Ten Entrepreneurship Myths

1. It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.
2. Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
3. Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
4. Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
5. Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
6. Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are most likely to fail.
7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.
8. Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
9. Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.
10. Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.

[Thank you, Scott Shane]

Perfect Press Release

Trait #1 – Make sure the organization you belong to is very clear.  Placing this information at the top is a good start.
Trait #2 – If your press release doesn’t contain news, you may as well not even send it.  Promise news at the top with “NEWS RELEASE” in a larger font than the rest of the press release.
Trait #3 – One of the main traits of news is that it is current.  Since you are offering news, make sure it is as current as possible.
Trait #4 – Get the name of the person you are sending your press release to and place it in a prominent position.  Be sure to double check the spelling.
Trait #5 – Provide a specific contact person with a phone number where they can be reached. Don’t make contacting you a challenge.
Trait #6 – It’s important to inform your contact when specifically you’d like your press release to be run.  If you don’t have a specific date, be sure to allow for immediate release.
Trait #7 – Just like your other marketing materials, headlines are a must.  Include a newsworthy angle in your headline for best results.
Trait #8 – Where is your press release being released from?  It’s always best to use a local angle, so try to place the story from a local perspective.
Trait #9 – Try to tell your entire story in the first paragraph.  If everything else is cut, at least you got your main points in.
Trait #10 – Turn the story in a personal angle as soon as possible.  Use quotes from known individuals if possible.
Trait #11 – Use subheads to highlight important parts of your story.  People are busy and only read the parts that interest them, so include subheads for each of your target markets.
Trait #12 – Beware of sexism and humor.  What is funny to some groups may be offensive to others.
Trait #13 – Use quotes from each of your target markets.  Be sure to include quotes from groups that read the publications you have targeted with your press release.
Trait #14 – Use later paragraphs for dispelling or confirming rumors. It’s always best to cover your bases with a little objectivity.
Trait #15 – Include quotes from senior executives to build credibility. News releases are taken a little more serious when the boss’s name is on the line.
Trait #16 – Could the local community perceive your news in a negative manner?  If so, highlight the potential positives.
Trait #17 – If promising a specific future result, be flexible.  Not reaching your specific results on time will always bring bad publicity.
Trait #18 – If space permits, allow your executive to inject some human interest to the story.  Use these quotes as a transition back to a more positive tone.
Trait #19 – Is there an executive that matches the demographics of your target audience?  If so, place them in your target audiences shoes to close the story with added trust.
Trait #20 – The notation “-30″- is the standard way of concluding a press release.  Keep your press release to one page!
Trait #21 – Including photographs is a great way to gain more attention for your story.  Make sure the photos you submit are easily reproducible and will hold their quality in both color and black and white.
Trait #22 – If you have other media you’d like to include or have available, be sure to provide the information here.  The more peripheral media you have available, the easier it is to use your press release in a story.
The most important things to remember are to include a newsworthy angle that is of interest to the local community or specific readers of the publications you send your release to.  By including as many of these traits in your next press release, you will drastically increase the likelihood of gaining some free publicity for your small business.

[Thank you, Prevail PR]