Upping the Odds of Startup Success

Question: Starting my own business has been a dream of mine for many years. I'm building up the nerve to give it a go, but when I consider all the daunting details and slim odds of success, it seems out of reach. Where can I turn for support and how can I improve my chances of success?

Answer: Good news. Those grim statistics we've all heard - that nine of 10 new businesses fail - are bunk. A review of businesses gone bust by StartupJournal.com, a Dow Jones & Co. division (the same folks who publish The Wall Street Journal), shows that the number of outright business failures in the U.S. is highly exaggerated.

For one thing, about a third of business closures that government statistics assume to be failures are not failures at all. These businesses were considered a success by their owners who simply sold off the pieces or closed them to retire or pursue other activities.

And here's the shocker: Data from the U.S. Census Bureau's Business Tracking Series show about 65 percent of new businesses still operating after four years. And a recent study estimates that only 10 percent of the nation's 5.5 million small businesses (not counting solo operators) close each year.

How's that for a turnaround? Instead of a one-in-10 chance of success, the odds of succeeding are more like 60-70 percent. Contrary to popular belief, new ventures may actually succeed more often than they fail. So without even trying, your odds of success have already improved!

But keep in mind that entrepreneurship is not for everyone. Most successful entrepreneurs are risk takers who don't take "no" for an answer. And the odds are not spread evenly. The more resources a new business has, the better its chances. That includes money, of course, but other key items such as market insight and the right people.

Here are four key factors that improve the odds of new business survival for startup entrepreneurs:

1. People. If you can afford to hire employees, do it. Well-staffed businesses have better survival rates than solo operations.
   
   
2. Startup capital of at least $50,000. Not easy, perhaps, but businesses that start with less have higher failure rates.
   
   
3. A college degree for the owner. Better yet, enroll in a college-based entrepreneurship program and learn the ropes before you get started.
   
   
4. Home beginnings. To keep costs low, start initial stages of your business from a home office. Businesses that start this way and then move into bigger digs have higher success rates.

The most common reasons for failure within the first few years include competition, mismanagement, high rent and insurance costs, high debt, inability to get financing, loss of clients and difficulty with collections.

"If you're ready to take the risk of starting a new enterprise, research your business carefully before taking the plunge," says Tony Lee of StartupJournal. Even though business failure rates aren't as high as we think, aspiring entrepreneurs still need to do their homework. These resources can help boost your odds of success:

• SCORE is one of the best (yet often overlooked) resources for small business startups. Volunteer SCORE counselors can provide free one-on-one advice, or you can ask questions by e-mail. A counselor will review your business plan, discuss your goals and offer feedback - all at no cost to you. Plus, the SCORE Web site has loads of helpful tips, articles and resources to help you on your way. Visit www.score.org or call (800) 634-0245.
  
  
• Small Business Development Centers (www.sba.gov/sbdc), or SBDCs, are an excellent, free counseling and information resource sponsored by the U.S. Small Business Administration. There are nearly 1,000 service locations at colleges, universities, vocational schools, chambers of commerce and economic development corporations nationwide. For locations, click the "SBDC Locator" at www.sba.gov/sbdc.
  
  
• StartupJournal.com is a great all-around resource for startup entrepreneurs. The same folks who publish The Wall Street Journal run this site, so the information is solid and trustworthy. The main page lists daily features and links to resources such as PR tools, financing, technology, a trademark search and creating business plans. The site is also loaded with tips on small business technology and management. Visit www.startupjournal.com.
  
  
• The U.S. Small Business Administration Web site offers good basic advice and information for business startups. Go to www.sba.gov and click on "Starting Your Business."
  
  
• eVenturing is a non-commercial site for entrepreneurs that is run by the non-profit Kauffman Foundation. The site offers articles on topics ranging from financing and accounting, to human resources, sales, marketing, operations, strategy and many others. Visit www.eventuring.com.
  
  
• StartupNation aims to be America's "go-to" resource for business startup. This dynamic site offers helpful advice and inspirational support through online seminars, newsletters, radio spots and other avenues. Visit www.startupnation.com.
  
  
• All Business Schools is an online directory of college business schools. You can search the site for those offering entrepreneurship programs. Visit www.allbusinessschools.com.