stores left by business owners, the foot traffic of that location is lessened. Hence, it can be a strategic place to conduct crimes and criminal matters because there is not much regular activity.
- Lack of Health Care – with the rise of expenses in ensuring health is at its best shape and well maintained. Medical assistance is offered by businesses to increase their hiring success rate. Health Maintenance Organization is usually included in the employment benefits of an employee. Hence, business closure takes away these benefits from employees, leading to limited access to proper health care, resulting in poor health and medical care that is needed.
- Homelessness – this is a result that is derived from the shortcomings of other systems. The number of businesses that failed dramatically influences the economic performance, which is a contributor to providing affordable homes. The Business Journals implemented a survey in 2017 to identify the leading causes of homelessness in Los Angeles. It drove them to the result that 30% of participants live on the streets because of job loss, and 39% answered it is due to unemployment. This means that underperforming businesses are sometimes forced to implement reductions to cope with the company expenses. An outcome of this is inadequate to provide personal funds to support basic needs.
- Increased Unhealthy Entertainment – The amount of stress you deal with pre, during, and post-business failure can take a toll on your wellbeing. People usually engage in unhealthy forms of Entertainment like illegal habits or destructive activities that claim to relieve you from stress and any form of being disheartened. The emotional impact of an unsuccessful business leads some to get on a quick escape from the consequences of business closure and problems through drug abuse, excessive gambling, and other forms of harmful practices.
On the other hand, business ventures that were led to Success also have expansive effects on people with direct engagement throughout the community. Be inspired by the list below that shows how you can immensely contribute positive changes to the life of others by winning in business.
The personal impact of business success
- Financial Freedom – every entrepreneur's goal is to be financially independent, which means having an avenue that generates income even without lifting a finger. It provides you limitless opportunities to live the life you want for yourself and your family without having to worry so much about sourcing for finance.
- Fulfilled Relationships – succeeding in business means you have created a system that works for your company. That means delivering your products and services to satisfied customers. Your relationships can also benefit from this result because you have a business structure to bond and connect with your family and friends. Based on the study "For Richer, For Poorer: Money as a Topic of Marital Conflict in the Home," money is the most common cause of the 740 instances of marital conflict between 100 couples. It is safe to say that succeeding in business gives you the capacity to provide and emotionally support your marriage and family financially.
- Healthy Lifestyle – the capacity to dive into activities that promote your wellbeing is the product of a successful business. Your health is affected by your business's health through the stress and problems that you encounter daily. Therefore, with a game plan that allows your business operations to run effectively and efficiently, you are opening yourself to other undertakings that nourish a healthy way of living. With a thriving business, you gain the luxury of time and money to engage in other activities away from any stress.
- Emotional Happiness – making your company thrive is very rewarding. Not only is it financially fulfilling, but business success also has other benefits such as satisfying your vision which you started with when you set up your business. Ultimately, it makes you proud of yourself and the rest of your team for weathering the storm.
- Expanded Opportunities – the prowess of winning in business equips you the chance of exploring other breaks to grow your business. After having built your momentum, Success allows you to expand. Just imagine your credit rating score.
Community impact of business success
- Increased Resources for Infrastructure - in 2019, the U.S. government spent $98 billion on infrastructures wherein the main chunk of drivers of this budget are taxes of businesses. Businesses that are thriving are the ones who significantly contribute to driving the money that is dedicated to financially support projects such as schools, hospitals, houses, and roads. These facilities are meant to enhance public systems such as transportation, employment, health care, education, and the likes, which also help companies better operate their businesses and supply the demand created.
- Safety – safety's general meaning is the state of being secured and away from any form of harm. Successful businesses provide security to their members by ensuring reasonable employee compensation, the opportunity for growth, and steady employment rates. It almost means that there is no reason to be in physical danger because the members of the society have a stable source of income.
- Strong Health Care – more than anything else, health should be the top priority for everyone as being in shape enables you to perform all of your duties regularly. An American-British economist stated in his journal that in 1980, a family income of more than $50,000 had 25% more life expectancy than families earning less than $50,000. In today's age, you can notice that well-developed countries have exemplary health care systems. Successful businesses play a significant role in the national budget because of the financial participation of successful companies, which are excellent sources in creating substantial health care facilities.
- Better Schools – children can participate in a good education system are more employable as they can perform tasks better and contribute substantial knowledge to an organization. According to National Center for Education Statistics, in 2019, the employment rate of people who completed high school in the U.S. was 74%, while college degree earners were 80%. It says that these children can be a great help and asset to make a business thrive. A thriving economic growth generates the ability to produce equipment that is beneficial to students' educational welfare and development. It also offers a competitive salary to the teachers, which draws them in and creates a skilled and talented new generation. The cycle is continued by the future generation who are well educated and trained once they engage and practice one's talent in different business industries.
- Abundance of Professionals – Professionals are essential to have the best team to work with you to thrive in business. As you grow your business, you will need a workforce who will support you every step of the way. This serves as an open invitation to aspiring employees to be part of your company. In connection to the accessibility to better schools, children have a higher rate of becoming professionals, providing a better education system. At the same time, opportunities to be exposed to other business roles and learn new skills are raised, which will hone their expertise in their respective fields.
- Increase Home Ownership – during the administration of Clinton, the President met his national goal to increase the homeownership rate. In 2000, the rate was at 67.2%, which was greatly attributed to the solid economic growth and low unemployment rate.
The capacity to increase your wealth by investing in real estate properties such as buying a house is achieved with the help of a good cash flow of income. Managing your company does not only mean generating revenue but also indicating that you are performing extraordinary measures to ensure that your funds are balanced and well spent. These practices are also a great help that you can apply in budgeting and administering personal finances.
- Plentiful Physical Fitness Opportunities – not only a successful business brings you financial Freedom but also the liberty to engage yourself in activities that promote a healthier and fit lifestyle. After the hard work and self-deprivation to achieve your business goals, this is your time to take some rest and enjoy the fruits of your labor.
- Healthy Entertainment – to thrive in business produces funds that reward yourself and the whole team for their unlimited effort. Moreover, it is proven in global studies that there's a correlation between Happiness and undertaking healthy Entertainment such as sports, music classes, or traveling. The positive energy that you generate when you are happy stimulates you to participate in your other interests.
- Increase Regulations in Promoting Success – creating new systems and standards that work on your organization when you reach business success is inevitable. This is because you have identified the framework that produces accurate and better results. With that, you involve yourself and your team in refined, precise, intelligent practices that will continuously lead you to thrive.
If you want to involve yourself in business, you must see and understand the transcending effects of entrepreneurship. The positive and negative impacts of engaging in business can be very experiential and eye-opening. It has its hazards. But, if you do it well in business, the benefits and the sense of fulfillment outweigh the risk and hard work to get you there.