On the rosy side, owning a small business may be satisfying and profitable. It may also "make you your own boss," although, what actually happens when one shifts from employee to small business owner is that you exchange one boss for dozens of them. Every client or customer thinks he has a claim on you.

On the realistic side, if you start a small business, you will probably lose your shirt. One out of three business startups fail within six months. If you make it through the critical first three months, you will have a 25% chance of lasting for five years.

If those are the odds, why does anyone bother? Lots of the between 750,000 and one million companies that start each year are started for the wrong reasons. They are started either because starting a business is psychologically easier than looking for a job, or because running a business is supposed to be easier than working for someone else.

Sloth is not a ingredient in success. If you start a business, no matter who you are, you are going to have to work harder than ever before. Not only will running the business take time, but so will learning all the things that you didn't need to know when working for a large company. The small business owner is CEO, Treasurer, production supervisor, marketing guru, risk management expert, director of legal affairs, and in charge of everything else that needs to be done. Failing at any of those chores increases the chances that the company will fail.

On the other hand, knowing the business increases the chances of success. The statistics cited above are really the national report card on business knowledge.

Ralph Waldo Emerson and his pal, Henry David Thoreau, have probably done more damage to this country than any other two individuals. Emerson, who knew nothing about running a business, claimed that if you build a better mouse trap, the world will come to you. Thoreau claimed that no one over the age of 30 knew anything worth knowing. Since "Walden" was published when he was 37, one wonders why he bothered. To give Emerson and Thoreau credit, they did realize that nobody ever lost money on books that say it is easy to be rich, or that your opinion is more important than anyone else's.

We chose the name The Do-It-Yourself Capitalist, not because raining money is so easy you can do it yourself, but because there is no one who will do it for you. The purpose of this "book," like this whole web site, is to introduce people to ideas and sources of information.

The reason so many companies fail is that the owner doesn't know what he is doing, which is understandable given all the things he (author's note: if you are going to be hung up on gender-specific language, you are going to have a hard time with this site. We find "he/she" and "he and or she" crude and cumbersome. The more inventive use of "she", apparently on the grounds that if a woman has done it, clearly men must have as well, seems insulting.)

Small business owners fail because they prefer to learn by trial and error rather than to ask for help. Put another way, businesses who receive help through incubators, the Small Business Administration or local economic development organizations, have a 75% to 80% success rate.

How much money do you really need?

Many businesses fail because they can't get enough capital to continue. But many others go belly up because the founders put the business on hold until they get all the money they think they need.

People starting to create their own businesses generally fall into two categories: those attempting to build, if not IBM, at least Dell Computer Co., overnight, and those who start out small. Regardless of what the books and courses on entrepreneurship say, most of the fastest growing privately held companies in the country, as identified in the annual INC™ Magazine surveys, fall into the second category.

Many of the presidents of those superstar companies never started out to build a major company. All they wanted to do was to make a living doing something they liked. Since they had no vast plans, they didn't think they needed vast amounts of money to get started. In 1995, the average start up capital for the 500 fastest growing private companies in the country was less than $9,000.

With less than $9,000 in start up capital, a company will have to get to revenue as soon as possible, even if it means eating over the kitchen sink because every table in the house has been taken over by the business.

Many businesses, such as brew pubs, restaurants, stores, heavy manufacturing, etc., can't be conducted from the home. Fine. What do you really need to start generating revenues? Not what do you need to make your dream come true. The fancy office will have to wait, as will the company car and all the other perks that we captains of industry so richly deserve. Unless you are a con man, or an interior decorator, a fancy office never earned anyone a dime. Expensive furniture and a toni company address are taking food out of the mouth of your baby, the company.

When Michael Dell's Dell Computer Company was beginning to really grow, Dell shoved the new hires into whatever space was available. Finally things got so tight that the workers rose up and told Dell there was no room for their credenzas in their offices. Dell wrote a memo saying there would be a credenza sale in the company parking lot next Saturday. He got rid of chunks of polished wood which weren't generating a nickel in revenue and replaced them with people who did.

When starting a business, it is probably wiser to look to the shops in Hong Kong, where they literally live with their business, for a model than the glass and chrome skyscrapers of New York, Los Angeles or Chicago. Every dime you save in overhead could produce a dollar in revenues. And every dollar of revenue the company produces is another step toward survival.

How much money do you really need to start your business? Probably a lot less than you originally thought, but you are going to need all your ingenuity and considerable sweat equity to get things going with the available money.

Stewart-Gordon Associates, Inc.
P.O. Box 781992
Dallas TX 75378-1992
voice (972) 620-2489
fax (972) 406-0213
e-mail Tom Stewart-Gordon