On the Fence About Starting a Business? This Stat Might Push You to Take the Leap

Some people dream about starting a business, but never really go beyond that point. They think about what it might be like to run a shop, a cafe, or other venture, but it's mostly a pipe dream.

But if you have a serious, well-thought-out idea for a business, then you may want to take the leap into small business ownership. Doing so could be a good way to grow your personal wealth, and that of your family.

The financial upside of starting a business

Recent data from the Federal Reserve found that families that owned a business in 2022 were considerably wealthier than those that didn't. The average net worth of families without their own business that year was about $570,000, compared to nearly $1.1 million among families that did own a business. To put it another way, families with businesses had almost twice the net worth of those without.

Now, let's get one thing out of the way. Just because you start a business doesn't automatically mean your wealth is going to soar and outpace that of your salaried friends. Not every business venture is successful, and it can take a long time to reach the point where a business increases your net worth and you have a flush business bank account.

What you should take away from this data, rather, is that starting a business could potentially set you up to grow your wealth over time, especially if you're willing to work hard at it. So if starting a business is something you're already interested in doing, then it could be worth mapping a plan to make that a reality.

Are you ready to start a business?

Starting a business is a big commitment. And there can be risks involved. It could take months or years for even a great business to turn a profit. So you'll need to be aware of that, as well as the fact that starting your own company might, at least initially, result in a less optimal work-life balance. 

You may have to put in a lot of time to get your business off the ground and oversee operations until you've staffed up. But if you're willing to accept those risks and drawbacks, then you may be in a good position to start a business if the following applies to you.

You have enough money in savings to cover about a year's worth of living expenses

You'll need a way to pay your bills until your business starts generating revenue, and that may not happen for a while. A good bet is to go in with a cushion -- about a year's worth of essential bills in your savings account.

You may, however, be able to get away with less savings if your spouse or partner has a steady job they're holding onto and you can manage on their income alone. For example, if you currently make $70,000 a year and your spouse makes $80,000, and you already live comfortably on just their salary, then you may be okay to start your business with less money in the bank.

You have an actual business plan

Maybe you want to open a cafe that features local artists who perform and teach classes. Or maybe you want to start a pet-sitting business. 

Ideas like these could take off in a big way, but don't just think of the big picture. Rather, map out the finer details. How will your business be funded? Where will it be located? What costs will you be looking at? Write up an actual plan you can work with.

You're not expecting to undergo major life changes soon

If you're having a baby in a few months or moving to a new home, then it's probably not the best time to start a business. Your business is likely to need your full attention. It's smarter to make that move when your life is stable and you can really afford to put in the time.

Starting a business could be your ticket to growing your net worth and setting your family up to be more financially stable. But make sure you're really in a good position to dive in. Also, make sure you're aware of the risks and challenges you might face, especially in those early days.