Founding a Startup: pros and cons – is it worth the risk?

Setting up a startup in Switzerland is one of the most exciting and opportunity-rich journeys, yet it is at the same time fraught with risks and potential hardship. In this article, we embark on a detailed exploration of the numerous advantages and disadvantages of establishing a startup. We also provide essential advice to those brave entrepreneurs who are ready to risk it all for the opportunity to accomplish their dreams.

Advantages of establishing a startup

Here are just a few of the many benefits of establishing a startup:

1. Independence and freedom

Starting your own business is the ultimate way to gain personal independence and freedom. If you are a natural innovator, it’s easy to feel frustrated in a traditional corporate workplace environment, where your own ideas are stifled by the existing structures.

Establishing your own startup, whether alone or with likeminded entrepreneurs, is the perfect way to follow through with your vision and put your ideas into action without having to answer to anyone but yourself.  

2. Creativity

Startups provide the perfect platform for innovation and creativity. You will constantly be tested and must find new creative ways to navigate the obstacles, turn your ideas into reality, and create financially viable products or services that address specific problems and meet customer needs.

This kind of creative freedom is extremely attractive to entrepreneurs, who feel bored by the rigid corporate culture of established companies. While the startup journey can be challenging, being able to express your creativity and passion can help keep your spirits high in the face of adversity.

3. Financial rewards

Undoubtedly, one of the biggest attractions to founding a startup is the potential for significant financial rewards should the venture become a major success. Entrepreneurs who build scalable and high-growth businesses can achieve substantial profits and increase their personal wealth far beyond what they could accomplish as just another cog in the machine of an existing business.

Of course, the stakes are high, because while there is the possibility of generating huge profits with a startup, there is always the very real risk of loss and failure. Many startups go bankrupt in their first few years of operation, and so you should always be prepared for the worst but have the positive mindset to expect only the best.

4. Personal and professional growth

Building a startup is a steep learning curve. As a founder, you’ll be pushed to acquire diverse skills quickly, from leadership and management to marketing and finance.

You’ll be challenged in so many unexpected ways and will have to learn how to trust your judgement and make decisions confidently and quickly, learning from your mistakes and failures along the way. This hands-on experience is invaluable and can accelerate your personal and professional development.

5. Flexibility

Founding a startup and being your own boss offers much greater flexibility in terms of work hours, remote working options, and decision-making. This enables you to find your ideal work-life balance.

As a startup founder, you can more easily adapt to changing needs and preferences, shape and reshape your company’s direction as you choose, and create your own unique corporate culture and policies.

6. Grants and tax advantages

Governments around the world are seeing the importance of encouraging business innovation and entrepreneurial activity to stimulate the economy and improve the wider society and infrastructure through new inventions and better products and services.

Switzerland is a prime example of this, where there are numerous grants and subsidies from the government and other private funding organizations that support entrepreneurship and innovation without requiring repayment.

These are available at both the cantonal and federal levels, with a variety of financing options and support programs. Startups in certain industries or which meet specific criteria may also be eligible for significant tax exemptions and rebates.

7. Make a positive impact

It’s not all about the fame and money. Entrepreneurs are perfectly placed to make a tangible and beneficial impact on society at large. By addressing serious problems and providing innovative solutions, your startup can improve (or even save) lives, create jobs, and contribute to economic growth. This sense of purpose and the legacy which is created from it can be highly fulfilling.

Disadvantages of setting up a startup

Establishing a startup can be extremely rewarding, but it comes with its risks and downsides:

1. Financial risks

Founding a startup is a high-risk endeavor, and many fail to ever become profitable. It’s quite possible you may completely exhaust your initial capital without any rewards to show for it. As founders often invest their personal savings and may incur debt, this could lead to significant financial strain if the business fails.

2. High stress and workload

The demands of building and running a startup are intense. You’ll likely need to work long hours, fulfil multiple roles and responsibilities, and be ready to react quickly to whatever new issues are presented.

This can make you feel like you never really get a proper break from work, and the high-stress environment can negatively impact your personal health and well-being.

3. Uncertainty

Walking the path of an entrepreneur certainly doesn’t offer the kind of stability and consistency you get with an ordinary full-time job. Startups operate in a highly uncertain environment. Market conditions, customer preferences, regulations and competitive landscapes can change rapidly. The unpredictable nature of running a startup makes it difficult to plan for the long term, both in terms of your personal life and financial stability.

4. Limited resources

Unlike established companies, startups typically need to deal with limited resources. This includes financial constraints, lack of human resources, insufficient infrastructure, and even limitations in physical space (think of the classic entrepreneurial stories of founders starting from their garage or bedroom).

This naturally makes it all the more challenging to overcome setbacks and catapult your startup to success. As a founder, you need to have the kind of innovative and resourceful mindset that allows you to thrive in the midst of outward limitation.

5. Bureaucracy and legal challenges

Dealing with the beaurocracy of setting up a new business and navigating legal and regulatory requirements can be complex and time-consuming. Non-compliance can result in penalties, legal disputes, and reputational damage, posing additional risks to the startup and your professional reputation.

6. Emotional and personal pressures

Entrepreneurship is not for the faint hearted. You will be constantly challenged and pushed to your limits, which can be extremely uncomfortable at times. This can take its toll on your emotional and personal wellbeing and often make you question whether your startup dream is worth all the difficulties involved. It’s vital that you find support networks who can help you through when it becomes personally difficult to manage.

This can take the form of close friends and family, partners and co-founders, or professional counselors and psychologists. Ensure that you maintain a healthy work-life balance as much as possible and continue doing the things you enjoy and bring you wellbeing.

What it ultimately boils down to

Weighing up the pros and cons to decide whether to establish your own startup can be complex and overwhelming. It’s a journey filled with contrasts and payoffs: the opportunity to follow your own vision and potentially make significant financial gains in the process versus the high risk of failure and the stress and pressure involved.

Ultimately, there is no black and white answer as to whether you should set out on the startup journey. The decision comes down to your own passion and aspirations, and ability to deal with the challenges that come up. If you feel strongly enough about your ideas and have the motivation to succeed in the face of difficulty, we say “go for it!”.

While no one can guarantee you’ll be successful, for passionate entrepreneurs it’s always worth the risk. What’s more, there are many ways you can make the journey easier by leaning on the support of expert partners like Nexova to guide you along the way.

Advice for potential startup founders

Here are some tips to help maximize your chances of entrepreneurial success:

1. Validate your idea: Before diving in, ensure there is a market demand for your product or service. Conduct thorough market research, gather feedback from potential customers to refine your offering, and test your concept with a minimum viable product (MVP).
2. Develop a solid business plan: A well-crafted business plan serves as a roadmap for your startup. It should outline your vision, target market, revenue model, and marketing strategy. This document is also crucial when seeking funding from investors. To learn more about how to create a business plan that will convince investors, read our dedicated article on the subject.
3. Build a strong team: The data shows that startups with a well-rounded and competent founding team are more likely to succeed than solo ventures. Build a team of talented individuals who complement your skills and share your vision. A diverse and capable team is essential for overcoming challenges and driving the startup’s success. If, however, you are considering founding a startup alone, read our article on the opportunities and pitfalls of solo entrepreneurship to determine if this is the best path for your entrepreneurial dreams.
4. Seek mentorship and networking: Connect with other experienced entrepreneurs, industry experts, and mentors who can provide valuable insights and guidance. Networking can open doors to potential investors, partners, and customers.
5. Manage finances carefully: Trying to catapult your startup to success with limited resources is one of the greatest challenges of the entrepreneurial journey. It’s essential to keep a close eye on your finances and make optimum use of the funds you have. Develop a solid financial plan, manage your cash flow carefully, and ensure you have sufficient funding to sustain operations. Consider hiring a financial advisor and accountant to help you stay on top of your accounts and maintain financial health.
6. Be resilient and adaptable: The startup journey is filled with ups and downs. Stay resilient in the face of setbacks and be willing to pivot your strategy based on market feedback and changing conditions.
7. Focus on customer satisfaction: Your customers are the key to your success, so treat them as your number one priority. Their feedback is invaluable for improvement and adaptation, and their loyalty is vital for your ongoing profitability. Continuously improve your product or service to ensure high customer satisfaction and loyalty.
8. Stay compliant: Legal and regulatory hurdles are often cited as one of the main causes for startup failure. Familiarize yourself with the relevant laws and regulations in your canton and industry and consider hiring a legal expert to help ensure your startup complies with all regulatory requirements and avoids potential pitfalls.