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Health-Care Blues

Here's a health scare: Premiums for employer-sponsored health insurance at small companies increased an average 12.5% in 2000, the largest increase since 1992, says a survey released by the Kaiser Family Foundation in September. "This is as dramatic an increase as we've seen," says Larry Levitt, vice-president of the foundation and the study's co-author. "This is bad news for employers and worse news for workers." Indeed, 42% of small firms say that next year they will likely have their employees pay a bigger share of premiums.

With costs rising and the economy slowing, the level of health coverage at small companies is expected to fall after three years of growth, says Paul Fronstin of the Employee Benefit Research Institute in Washington. Already, the percentage of small companies offering any health benefits has sunk from 67% in 2000 to 65% in 2001. The worst part is, there's no cure in sight. Who jumps in when things get busy? More than 83% of entrepreneurs put in extra hours themselves, says a National Federation of Independent Business poll, while just 63% say employees do. "For employees, working overtime gets old in a hurry," says survey author William J. Dennis Jr. Ownership's grand, ain't it? Aspiring entrepreneurs usually want lots of guidance--and plenty of cash. The lucky ones get both from "angel investors," who funnel $30 billion into new companies every year.

But how do you win the attention of a prominent angel? In their new book, Every Business Needs an Angel (Crown Business, $27.50), Washington (D.C.) angel investors John May and Cal Simmons share insight on how angels size up entrepreneurs. Their first concern: "We bet on the managers," says Simmons. "A good idea with a bad leader isn't going anywhere."

Simmons, 50, who has founded 12 companies over the past two decades, says to make sure your pitch carefully balances hype with realistic projections. Don't hide potential weaknesses--your investors will find out sooner or later. And, he adds, "keep your ego in check," or you'll lose out on the angel's experience, input, and networks. Not much point in having angels, after all, if you don't let them watch over you. Joel Getzler, a New York turnaround consultant, on how to prevent management crises:

What are the alarm bells that signal a crisis is at hand?

A crisis usually means a cash crisis, which is a self-evident problem. But it's often caused by the owner's mismanagement. It's the same thing if your inventories are high and you're still buying or if you can't make payments to vendors and you haven't negotiated new terms yet.

What kinds of management mistakes lead to a crisis?

Entrepreneurs are too close to their businesses and tend to be egotistical. The same nature that helped you build a business comes back to haunt you because you can't look at your business objectively and admit your own mistakes.

What can entrepreneurs do to prevent a crisis from taking root?

Surround yourself with two or three people you really trust--ideally other business owners. They should be people you can talk to about your business and who ask pointed questions that you're then willing to answer honestly. Entrepreneurship is all about change. So the National Commission on Entrepreneurship decided to study how entrepreneurs themselves have changed over the years. A lot, it turns out. In 1917 the median age of successful entrepreneurs was 40, vs. 26.5 in 1997. Why? They had to accumulate savings--and so, not surprisingly, they had more experience in their industry. Years ago, starting a business was for those with few other options. Today's entrepreneurs usually have myriad opportunities, and experience isn't a defining factor. As for savings, entrepreneurs now come from wealthier backgrounds. Younger, wealthier, less hidebound--it might just add up to new and improved. Employees at small outfits say on-the-job stress can come from many sources

51% of small-company employees feel stressed by their workload

29% cite job security as a source of workplace angst

16% are worried about issues of fair pay

2% say they suffer stress from a relationship with a peer or supervisor

Data: ComPsych Corp. Net Gain: Percentage of small-biz owners who say their Web site has increased profits: 8.4%

Data: National Federation of Independent Business

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