When Betsy Damos scraped together $1,500 to start her own textile design and production business in 1970, making it in New York was part of the dream. Failure wasn't. Within a year she closed shop.
Nine years later, unable to shake the desire to own her own business, Damos left a tenured position as a college professor to try again. Today, at 43, she is sole proprietor of Damos Textile and Print Studio, a small storefront in the backside of a King Street building in Alexandria where she handprints and markets her originally designed materials.
Damos says her 1970 misfire was "absurd -- I was truly undercapitalized." Knowing better what to expect, she bankrolled her second effort with $25,000 in personal savings. Still, the unforeseen problems occurred. "You have things happen each week that could make you quit," she says. "In the beginning, there's probably a daily occurrence so discouraging that it's enough to make you stop right then. You have to have stamina or stubbornness."
After more than three years of keeping his computer software programming and publishing firm afloat, Craig Barzso, 33, says, "There are plenty of times I've looked in a mirror and said, 'It's over. I've failed.' Then I get up the next morning and I'm back on my feet." To survive, Barzso has had to revamp the original idea and product of his Bethesda-based Concept Development Associates Inc. four times in three years.
Like Damos and Barzso, an increasing number of Americans are testing their business endurance, trying their hands at being their own bosses by opening small stores, marketing novelty products, providing innovative services or operating direct-mail sales, often from basements or makeshift offices.
Entrepreneur chic has consumed America.
During the 1980s, the word "entrepreneur" has been headlined, defined and analyzed more than at any other time since this nation first dreamed the American dream. Even President Reagan has referred to the decade as the "Age of the Entrepreneur."
The national media have also fanned the fire. Entrepreneurial success is good news, typically profiled as if somebody had won the big lottery. Even more indicative of the trend, however, is a new crop of specialized publications, slick and serious magazines such as Inc. and Venture that every month provide how-to's and how-not-to's for budding businesses. As Venture boasted last year, "By almost any measure, the 1980s are shaping up as the most entrepreneurial decade in U.S. history."
Statistics further confirm the phenomenon. The Little Entrepreneur That Could has practically remodeled the American economy in the '80s: Despite the ups and downs of the first half of the decade, almost 3 million new corporations opened their doors -- a record-breaking average of about 650,000 startups each year, according to Dun & Bradstreet, a business research firm. The number of self-employed Americans, according to Department of Commerce figures, has jumped from 8.3 million in 1979 to near 10 million last year. Public policy makers have turned almost giddy with support since an MIT survey disclosed that new businesses were creating 80 percent of all new jobs.
Small business has become the big business of the '80s. But there is a down side, a nightmare that awaits the majority of these American dreamers.
About eight out of 10 new businesses fold in five years or less -- and the majority go out of business in the first 12 months, reports Michael E. Gerber, president and cofounder of the Michael Thomas Corp., a small-business development firm in San Mateo, Calif., that claims to have helped "thousands" of San Francisco Bay area firms stay on their feet.
Gerber, the author of The E-Myth: Why Most Businesses Don't Work and What to Do About It (Ballinger, $14.95), blames much of that failure on people starting up new businesses who suffer "from an entrepreneurial seizure" but have no clue to what it takes to succeed.
"Most small-business heads start their dream businesses after becoming frustrated working as 'technicians' for someone else," says Gerber, whose corporate slogan is "Bringing the Dream Back to American Business." "They think that because they understand the technical work of a business, such as printing or poodle-clipping, they will understand a business that does that kind of work. But they don't understand how to run a business that works."
While tracking entrepreneurial nose dives is tricky business because of buyouts, restarts and deceiving statistics, most startups do stop soon after, confirms Jan Zupnick, president of the Entrepreneurship Institute, a nonprofit organization headquartered in Columbus, Ohio, that tries to escort entrepreneurs past the pitfalls.
"One of the disadvantages of all this hype of entrepreneurship is that everybody thinks they ought to go out and do it," says Zupnick, "but it just isn't that easy. The problem with this groundswell of activity is that a lot of people are getting into it who shouldn't be. Entrepreneurism isn't for everybody."
One survey suggests fallout from half a decade of rampant entrepreneurship has already begun. Gilbert Tweed Associates Inc., a national executive search firm based in New York, analyzed the unsolicited resume's it received last year. Of about 2,000, at least a third came from people who were self-employed, consultants, owners of small businesses and entrepreneurs, all asking assistance in finding their way back into the corporate rat race.
"Either they're just not hacking it, they can't make it, or they don't like it," says Lynn Gilbert, president of the company she cofounded 13 years ago. "To be an entrepreneur is a very lonely life. Many of them grew up in corporate America where they had secretaries, they had assistants, they had departments, they had businesses all kowtowing to them. And now they're out there pumping their own gas, typing their own labels, selling their own products.
"But there are enough of the good stories to convince people to take the risk. When they get out there it's just a different world than they're used to. Now they're running the show. Now it's their baby. But they don't like changing the diapers."
Kathy Kolbe is convinced that without the right "mind-set," being your own boss "is not always what it's cracked up to be." Profiled in Time magazine's 1985 Man of the Year issue as one of "Seven Who Succeeded," and honored by President Reagan as among the nation's Small Business Persons of the Year, Kolbe started 10 years ago with $500 and a spare bedroom as her office. Her hunch was that there was a market for educational tools and materials to teach creative thinking and problem-solving to gifted children.
In 1979, Kolbe mailed out a catalogue of her products to more than 3,000 teachers and parents. Within 2 1/2 years, she made her first million dollars; within four, she reportedly was grossing three times that annually.
"If you like doing 10 things at once and doing them yourself, then you have the entrepreneurial mind -- if you don't, you'll go nuts," says Kolbe, 46, who labels her Phoenix-based firm, KolbeConcepts, a management consulting and thinking skills company.
Her latest venture is writing a how-to book for entrepreneurs, and she is taking her message on the road nationwide -- along with a caveat: "There are so many pitfalls . . . When I give a speech about entrepreneurship, I tell people there are more reasons than we have time to talk about why not to be an entrepreneur."
The No. 1 problem that too few expect, says Kolbe, is a small-business fact of life: You are the business. "You have to milk the cows every day," she says. When an automobile accident hospitalized her in August for four months, her business lost 50 percent of its annual sales, she says. "Everybody else can get sick, have a birthday, a holiday, a day off -- but you can't."
Betsy Damos says she knew her design company was starting to progress when she first felt she could take off an occasional Sunday. "Doing it all" is a major topic of discussion among the 110 members at the monthly meetings of the District's Chapter of the U.S. Entrepreneurship Network, sponsored by the Entrepreneurship Institute, says Zupnick. "Not everybody can live up to all the demands. Not everybody can work 16 hours a day for the first couple of years and like it. And the joke is that you're lucky if you make minimum wage."
Money is another major hurdle for the off-and-running entrepreneur. Like Kolbe and Damos, most first-timers are underfinanced. Even the experts aren't immune. The Foundation for American Entrepreneurship, a nonprofit corporation, was established last year in metropolitan Washington to "provide future entrepreneurs with the know-how they need to make it," according to its brochure. Its first major seminar was scheduled for early November on Capitol Hill. Sen. Steven Symms (R-Idaho), known as a friend of small business, was to give the opening address. Cable TV maverick Ted Turner was to be the keynote speaker and Kathy Kolbe also was scheduled to speak.
"We were told the seminar wasn't to be held because they had overextended themselves and they couldn't meet their bills," says Kolbe of the canceled event. "It's a new foundation and the seminar went beyond the financial scope of what they had targeted," says a spokesman for Symms. FFAE president and founder John F. Reed didn't return telephone calls. But in the Foundation's brochure, he attests to the problem: "I know how difficult it is to make it as an entrepreneur. Even if you have a great idea or product, it's extremely difficult to maintain the tenacity to see it to fruition."
The greatest failing of most entrepreneurs, however, is poor planning, says Zupnick. "Failing to do the homework before they start," he explains. "Typically, somebody says 'I wanna make chocolate chip cookies and I've done my preliminary research and it says people want these things.' They open the doors and then start thinking about how to market the cookies. By then, you've got to pay bills, so you're too busy to plan because you're doing."
Craig Barzso agrees. "I may differ from a lot of other entrepreneurs in that I spent a lot of time laying out the groundwork, making my plans and testing the market," he says. Careful consideration convinced Barzso that a market would soon develop for computer software products on the topics of cooking, wine and travel. From his $7,000 investment in 1982, he so far has produced 30 titles, including the software version of the Mr. Boston Bartender's Guide, employed 14 people "during the busy season," and has "made great gains in terms of corporate net worth." He admits, "I never made less money in my life since I was 16. But in terms of satisfaction, I've never been more satisfied in my life. It is succeeding -- and I set it in motion."
Family life is another consideration for the would-be entrepreneur. But opinions on the influence the business has on relationships vary.
Kolbe, who raised two children as a single parent while developing her business, insists, "The entrepreneurial person is not a workaholic. They are socially well-adjusted people, very outgoing, because they are pleased with what they are doing and pleased with themselves. It's not that you don't get tired, but there's an energy when you believe in what you're doing . . . They have the energy to put into a relationship."
Says Zupnick, "The old myth is that entrepreneurs can't be married -- they're either single or divorced. The fact is that most of them I come across are married. The business is like another marriage: If the family doesn't buy into that other marriage, it will destroy it. If they support it, it won't."
When Craig Barzso goes home, he puts as much of the business as he can behind him. He tries to keep the two lives distinct and says entrepreneurship hasn't taken a toll on his personal life.
But, he adds, "it is almost like a religious commitment. You are going to go to bed thinking about it. You are going to wake up in the morning thinking about it."