Exposing myths about small businesses

We all have beliefs about starting and operating a business. Many of the beliefs, like that small businesses generate a significant amount of our countries' Gross National Product, are true. Others are small business falsehoods. Listed below are my favorite small business myths.

* Myth 1: Over 95 percent of small businesses fail.

In the 1990s there was a report that stated 95 percent of all new restaurants fail. Consequently we hear this statistic quoted regularly about all new businesses.

The truth is two-thirds of new employer firms survive at least two years, and over half survive at least four years according to the Small Business Administration. In addition, owners of about a third of the businesses that closed considered themselves successful, for reasons including retirement or graduating from college.

* Myth 2: The government will give you cash to start a business because you are creating jobs.

There aren't any government programs that give people money to start for-profit businesses. Loans for start-up businesses tend to be the toughest loans to get. The SBA guaranteed loan program is how the government helps small businesses get "guarantees" to start their business, but the capital doesn't come from the government. In 2005 more than $50 million in SBA loans were provided per day to U.S. small businesses.

* Myth 3: Small business owners are rich and get to take it easy.

Business owners tend to be a hard working bunch. According to a recent Gallup Poll small business owners work 6 day work-weeks and average 52 hours per week. Despite this hard work 84 percent of those surveyed said they would do it again.

* Myth 4: I'm a good cook so I should start a restaurant.

There is more to running a restaurant than having a good recipe and being able to cook well. Restaurateurs do the buying, budget, do payroll, manage employees and taxes. As owner they generally don't get to cook much and when they do, they are under pressure and distracted by employee difficulties.

* Myth 5: Failure is bad.

I have never spoken to a successful businessperson who didn't have great stories of mistakes and failure about his or her path to success. Failure is part of the process of success. People learn best by trying. Studies at Tulane University suggest the average entrepreneur fails 3.8 times before making it work. Entrepreneurs are ready to take risks -- and fail -- but keep on going.

* Myth 6: Small business owners, with few employees, don't really have to worry about federal and state labor laws.

This assumption opens the door of liability to small business owners. Regardless of the number of employees, employers have an obligation to follow state and federal laws to protect their companies and their employees. It is up to the employer to stay informed with all the laws and regulations that apply to employment and how they impact any businesses.

* Myth 7: You need lots of money to start a business.

The average business in the U.S. starts with less than $5,000. Getting money is not usually what stops people from going into business. Entrepreneurs discover that money is a planning issue, not an obstacle.

* Myth 8: Money will fall out the sky if you have a great business idea.

The idea is much less important to your success than your determination and hard work. Investors may agree that you have a good idea, but won't invest until they have seen your market research, budget, management team and other elements of your business plan.

You can get free help planning, starting and expanding your small business at the Napa Valley College Small Business Development Center. Call us at 253-3210.