The New Horatio Algers

The economy may be on high-level dead center as the analysts like to say, but a bright new crop of small businessmen never had it so good. Even though the nation's 500 largest corporations account for more than half of all manufacturing and mining sales, plenty of room remains for the little man with a big idea, a moderate bankroll and some business sense. Those who get ahead fill specialized needs and are more flexible and faster moving than the giants. "It's no use trying to meet General Motors on all fours," says the Bank of America's Richard Oddie. "But the ambitious, competent man will find a soft spot to go through."

Searching for the spot, a record crop of 181,538 companies started last year. Most of them are destined to make it. Business failures are down 8% so far this year. Frequent cause of failure: lack of sales skill.

Benevolent Bankers. Washington, ideologically committed to the small businessman, is treating him even more tenderly than usual. Defense orders to small business have risen by $1 billion to $4.6 billion in the past year. And financing is not as difficult as it once was. Newcomers benefit from the easy-money policies that the U.S. has pursued for the past 2 1/2 years. There is also an increasing trend among large corporations to buy minority stakes in promising small companies to achieve diversification, tax write-offs or future profit potential.

Even the big banks, seeking new borrowers for their embarrassingly ample supply of deposits (TIME, July 13), no longer give the cold eye to promising entrepreneurs, so long as they have thought-out plans. Chicago's David and Henry Chambers recently organized a company to build prefabricated roof trusses, went to the big First National Bank with a comprehensive projection of sales, costs and future capital requirements. The First National not only agreed to future financing, but also recommended an accountant to handle the brothers' bookkeeping.

Magic Words. "Somehow," says David C. Buell of Boston's Small Business Administration office, "a company with the word 'electronics' or 'nucleonics' in it always seems able to get some private money to start up, even after the bad scare this spring in the market." There are also other fields where a capable manager can ride high on a good idea:

> In Los Angeles, former chiropractor Donald M. Petersen, 35, was fascinated by the built-in vacuum cleaners at a Hilton hotel, boned up on the subject, started the Central Vacuum Corp. manufacturing built-in vacuums for houses. It now has sales of more than $1,000,000.

> In Albuquerque, N.M., three young, low-salaried psychology professors have prospered from a new technique in teaching. Their 16-month-old General Programmed Teaching Corp., producing programmed materials for teaching machines, should gross about $2,000,000 in the coming year.

> In Lawrence, Mass., Wharton School Graduate Paul Goldman devised a technique for making one-piece molded plywood furniture. His Plycraft, Inc. has sales exceeding $2,500,000 and recently installed the seats in Manhattan's new Lincoln Center.

> In Oakland, Calif., Engineer Rudolph Hurwich, 41, and Accountant Leo Helzel, 45, bought the rights to a hand-operated labeling device, formed Dymo Corp. After four years of rapid diversification, Dymo has sales of $10 million.

> In Miami, Henry Keller, a onetime window salesman, scraped together $8,000, formed Air Control Products to sell aluminum windows, sashing and patio furniture. Keller concentrated on cost cutting and simplified production, last year rang up sales of $37.5 million.

Plop, Plop. Small businessmen find they have little to fear from the corporate Goliaths. "General Electric and Westinghouse," says Donald Petersen, "have to spend $1,000,000 to set up a production line. They have to have those appliances coming off the end, plop, plop, in pastel blue and pastel yellow. Then they have to spend $3,000,000 to advertise and convince the homeowner he should buy in pastel blue or pastel yellow."

Small businessmen have more to fear from speculators who prey on them when they are desperate for capital. Says Petersen: "There are always some people who say 'Look, I'll put up $100,000 or so. You take 49% of the action and everything will be fine.' " The young small businessman is torn between his need for more money and loyalty to original investors; often he takes the cash and loses control.

For all their growing pains, small businessmen who make the grade find the experience stimulating as well as profitable. They frequently command more employee loyalty than big corporations. Even without bonuses or stock options they are able to hire capable executives who have been stymied in giant firms. Whatever the risks, the American dream still attracts, and so do the opportunities.

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