It depends on the small business. Does it require a large outlay of capital or not. I know of a person that bought a Chinese takeout/restaurant business for $75000 a year ago business is bad and he can't meet the expenses. He is probably just going to lock the door. $75000 lost plus some savings plus potential suit from the landlord for rent while the place is vacant and his lease is still in affect. I know someone else who services computers and his only expenses are small amount of advertising and insurance and some equipment.
Trading is quite non-risky. You only lose money (depreciating assets) when you trade. You make money if you don't trade (if broker gives interest). That's why trading is in that sense the easiest with the lowest start-up costs. Ofcourse the goal of any small business is to make profit. Profits aren't easy to acquire in trading and you have to be lucky in the sense that you find an edge before you blow-up. Before you have an proven edge, trading is a marathon to stay as long in the game as possible, after you got an unproven edge, trading is like a research object, afterwards, trading can be like winning over and over in a competition. In that sense trading is not like many other small businesses. The most similar are like inventor businesses, businesses with high risks and low rewards in the beginning, not like restaurants. Still, I view trading in itself as not very risky if you play it smart and not gamble.
I'm surprised no one has mentioned that a small business owner has all his eggs in one basket. A trader never has to do that, but can diversify across trading techniques, markets, etc. and can keep cash also. The independent trader does not have to pay employees, so there is no cash drain when they are not profitable. There are no customers to demand things, and nobody else to please. Having done both, I would never go back. Mary
As a business operator in Michigan - one thing a trader can do is better control his TAXES! God help you if you're an unfortunate business model which the local government deems to be more taxable, or under-taxed. Trading allows you the flexibility to possibly 'choose' among possible tax liabilities depending on your vehicles and locations - this is something most small businesses can't be as flexible with.
If you are not prepared, trading is less risky because of low barriers to entry, quick and easy exit. Exit rates are roughly the same. Now, if you take time to prepare well, I would say trading is more risky. Preparation reduces business risks to a minimum, and helps when raising finance. In trading, your preparation is no guarranty of your trading success. There are these huge factors: the market does what it wants and when it wants, and, trader's psychology. With good preparation, your business can be run without you, for some cases nearly for many many years. In trading, you have to keep up to date with the market. Taking into account preparation, trading is more risky, but also the most profitable one-person business, if you are good at it of course.