The myths of starting a business

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. From Scott Shane on Kiplinger.com, here are four common myths of entrepreneurship:

It takes a lot of moneyto finance a new business

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.

Go to venture capitalistsfor 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 72 percent of the companies that got VC money over the past 15 or so years. VCs fund only about 3,000 companies per year, and only about a 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.

Banks don’t lend money to start-ups

Federal Reserve data shows that banks account for 16 percent of all the financing provided to companies that are 2 years old or younger. While 16 percent might not seem that high, it is three percentage points 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.

Growth depends more on your talent than on the business

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 20 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.

— MarketWatch