Busting myths about starting a business

NEW YORK – If you’ve been thinking of starting your own business you may have some doubts that you can make it work. According to a study by the U.S. Small Business Association, only two-thirds of all small business startups survive the first two years and less than half make it to four years.

But before you let doubts quash your dream, take some time to examine them. They might turn out to be not true. From Scott Shane on Kiplinger.com, here are four common myths of entrepreneurship:

It takes a lot of money to finance a new business.

Not true. The typical startup 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.

Venture capitalists are a good place to go for 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 72 percent of the companies that got VC money over the past 15 or so years.

Banks don’t lend money to startups.

Federal Reserve data shows that banks account for 16 percent of all the financing provided to companies that are 2 years old or younger. That’s three percentage points higher than the amount of money provided by the next highest source – trade creditors – and is higher than many other sources everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors and government agencies.

The growth of a startup depends more on an entrepreneur’s talent than on the business he or she chooses.

Actually, the industry you choose has a huge effect. Over the past 20 years or so, about 4.2 percent of all startups 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 startups in the hotel industry and 0.007 percent of startup eating and drinking establishments made the Inc. 500.