Lack of Sufficient Capital Is the Greatest Single Reason for Small Business Failure
This is true for many enterprises, but it won't be true for mine. I may fail for other reasons, but I picked a field-consulting and writing-in which start-up costs are minimal. I spent about $5000 renovating and furnishing an upstairs room in my home, bought about $5000 worth of office equipment, ordered a few phone lines, had some stationery printed and was in business.
In fact, one of the great discoveries about the whole process has been that, as long as I keep financial obligations at a minimum, I don't have to figure everything out all at once. A note to myself in my David A. Lord folder even says so. My objective is to keep the enterprise as simple as possible: to have no employees, but to joint-venture with other individuals and/or organizations on projects too big for me alone; to take on no debt; to track expenses carefully for which I can be reimbursed by my clients; and to keep other on-going expenses at a minimum.
Before you commit to an operation that will require a big capital investment, and therefore a big obligation, consider whether your goal of doing a particular kind of work can be carried out in a simpler format that will actually give you more time to do the work you're dreaming about doing.
In fact, while most small businesses fail due to a lack of working capital, "that's like saying the cause of most divorces is conflict," says small-business guru Paul Hawken. "The question is, what causes the lack of working capital? In a business, money doesn't create anything at all, much less ideas and initiative. Money goes where those qualities already are. Money follows, it doesn't lead. As a businessperson, you foster money with thought, strategy, demeanor and deed."
The bottom line, says Hawken, "You should start a business with just as much capital as makes you feel comfortable, and you should obtain it from sources you're most comfortable with. Embarking on your first business venture, you should start slowly and steadily, preferably using your own money. And if you borrow from yourself, you'll have the right attitude about money right away, which is that it's hard to come by and hard to keep. It's easy to remember this with your own money, but you can lose perspective when spending borrowed money or invested capital," he says.
"I Had No Other Choice, so I Started My Own Business," Is a Classic Prescription for Failure:-
People who prefer the security of an established organization usually fail, while those who can't stand working for someone else and have to do it their own way rack up lots of points on the "am-I-an-entrepreneur" test. Carol Hyatt, author of several forward-thinking career books, agrees that there's a big difference between "forced entrepreneurs" and "ones with mission."
Perhaps, but I've had a different experience. I thoroughly enjoyed working within companies owned by others. I especially loved the camaraderie of being part of a team of professionals until, that is, I found myself being asked to make a long-term commitment to a situation in which too many doors were closed. There'd be no chance for me to advance to full leadership of my business, or even my business unit. The value of my ownership share would depend on decisions in which I had no formal vote. I offered to buy out my business unit but was rejected. In that context, I became a "forced entrepreneur." I felt I had to start my own business.
Does this mean I'll fail? On the contrary, I believe that most of the qualities that made me a valuable and effective employee will also help me become a successful entrepreneur. It's a question of motivation. But just because you didn't open a lemonade stand when you were three, sell the most Boy's Life subscriptions or Girl Scout cookies, and make trouble at every job you've held since because you just had to be in charge, doesn't mean you can't start your own business today.
In fact, a successful New York City entrepreneurial program called Workshop in Business Opportunities (WIBO) is based on the inspiring premise that "most people are capable of starting and running their own businesses as long as they're taught necessary skills and are committed," says Rafael J. Gerena, co-owner of a small advertising agency, who completed the course.
