TEN ENTREPRENEURIAL MYTHS

By Mary Anne Van Arsdale

IF YOU'RE CONTEMPLATING BECOMING YOUR OWN BOSS, BE SURE TO REVIEW THESE
COMMON MISCONCEPTIONS FIRST

Americans launched more than 1.3 million new enterprises in 1990, according
to the latest statistics from Dun & Bradstreet Corp. Many were started by
people who fit the traditional entrepreneurial profile: risk-takers with a
strong desire to control. Other owners, however, were inspired more by a
dismal career situation - particularly unemployment - than their
personality.

Often, executives who have been terminated because of corporate cutbacks
find job hunting difficult, if not intolerable. They conjure up ways to
avoid what they consider a painful process of writing and sending out
resumes, networking and interviewing. One way to stop the seemingly endless
worrying about landing new positions, they reason, is to start their own
businesses.

However, "entrepreneurship by default" - opening a business because no job
offer seems imminent - can be more painful than job hunting when managers
aren't realistic about what it takes to launch a successful venture.

"Executives who have been terminated often convince themselves that they'd
like to start a business of their own," says Louis Persico, president of
Career Management Consultants Inc. in Harrisburg, Pa. "My first job is to
make sure going into business isn't simply a gut reaction to their
termination. Then I need to advise them about the planning, management
skills and perseverance it takes to become an entrepreneur."

If you're considering starting a business, review the following 10 myths
associated with entrepreneurship before deciding whether to proceed:

MYTH #1: THIS IS AS GOOD A TIME AS ANY. Believing that they must do
something before their income runs out, terminated employees whose severance
or unemployment benefits are nearly exhausted are especially prone to
entrepreneurship by default. That's probably the wrong time to consider
business ownership, however. Long-term unemployment places a strain on the
emotions as well as the pocketbook. Marital tension increases and social
life decreases. Families spend time and money differently, and the
uncertainty of the future pervades daily decision-making.

A start-up places new demands on a family, including long working hours and
a heavy financial burden. Ideally, entrepreneurship should be pursued either
while a person is employed or immediately after a termination, when the
family's financial and emotional resources are still strong.

MYTH #2: ALL I NEED IS A GOOD IDEA. For nearly five years, a Pennsylvania
mechanical engineer spent his evenings designing an industrial product he
was sure was technologically superior to those manufactured by his employer.
When his firm found out about his nighttime creativity, he was fired.
Undeterred, the engineer opened a shop in his garage and began building a
prototype.

He had a good idea and the technical expertise to create the product. What
he lacked was an ability to get others excited about his project. He needed
professional support from an accountant, marketing professional and lawyer.
He needed distributors, bankers and vendors to cooperate as well. Today, his
good idea remains unsold because he has no one who can communicate his
vision to others.

MYTH #3: I CAN DO WHATEVER I WANT. Often, terminated managers consider a job
loss a personal failure and see entrepreneurship as the fastest road to
success.

Few consider that about 50% of new businesses fail within five years,
according to Dun & Bradstreet's report on business failures.

Building a successful business requires more than an interest and
"technical" experience in the field: Would-be entrepreneurs must make sure
that a sufficient market for the proposed product or service exists and that
they have strong sales, planning and financial record-keeping skills.

MYTH #4: I'LL BE MY OWN BOSS. Some executives establish a business because
they can't imagine starting over with a new employer or because they're
disillusioned with the uncertainties of the corporate world. They see
entrepreneurship as a way to control their destinies, set their own daily
pace and "do their own thing."

However, just as no man or women is an island, neither is any business. The
basis of profit is making the sale, and selling in the '90s requires serving
the customer. Entrepreneurs who insist on doing their own thing usually have
business practices that reflect that philosophy. They choose products,
prices and hours of operation that are self-serving. They are me-oriented,
not thee- oriented. They fail because they don't realize that the real boss
in any business is the customer.

MYTH #5: I'LL REGAIN MY RESPECT. A job loss is visible to friends, family
and business acquaintances. Unable to take this loss of face, some
executives launch new businesses, envisioning the respect it will bring
them. In fact, the opposite usually happens. Self-respect is the first to
go. New entrepreneurs typically exist in work environments in which they
have no secretary or assistants to handle the mundane tasks of running a
business. They're now in the trenches, doing everything: answering the
phone, typing and even delivering the product. Business owners may also
double as salespeople, and the daily rejections can be devastating to their
self-esteem.

As for regaining respect from others, this rarely occurs. Tolerance is more
common than acceptance. Some people will suspect that the business was
started only because the ex-manager couldn't find a job. Even friends may
congratulate the entrepreneur diplomatically while privately wondering about
his or her sanity and ability to meet mortgage payments.

MYTH #6: I'LL GET RICH. Unemployed managers seem to have the audio on and
the antennae up for stories about those who left their jobs, started their
own businesses (often the low-risk type) and carted their wages home in a
basket. Hourly rates of $150 or per diems in excess of $2,000 tempt the
frustrated, who quickly set up "stationery businesses" - ones with a
business card and letterhead but little else. The sales pitch used by those
pursuing this pot of gold is often, "If it pays, I can do it." Such ventures
lack purpose and focus, and their owners will usually dissolve the
businesses as soon as they receive decent job offers.

MYTH #7: I CAN OD IT BETTER. Most would-be entrepreneurs believe they can
build a better mousetrap than existing competitors or former employers. They
can identify the weaknesses in others' products and business approaches and
prescribe the one thing that could be done to improve the offering. But
doing one thing better doesn't always guarantee business success. The
improvement may not be one that customers perceive as important enough for
them to quit buying from their old source. A purchase often is a solution to
a problem, and customers typically see no reason to reconsider a solution
once a reasonable one has been found.

The same entrepreneurs who believe they can do it better usually believe
they can do it cheaper as well. Improving quality with a concurrent
reduction in price is rare - and suspect. Chances are, these entrepreneurs
have inaccurately estimated marketing, labor or distribution costs.

MYTH #8: IF I CAN MANAGE SOMEONE ELSE'S BUSINESS, I CAN MANAGE MY OWN.
Unemployed executives often figure they can apply their operational skills
just as effectively to their own businesses as they did at their previous
employers'. True, management skills are transferable, but neither a business
degree nor experience at a large corporation fully prepares people for going
it alone. In corporations and coursework, business functions are fragmented:
Marketing, management, human resources and finance are handled as separate
entities with little relationship to each other. Often, the mindset of
corporate managers is one of being a part of someone else's operation. Only
after they've started their own businesses do they realize that they don't
know how to wear all the management hats at once.

MYTH #9: I'LL HAVE MORE TIME FOR MY FAMILY. A common reason entrepreneurs
give for starting a business is uncommon when it comes to reasons for
staying in business - flexibility of time. The predictable schedules,
two-week vacations and 40-hour weeks managers at large companies enjoy are
only a memory in the early years of nurturing a business. Most new business
owners work more than 60 hours a week.

A former salesperson discovered how time-consuming entrepreneurship can be
after she was laid off from her job at a Harrisburg, Pa.-area newspaper.
With two preschool children at home, the sewing hobbyist reasoned that a
tailoring business would allow her the time she needed to raise the family.
Two years later, she re-entered the job market because she'd been unable to
do two things at once in the same place. Costs and prices were hard to
estimate accurately because of family-related work interruptions, and
customers intruded on evening and weekend time so much that her family could
rarely plan outings.

MYTH #10: I'LL HAVE MORE SECURITY. Research indicates that successful
entrepreneurs are risk-takers, yet unemployed executives often start
businesses in hopes of finding a secure future. They've learned through
experience that when you work for a company, a good job and salary can be
here today and gone tomorrow.

They fail to see, however, that entrepreneurship can make their pay and
perks even less stable. Few business owners are able to draw any salary for
18 months or more after start-up. They must pay all their own benefits, and
paychecks stop when the flu strikes or the family needs a vacation.

Security is especially problematic in the initial start-up phases when
equipment and supplies must be purchased, deposits made and professional
services secured. Many would-be entrepreneurs are surprised to find that
banks won't assume all the risks of a new business. Executives may need to
use their severance pay, savings and home as collateral to attract others to
invest.

"When bankers talk with entrepreneurs they want to see very possible bit of
collateral committed," says Jill D. Edwards, manager of the Cyber Center, a
start-up business incubator in York County, Pa. "If the entrepreneur doesn't
believe in putting everything on the line, why should the bank? The bank
wants to share the risk. Otherwise, it's too easy for the entrepreneur to
walk away, generate 100 resumes and go back into the job market."

In fact, many executives first confront entrepreneurial myths when they try
to secure loans or investment capital. Says Ms. Edwards, a former bank
lending officer, "The banker wants to see a business plan to evaluate
whether the entrepreneur thought about or merely dreamed about the proposed
business. The business plan is the reality check. The banker can tell if
applicants know what's ahead by their research and by what's included and
not included in the plan." Midway through the plan, some executives go back
to job hunting to avoid the risks of entrepreneurship.

Ms. Van Arsdale is director of the small-business development center at
Pennsylvania State University's York campus.