Assignment task: Family and Friends Along for the Ride
Switching to the realm of the entrepreneur means giving up the mindset of being an employee. Significant risks come with the change in lifestyle, and most notably, your steady paycheck disappears. For the avid entrepreneur, the risk to one's finances are often calculated, but what of the risk to those who are financially dependent on the entrepreneur, or even those who will be financially dependent in the future?
Conventional wisdom states that 9 out of 10 startups will fail (although the jury is still out on the accuracy of that number), and with such a high risk of failure, entrepreneurs face the daunting prospect of bankruptcy and poor credit before the businesses even take off. Taking precautions against the possibility of failure is a necessary step for any entrepreneur. Before beginning, it is important to decide just how much personal investment an entrepreneur should commit to, whether by using family savings or taking out loans.
It is easy to overlook the heavy financial risks for young entrepreneurs who have nobody financially dependent on them. But, the financial ruin of a failed venture has the capacity to follow an entrepreneur for many years to come. A poor credit situation and accumulated debt can take a toll on any future partner or child.
On the other side of the issue, perhaps financial stability and security do not build the strongest families. Children who grow up with an entrepreneur for a parent might develop a stronger ability to overcome adversity and cope with hardship. Although the situation may be difficult in the short term, those children could grow into stronger adults.
Critical Thinking Questions
How much patience should a spouse, child, or anyone financially dependent on an entrepreneur be forced to have during dire financial situations? How many failed ventures are too many for them to endure?
Is it fair to risk your family's financial security to pursue a dream?
Are the benefits of being an entrepreneur worth the heavy risk involved? Is the probability of failure too high to bet a family's future upon?
[1] Heidi M. Neck; Christopher P. Neck; Emma L. Murray. Entrepreneurship: The Practice and Mindset - International Student Edition. SAGE, 2021, page 49.