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How to Start Out in Business

Oct 31, 2007
It well may be that you are among the millions who are dreaming the American Dream of starting your own business, of finally becoming boss of your own store. If you are I urge you to read what follows with utmost care.

For if you start your own little business or buy into one nearby, you have only a fifty-fifty chance of lasting two years. The chances are only one out of three that your firm will live to four years. The chances sink to one out of five that your concern will attain an age of ten years. If you do survive two years, however, the life expectancy of your business will be lengthened and the odds are your firm will remain in operation an additional five years.

Your chances of survival will be best if you go into some form of wholesale trade. About three-fourths of these firms live through the first full year, about half survive three years, and about 30 per cent survive more than a decade. If you go into retail trade, though, your chances of survival will be considerably less. Only about three-fifths of these concerns live out the first year, and only about one-sixth reach the age of ten years. Most vulnerable today are firms selling infants' and children's wear, men's wear and women's ready-to-wear. Least vulnerable are firms selling farm equipment, drugs, groceries, meats, etc.

What is the failure record at the manufacturing level? Most vulnerable are companies manufacturing furniture, transportation equipment, leather and shoes. In the best positions are printing and publishing companies, chemical and drug firms, and manufacturers of stone, clay, and glass.

In what financial classification do you find the greatest concentration of business failures? In the $5,000 to $25,000 group; 49 per cent of the firms going under have liabilities in this range. The next largest concentration is in the $25,000 to $100,000 group; another 28 per cent of the failures have liabilities in this range. Among very small and really big businesses failures are few. Only a tiny per cent of the companies which go bankrupt have liabilities of over one million dollars.

Does all this mean you should give up the dream? Oh, no! I shudder to think of what would happen to our America if ever we became content to be just cogs in the wheels of the big corporations. It does mean that if you do decide to make your dream real, be sure you really know your business. If you want to open a little restaurant, for instance, go to work for a little restaurant for a while. Be sure you have the cash and the credit to see you through the rough periods that are virtually certain to come in the first crucial years.

Many fail not because of ignorance or inefficiency but because they simply haven't the capital to get through the lean times. Be sure you have the will and temperament to make a go of it and stick it out. Look within yourself and be honest with yourself, for it may be that in coming years many would-be independents will find it even tougher than it has been to survive and prosper.

The difficulties of getting capital with which to grow at tolerable cost have been mounting, particularly for small businessmen. In phases of scarce, expensive credit, a big and established corporation can get the funds it needs to compete and grow but our nation's financial structure is simply not yet set up to provide the unknown, small, marginal concern with adequate risk capital and long-term funds. Surely the structure will be further reformed to fill this gap in financing for the small businessman and progress is being made. But that the gap still exists is undeniable.

The basic message remains. Ask yourself if you have the know-how, the competence, the sufficient experience to survive, and give yourself honest answers. Realize that your first years are your most crucial. In short, study the failure statistics of the past to make sure you don't become a failure statistic of the future.
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