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A Reality Check

A Reality Check

Entrepreneurs are notorious optimists - they almost have to be, to take the risks required to start their own ventures.

I'm an optimist too, but I temper my sunny outlook with a large dose of realism. (It doesn't always save me from making dumb decisions, but it helps.)

I love assisting people who want to start their own businesses, and particularly relish hearing from those who took my advice and have succeeded beyond their wildest expectations.

But some of the inquiries I get seem to come from untempered optimists who need a reality check, or those who are so focused on bootstrapping that they may fall into the "penny-wise, pound-foolish" category.

One of my columns recently dealt with the latter possibility: A couple who run two businesses merged under one financial and legal umbrella. That's not a good idea, and not even necessary in this era of cheap, easy entity formation available online.

I recently got another question from a would-be entrepreneur who wants to start not one, but two companies: One in the television and film industry and the other in food production.

Ambitious, but tough. Starting one business is difficult enough, as any entrepreneur will tell you. And both the entertainment and the food industries are costly and complex to break into, particularly for those with no experience in or ties to existing businesses. It can be done, but it's not wise to do it simultaneously.

Another would-be entrepreneur wrote me to ask about starting a social networking site, tossing out as an afterthought: "Oh yeah, I have no money."

Well, it's easier to start a home-based, online company with no resources than it is to open a brick-and-mortar firm. However, it's always smart to save, beg or borrow startup capital before starting a company.

The number one reason businesses fail, the experts say, is because they don't have enough money to get them through the year (or more) it may take to become profitable. In most cases, it's better to hold off your startup until you get the information you need, do the research that will improve your odds and amass the cash that will allow you to set your company up right.





A Reality Check - To learn more about this author, visit Karen E. Klein's Website.

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Karen E. Klein
(Visit Karen's Website) Karen E. Klein is a Los Angeles-based columnist for Business Week and The Los Angeles Times. She has also written for Newsday, The Chicago Tribune, Newsweek, The Los Angeles Daily News and Sunset magazine.

Karen E. Klein is a Gold author on EvanCarmichael.com
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