| Large, multinational corporations may
be the companies whose ups and downs seize headlines. But to a far greater
extent than most Americans realize, the economy's vitality depends on the
fortunes of tiny shops and restaurants, neighborhood services and factories.
Small businesses, defined as those with fewer than 100 workers, now employ
nearly 60 percent of the work force and are expected to generate half of all new
jobs between now and the year 2000. Some 1.2 million small firm have
opened their doors over the past six years of economic growth, and 1989 will see
an additional 200, 000 entrepreneurs striking off on their own. Too many of these pioneers, however, will blaze ahead unprepared. Idealists will overestimate the clamor for their products or fall to factor in the competition. Nearly everyone will underestimate, often fatally, the capital that success requires, Mid-career executives, forced by a takeover or a restructuring to quit the corporation and find another way to support themselves, may savor the idea of being their own boss but may forget that entrepreneurs must also, at least for a while, be bookkeeper and receptionist, too. According to Small Business Administration data, 24 of every, 100 businesses starting out today are likely to have disappeared in two years, and 27 more will have shut their doors four years from now. By 1995, more than 60 of those I00 start-ups will have folded. A new study of 3,000 small businesses, sponsored by American Express and the National Federation of Independent Business, suggests slightly better odds: Three years after start-up, 77 percent of the companies surveyed were still alive, Most credited their success in large part to having picked a business they already were comfortable in. Eighty percent had worked with the same product or service in their lest jobs. Thinking through an enterprise before the launch is obviously critical. But many entrepreneurs forget that a firms health in its pulse. In their zeal to expand, small-business owners often ignore early warning signs of a stagnant market or of decaying profitability. They hopefully pour more and more money into tile enterprise, preferring not to acknowledge eroding profit margins that mean the market for their ingenious service or product has evaporated, or that they must cut the payroll or vacate their lavish offices. Only when the financial well runs dry do they see the seriousness of the illness, and by then the patient is usually too far-gone to save. Frequent checks of your firm's vital signs will also guide you to a sensible rate of growth. To snatch opportunity, you must spot the signals that it is time to conquer new markets, add products or perhaps franchise your hot idea. |