From: rh@smds.UUCP (Richard Harter)
Newsgroups: soc.men
Subject: Re: Smelling The Roses (was Re: Companies can afford it, right?)
Date: 12 Apr 92 04:03:46 GMT
Organization: SMDS Inc., Concord, MA

In article <1992Apr11.152739.15697@midway.uchicago.edu>, learn@gargoyle.uchicago.edu (William Vajk (igloo)) fulminates ignorantly:

	-- hey, you editorialize on the quote line and I'll do the same

> In article <1163@smds.UUCP> rh@smds.UUCP (Richard Harter) rambles:

> >Ah statistics.  That statistic is true.  However it includes *all*
> >startups.  The majority of businesses that have anything remotely
> >resembling a reasonable business plan succeed.

> Of course, "reasonable business plan" is measured by success. It was
> not reasonable if the business failed, right?

Wrong.
Er, do you have any notion what a business plan is?  I thought so.
A business plan describes how you mean to run a business.  It covers
little details such what kind of business, how much capital is required,
what the markets are, what resources are currently available, what kind
of competition there is, and so on.

> >It isn't all that hard to do a moderately successful startup 
> >[particularly if you don't have venture capital.]

> It is extremely difficult to do an even borderline successful startup.
> If it weren't difficult, there would certainly be many many more attempts
> than there are presently.

...
> >Again, misleading.  Most of the failures are in things like family
> >restaurants and the like. 

> Did you wish to restrict startups to high tech or something? I won't
> bother to ask why, because there is, IMO, no validity to such a 
> restriction. Indeed, restricting to high tech makes the statistics
> even worse. Consider those who have a dream and actually put together
> a plan, then cannot raise the capital necessary. Many of them devote
> serious time to their venture, and I consider that once the plan is
> created and pursued, the venture has started. The likelihood of a
> high tech startup getting to the stage of actually operating with
> marketable product is much lower than the family restaurant. Yes, the
> failure rates are skewed as there are many uncounted.

Well, you being a smart fellow and all that, I'm sure you must be right
but the facts don't bear you.  The rate of failure for high tech startups
is about 25% [survival 5 years after startup] -- cf _Entreprenurs in High
Technology_, Oxford University Press, 1991, Chapter 9.  The overall
failure rate for startup businesses of all kinds is ~90% (SBA statistics).
The overwhelming majority of these are small, single-proprietor retail
establishments.  The single most common cause for failure is inadequate
capital, which accounts for over fifty percent of the failures.  The
second most common cause is bad business practices [e.g. failure to file
taxes, gross inventory mismanagement, etc.]  When one factors out
incompentency and inadequate capitalization a majority of startups of
all kinds succeed, with the understanding that "success" means survival
rather than major growth. [Again SBA studies.]

Of course, success rates are lower if you count as failures all people
who think about starting a business and never do.  Sort of like counting
people who never went in the water as deaths by drowning because they
didn't swim successfully.

-----

Bill goes on -- he says some sage things and some silly things.  But
they are rooted, IMHO, in a substantial ignorance of economics, sociology,
and any real understanding of how institutions work and what they can and
can't do.  I'm sure he thinks the same of me.  And, to tell the truth,
I think discussing issues with him is a waste of time, and I ain't agonna
do it.

It's all yours Bill.  Just reply and you have the last word.
-- 
Richard Harter: SMDS Inc.  Net address: rh@smds.com Phone: 508-369-7398 
US Mail: SMDS Inc., PO Box 555, Concord MA 01742.    Fax: 508-369-8272
In the fields of Hell where the grass grows high
Are the graves of dreams allowed to die.