Entrepreneurs must do their legwork

Entrepreneurs must do their legwork

November 13, 2006

You think you have what it takes to be an entrepreneur?

Well, get in line.

Last year, 671,800 new businesses opened their doors, a 4.5 percent increase from the year before, according to the Small Business Administration's Office of Advocacy.

At the same time, 544,800 companies closed their doors.

And while all of these closures weren't startups, statistics show that, though 66 percent of all small businesses survive at least two years, only 44 percent survive four years, according to Christine Serrano Glassner, regional advocate for the SBA's Office of Advocacy in New York City.

"It's very tough today to start a business because it is so highly competitive," adds Judith Tyne, director of the Center for Entrepreneurship at Hofstra University in Hempstead. "There's a tremendous amount of obstacles and challenges."

But there are ways to minimize your chances of failure and avoid some of the most common startup mistakes, experts say.

First, make sure you have enough capital to get up and running, says Roslyn Goldmacher, president of the Long Island Development Corp. in Bethpage.

"You should always plan for your immediate startup costs and enough capital to take you through to break even," she says, noting that the "break-even" period for a small business should be maximum six months to a year.

Too often, entrepreneurs are underfunded and come in with unrealistic expectations, adds Gloria Glowacki, assistant director of the Small Business Development Center at Stony Brook University.

"They don't think they have to put up any money or collateral," she says, explaining that lenders usually want a borrower to pony up 25 to 30 percent of what they seek along with collateral, such as a home.

They also are unaware that grants are "few and far between," she says.

The reality is that you'll have to raise money the old-fashioned way – by hitting up family or friends, mortgaging your home or getting a bank loan, notes Glowacki. She suggests working in the field of interest before seeking funding.

"Banks don't want to lend money to a computer programmer who wants to open a restaurant," Glowacki says. "They want experience."

Once you get experience, it's time to do your homework.

Entrepreneurs often don't do enough market research and jump into a venture without sizing up the competition or gauging demand, says Tyne.

They also fail to realize the level of commitment that starting a business involves.

Jim Finkle, the former manager of the Long Island High Technology Incubator at Stony Brook, now a consultant in Virginia, knows this all too well: He worked with more than 70 startups over his 11-year tenure at the incubator.

"Some chief executive officers are just looking for a paycheck and don't have the wherewithal to see five years down the road," he noted – and oftentimes they don't want to work "beyond 40 hours."

In Finkle's experience, entrepreneurs who buy items like fancy cars to impress clients rather than reinvest their earnings into the business are the ones who don't make it.

You have to value every dollar as possibly your last, agrees Jim Hayward, who has started four biotech companies over the past 25 years including the Collaborative Group, which was sold to a New Jersey specialty chemicals company in 2004.

He's learned a lot, including a measure of wisdom: You should never run your business like an autocracy. It takes a lot of people to "create a vision, not one founder, CEO or scientist," stressed Hayward, now chief executive of Applied DNA Sciences Inc. and chairman of Evotope Biosciences.

Jeff Brogan of MesoScribe Technologies, a sensor development company, says he has aimed for key strategic partnerships, particularly with manufacturers that could become "early adopters" of his 4-year-old company's technology.

He didn't do this with his first startup, Poly Therm, which specialized in polymer coatings, and he says that was a mistake. Brogan, 37, says Poly Therm folded in 2003 due to intense competition and lack of investment.

But, he adds, MesoScribe now has "funding to sustain operations and future growth."

Heck, who says you can't start over?

Send e-mail to Jamie Herzlich at jherzlich@aol.com.

Common startup mistakes

Being underfunded and having unrealistic funding expectations

Not doing enough market research

Lack of organized finances

Hiring low-cost, unqualified labor

Underestimating the importance of marketing

Starting a business in a field you've never worked in

Misallocating resources rather than reinvesting them in the business

Operating as an autocracy

Not writing a business plan

Poor location

Copyright 2006 Newsday Inc.

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