SOUTHERN CALIFORNIA JOB MARKET : PART TWO: MAKING THE BREAK : Starting a Business Takes Planning, Capital

Every year, thousands of employees decide that they could do it--whatever “it” is--better, faster, cheaper than their employers, and they strike out on their own. Thousands more realize that they want to try something completely different, and they also start new businesses.

And, yes, a great many, perhaps a majority, fail.

But the ones who succeed often find greater satisfaction, compensation and self-esteem than they’ve ever had.

Are you considering going out on your own? If so, you can improve your chances for being in the successful minority by thorough and thoughtful preparation. “Write a plan for yourself, even if you can’t afford to pay a consultant to do one for you,” says William A. Cohen, professor of marketing at California State University, Los Angeles, and head of the school’s Small Business Institute.

“Put everything on paper--your goals, what you’ll need, where you expect to get funding. To get a loan of any kind, you’ll need the plan, anyway,” Cohen says. “I don’t see how you can get there without knowing what ‘there’ is.” Cohen advises analyzing your competitors, formulating a definite strategy and a schedule for implementing that strategy and studying your objectives and financial requirements.

“Then go ahead and take the plunge, if it all looks good to you,” Cohen says. “Some people plan for years and years and never do it--but more people jump too soon.”

Still others have the best of plans, yet fail because of circumstances completely out of their control.

Ronald F. Lipp was a partner in a large Chicago law firm who decided, in the early ‘80s, that he was “bored to tears.” After doing some solid planning, he opened a small winery in Mendocino County, Calif., with his partner, Michelle Turner. But in his planning he hadn’t been able to foresee one critical factor.

“Our timing was lousy,” Lipp recalls. “The wine business had had 15 years of upward growth, where if you had a good product it would come close to selling itself. In 1982, the year we went into the marketplace, the wine industry ran into a brick wall.”

Lipp says a combination of exchange rates that made French wine extremely cheap and a sudden waning of the wine fad spelled doom for their new business.

“Ten years earlier, we would have been terrific,” Lipp says.

William Cohen’s book, “The Entrepreneur and Small Business Financial Planner,” published by John Wiley & Sons, is a handy paperback that describes everything from the legal aspects of going into business (obtaining appropriate licenses, deciding whether to incorporate, and so on) to bill collecting and sources of capital.

One of the most important considerations is to have plenty of funds--and, since that amount varies widely from business to business, only you will be able to determine just what that amount is.

For a rule of thumb on how much money you’ll need, Cohen says, figure that you’ll require twice as much capital and have half the sales of your most conservative projections. Optimism can be your worst enemy when coming up with your funds.

Ron Lipp echoes that advice: “We had enough capital for things to go right or for just a few things to go wrong, but not enough to sustain us for substantial down periods,” he says.

“Any set of plans needs to be perceived as a rough approximation, and you must realize that they will be wrong,” Lipp says. “The only thing you won’t see is how they’ll be wrong. So you have to build in contingencies of what to do when things do go wrong.”

By far, your best source of capital is your own money. “Friends and family are good too, but both are also dangerous,” Cohen says. He points out that such borrowing can carry a high psychological cost.

He suggests trying some unconventional sources of funds, including suppliers. “Going to the bank is the toughest,” Cohen says, “and venture capitalists want to see track records. They’re looking for the big win: Increases of 500% in only three to five years. Most businesses don’t do that.”

How do you know if you have a good idea for a new business? “Get an opinion from experts,” Cohen recommends. “Figure out who’s going to buy what you’re selling. . . . If it’s going to be marketed in a department store, make an appointment to see the buyer while you still have a job.”

He suggests printing business cards that identify you as marketing representative instead of president--you’ll seem more professional and buyers may take you more seriously.

So, your ducks are in a row, you have a product or service you’re sure will sell and a business plan that considers every aspect of your new venture. Before you give up that steady paycheck, consider one last, and exceedingly important, factor: Your personality.

“The most successful entrepreneur is someone who is self-motivated, who can create his own structure, who isn’t relying on someone else to tell him what to do and when to do it,” says Barbara Langer Weiss, a Los Angeles psychotherapist. If you have come from a family that doesn’t take risks, you may have a tougher time than a person from a family where one or both parents were self-employed.

“I’ve seen some people who want to go out on their own but they have trouble because they have an internal voice, an internal parent, saying: ‘Get into something with more stability,’ ‘Are you going to make it?’ ‘What do you think you’re doing?’ ” Weiss says.

Cohen says the successful entrepreneur is someone who values achievement--and that’s not necessarily someone who’s motivated by money. “Workers who do well in large companies are primarily interested in power,” Cohen says. “Entrepreneurs have more internal motivation.”

Ethan H. Margalith, 33, founded Starving Students, a Los Angeles-based household moving company, when he was 17 and indeed a starving student. He paid his way through college and law school with his business and discovered, after graduation, that he couldn’t imagine working for anyone except himself. Starving Students now has 400 employees and offices in 25 locations.

“You cannot be afraid to take risks; you have to be very goal-oriented and motivated on your own,” Margalith says. “I prefer to decide my own destiny. Personally, I never thought about the money.”

Ron Lipp, who is back to a successful law practice in Sacramento, says that a little Shakespeare is in order if you’re considering taking a plunge into self-employment.

“People need to understand their motivations,” Lipp says. “If they’re highly colored by a sense of romanticism, they need to know that. Maybe they should still go ahead, but at least they’ll understand what’s driving them. First of all, they have to be true to themselves.”