1. Are You Willing and Able to Bear Great Financial Risk?

Many calls came in after last week's posting of the 10 questions for entrepreneurs. So this week's posting will include excerpts for each question as taken from the Wall Street Journal's Feb. 23, 2009, edition. So we begin with question 1: "Are you willing and able to bear great financial risk?"

Roughly half of all start-ups close within five years, so you must be realistic about the financial risks that come with owning a business -- and realize that you could very well lose a sizable chunk of your net worth.
Consider how much you'll have to ante up and how losing it would affect your other financial goals, such as having a sound retirement or paying your kids' college tuition. Weigh the importance of starting a business against the sacrifices you might face.
Entrepreneurs should be sure that "if they lose this capital, it either won't destroy their financial situation, or they can accept the concept of bankruptcy," says Scott Shane, an entrepreneurship professor at Case Western Reserve University in Cleveland. "Some people thrive on the financial risk; others are devastated by the thought of losing even $10,000."
And don't assume you'll be able to lower your risk substantially by finding investors. Less than 10% of start-up financing comes from venture capitalists, angel investors and loans from friends and family combined, Prof. Shane says. And that's true even in good economic times. Banks, meanwhile, often won't lend to start-up founders without a proven track record. When they do, they generally require the founders to guarantee the loan or credit line with their personal savings or home -- an incredibly risky proposition.