(FORTUNE Magazine) – THE BEEFY REDHEAD was down on his knees examining a mechanical filing system in a big Wall Street investment house. He had grease on one sleeve -- transporting and installing files is rough work. An investment banker (Harvard Business School, '76) sauntered by. The redhead turned around, and the banker was shocked to see it was his Harvard classmate, Bill Elliott. Poor Bill. The banker made appropriately sympathetic remarks, and the two began talking. It turned out that Elliott, 37, had done well in the corporate world. But he had chucked it all to run his own small trucking company from a battered office in a warehouse near the New Jersey Turnpike. He has to be ready to do anything, including getting grease on his clothes when estimating a job, as he was doing that day on Wall Street. By the end of the conversation it was the banker who needed sympathy. He confessed he was bored to death stuck in an office, analyzing reports. Meanwhile, poor Bill Elliott is having the time of his life. Like many other executives who thought a corporate career was the only way to go, Elliott has tried it and rejected it for the exciting, nerve-racking life of the entrepreneur. In many ways that choice is more attractive than ever. Managers figure they can't bank on tenure at Grand Old Corp. anymore -- a wave of cost cutting could wipe out any job at any time. And with so much fat trimming everywhere, finding a new job could be mighty tough. Besides, with more two-income families today, it is easier for one spouse to start a company while the other keeps earning. Some managers don't reevaluate corporate life until they are pushed out of < it; of those, an increasing number decide not to jump back in. Outplacement companies hired by corporations report a big increase in the number of clients who start their own businesses. Stephen G. Harrison of the New York outplacement firm Lee Hecht Harrison says that while 10% of his company's clients had thoughts of becoming entrepreneurs five years ago, today the number is up to 30% -- although only 10% to 15% go through with it. To a corporate desk slave who lets his or her mind wander, it can all seem nearly irresistible: the independence, the sense of purpose, the vast rewards from a tiny investment (Didn't Ross Perot start Electronic Data Systems with $1,000?), all in an age that worships entrepreneurs. Recent experiences of corporate rebels douse that vision with cold reality. But they also illustrate that with luck and the right skills and a good idea and enough capital and extraordinary persistence, the rebel's dream can work. When he gives up the trappings of a corporate job -- the secretary, the big office, the expense account, the lunches, the services of lawyers and accountants -- the new entrepreneur embarks alone on a sea of barely imaginable dangers. His life changes fundamentally. Steve Harrison has started his own businesses and counsels others who want to. ''It's a different way to live,'' he says. ''You learn to be scared and act like you aren't. You have no vacations. When you're home having dinner you're not really there, and when you are sleeping you aren't really sleeping. Your soul is at stake. The sense of responsibility is every bit as imposing as a new father's.'' The risks are terrifying. Venture capitalists say up to half of all new companies fail in their first year and 80% go under within five years, but no one knows the precise odds. Start-ups backed by venture capitalists seem more likely to succeed. Alexander L.M. Dingee, president of Venture Founders of Lexington, Massachusetts, says his firm finances 1% or 2% of the deals it sees. Of every ten it backs, from one to three make it big, about the same number fail, and the rest just get along. ONE REASON the odds are so bad is that many entrepreneurs start businesses for unbusinesslike reasons. When an executive loses or gives up a job, he may be so mad he swears he will never again work for a big company, or he may harbor some idealized notion of turning a hobby into a business. But it takes a lot more than anger at a former employer to create the missionary spirit needed in a start-up. As for hobbies, President James C. Cabrera of the New York outplacement firm Drake Beam Morin scoffs, ''If everyone who had come to us who loved boating had opened a marina, we'd have every lot on the Atlantic, the Gulf, and the West Coast covered by now. If you open a marina because you love boating, you're going to get very frustrated because you will be running a business while everyone else is out boating.'' Restaurants are another popular folly -- dreamily attractive, horrendously demanding, and notoriously short-lived. In light of these facts, George Finlayson, 45, and his wife, Marjorie, may seem insane. They bought a combined marina and restaurant in 1983, when his position running a service department for Ingersoll-Rand in New Jersey was consolidated with others. But the Finlaysons are making a go of their venture because for them it is strictly a business; they are not boating or cooking enthusiasts. ''We're betting everything we've got to build a business,'' says Finlayson. They took their golden handshake from the company, combined it with savings and loans, and put $460,000 into a rundown establishment in a nice area on Lake Sinclair, a short drive southeast of Atlanta. The restaurant had been closed and the marina was a junkyard, but the Finlaysons started rebuilding. Business picked up. The boat storage area, only one-third full when the Finlaysons moved in, is now full, and they have just borrowed $65,000 to expand. They recently bought a boat showroom nearby and got a firm vote of confidence from the local bank: a loan for the full $300,000 cost. The Finlaysons are open for business from 9 A.M. to 10 P.M., six days a week, and are too short-staffed to take vacations. They haven't yet come close to matching his Ingersoll-Rand salary of about $60,000, but at least the venture produced a slightly positive cash flow from the outset. They took a cut in their standard of living to build the business. The house that came with the property has neither heating nor air conditioning. As an entrepreneur, says Finlayson, ''when you're not sleeping you're thinking about the business, but you can see a return for your work.'' He says he is happy and ''thinks'' his wife is. Corporate executives who have spent years dealing with enormous numbers may have a hard time acknowledging that sometimes only modest goals make sense. Don J. Kolb, 54, went into the classic car business on a small scale after he was shunted aside at Branson Sonic Power when SmithKline Beckman sold the subsidiary to Emerson Electric three years ago. Kolb had an advantage most entrepreneurs lack -- 23 years as head of marketing at Branson, the kind of experience that tends to curb wilder fantasies about owning a business. He had also restored a 1925 REO Sport Roadster so beautifully that on his first try he won the Super Bowl of classic cars, first prize in his class at the National Antique Car Show in Hershey, Pennsylvania, in 1979. As a good marketing man, he spotted two promising niches. He could appraise classic cars for buyers and sellers, and he could furnish a princely livery service. From his home in West Redding, Connecticut, a 1963 Silver Cloud Rolls-Royce and a 1954 silver-gray Bentley -- picked up in England two years ago when the pound was at its cheapest -- glide forth to embellish weddings and other special events. The fee is $285 for three hours. Word-of-mouth has spread demand for his services as an appraiser and as a sales agent. Kolb has forsworn great ambitions for his company, Connecticut Classics -- probably prudently. He just wants to maintain the living standard he achieved with Branson, and he is doing that. ''I don't want to feel any pressure to grow,'' he says. EXECUTIVE DROPOUTS seem to have a soft spot for owning a store, especially one that purveys the good things of life, such as books or food. It seems like a neighborly, family kind of thing to do. Like a restaurant's, a store's appeal can be deceptive. Joe Terbell Jr., Yale '62, and his wife, Harriette, bought a cheese shop in Westport, Connecticut, when his career as a compensation specialist with American Express, Chesebrough-Pond's, and several consulting firms ran dry. He thought an upscale exurb would appreciate a shop that offered a properly ripened Brie. But Terbell wishes now he had known more about retailing, about how to advertise most effectively and the right quantities to order. He didn't realize how much competition was out there -- other specialty stores, supermarket gourmet departments, and now discount gourmet stores. To increase sales he added takeout foods, lunches, and more charcuterie. Terbell finds that just keeping his World of Cheese going takes 11-hour work-days, six days a week. After 3 1/2 years he has realized only a modest return on the $220,000 he paid for the store. Fortunately his wife kept working as a management consultant in New York. He muses now in his cramped office in the back of the store that corporate business would be a really profitable line to develop -- gift packages for clients, for instance -- but he doesn't see how he can find time for it. Consulting is such an obvious business for the former executive to start that it has become overcrowded. It uses the executive's expertness and contacts and requires little capital beyond money to survive for six months or a year while the business gets going. The wave of corporate downsizing, strangely enough, has created new opportunities for consulting because companies now buy the outside services they used to maintain in-house. But it has also pushed too many people into consulting. Many so-called consultants are simply concealing unemployment in a dignified way. One who isn't: Lois Schneider, whose 13-year career at CBS in New York came to an end with the abolition of her department in 1983. Schneider had been helping CBS with new ventures and decided to remain in that specialty. The transition to consulting was nearly painless. Within a week she had her first client, thanks to a lead given her by CBS contacts. The episode emphasizes an important rule for corporate escapees: Don't burn your bridges to old employers, because they may help your new business. Schneider, 40, now serves Citicorp, Nynex, and other major clients. With fees of $600 to $800 a day -- modest in this self-promoting business -- she earns a bit more than she did at CBS, which she says was in the high five figures. Like consulting, mundane services can offer a relatively painless entry into entrepreneurship. When Rose Kane's 16-year career at Tenneco was closed out by the sale of its chemical division in 1982, she thought only of finding another employer. But the experience of two low-paid jobs with other agencies convinced her that she could do better. She was right. Last year she netted over $100,000, 2 1/2 times what Tenneco paid her, from her small agency in Rutherford, New Jersey. Franchises, licenses, and agency agreements can also cut the costs of entering a business and instantly give the ex-corporate manager the attributes of a large, established enterprise. William S. Elliott, the Harvard trucker, runs an independent agency for North American Van Lines. When he graduated from business school in 1976, he thought, like his classmates, that a big corporation was the only place to work. He joined North American Van Lines and in a few years was ''having a wonderful time'' in Whitby, Ontario, running its $50-million Canadian division. But when he was brought home to headquarters in Fort Wayne, Indiana, to write strategic plans, he became restive. He quit and took a job as vice president of a diversified services company in New York. That soon proved to be a mistake, and, wondering about what to do with the rest of his life, Elliott invested $700 in a one-week course offered by the John Crystal Center in New York City, which helps people change careers. He got a clear message that he should be running his own business, but he didn't have a lot of capital. The choices narrowed to a service business, to an agency agreement, and to trucking, because that's what he knew. His business school education wasn't much help. ''Harvard doesn't teach you to deal with auditors, to meet a payroll, or to handle the paperwork,'' says Elliott. He bought an almost extinct northern New Jersey trucking firm to get its permits. He expected the paperwork to take 15 days; it took three months. He applied for a Small Business Administration loan. He got it -- after a year's delay. But with a combination of purchases, leases, and an agreement with North American to furnish some equipment, its logo, and certain services, he was able to put together a small fleet. TRUCKING IS a precarious business, but Elliott picked out a high-margin niche: short-haul, specialized work with plenty of service thrown in. When a New York investment bank wants him to deliver a new mechanical filing system, for instance, he doesn't just dump it on the sidewalk in Manhattan. He installs it. Elliott has built a crew of 26 part-time and full-time employees and says he finds it ''incredibly satisfying to see people learning new skills.'' Financially the business is not yet such a success. In fact, he says, had it not been for his wife's income as a pediatrician he couldn't have set up the business. He says he is a little short of his goal of grossing $1 million annually after being in business almost three years, and well short of netting $100,000. But the business is growing rapidly. When his wife asked if he minded not being able to trade in his 20-foot sailboat for a bigger one, he said, ''Hell, no.'' Anyhow, he's had time to go sailing only three times in the past year. Corporate executives who start high-tech companies play the whole game on a magnified scale. An entrepreneur can dream of turning a few thousand dollars and an idea into a $100-million business -- it has been done more than once. But it can all be blown away faster than it was created if IBM or the Japanese decide to move in, or if he misses a technological innovation by a few months. James L. Patterson, a 49-year-old IBM veteran, has lived the restless computer executive's dream. He has succeeded hugely by creating a highly profitable $121-million-a-year disk-drive company. Patterson left IBM in 1970 and then worked for Memorex and System Industries Inc. for another decade before deciding to become an entrepreneur. He and five partners each put up $10,000 to launch Quantum Corp. in 1980. The product they developed -- a hard disk drive with four times the capacity then available from the leading competitor -- attracted the attention of venture capitalists. By midyear Quantum had $3 million in financing, and the investors soon had their winner. Sales soared from $14 million in the fiscal year ended March 1982 to $121 million in 1986. IN 1986 QUANTUM stumbled badly after launching a new subsidiary, Plus Development, to make cards containing a hard disk drive that can be slipped into an IBM PC. While executives focused on this new business for the retail market, says Patterson, they missed a whole cycle of progress in the old business of making hard disk drives for the wholesale market. Sales of the old disk drives collapsed, from $109 million in fiscal 1986 to an annual rate of $40 million by last December. Quantum, based in Milpitas, California, laid people off and decided to close a plant in Puerto Rico. The experience was so painful, says Patterson, that Quantum went into 1987 ''with an unhealthy lack of confidence.'' But the new Hardcard sold so well that it made up for the loss of disk drive sales. Quantum sustained its sales and profitability. Executives seeking a model of how to start a business might learn from the case of John P. Walker. Looking collegiate at 38, he is directing the start-up of VitaPhore Corp., a medical company with the vital signs venture capitalists look for. It has a proprietary product with a clearly defined market. It has professional management, a clear plan, and a good customer. VitaPhore makes a tiny cuff that fits around catheters at the point where the tube enters the body. Catheters are a major cause of often-fatal hospital infections. The VitaCuff gradually releases silver ions that fight bacteria. Hospitals hardly have to be persuaded that they need the VitaCuff. Typically for a high-tech company, VitaPhore was started by two researchers, Sophia Pesotchinsky, a Soviet emigre, and Ron Yamamoto, both from American Hospital Supply Corp. (since acquired by Baxter Travenol Laboratories, Inc.). But unlike most scientist-entrepreneurs , they realized they did not know how to run a business. Their backers searched for someone who did and found him in Walker. He had broken loose from another part of American Hospital, where he had enjoyed a brilliant 14-year career. At 35 he had become head of a $1.4-billion division, but as the corporation retrenched and became more centralized when its growth slowed, he decided to move on to California to find something he could help expand. Walker moved in as C.E.O. of VitaPhore last summer. Venture capitalists liked what they saw enough to chip in $6.25 million to get production started. Walker signed up his old employer, American Hospital, as a national distributor. The product began to move out of the plant at San Carlos, California, in January. Walker hopes to reach breakeven by the fourth quarter, but of course the market will decide whether he succeeds. The pace at VitaPhore is slower than at American Hospital. Walker can concentrate on a few essentials. At American Hospital he was spread thin over many demands, often nonessential. He had a foot-deep pile of paper to go through every day. He recalls one two-inch clump of documents bearing eight signatures on hiring a $200-a-week part-time employee. At VitaPhore he has little paperwork and few of the trappings of big business. He has a tiny inside office over the labs, with a metal desk and two straight chairs. He comes to work in sneakers, chinos, and sport shirts, leaving a wardrobe of business suits at home collecting dust. Good management is probably the key ingredient of success -- and often people with great ideas don't have management or sales skills. The concept for Adelie Corp. came from two computer whizzes at Orion Research Corp. They designed a software information system linking all of a corporation's sales and marketing operations. When they established the company in Cambridge, Massachusetts, in 1982, they saw they needed a professional manager. Within months they recruited Charles Khuen, marketing manager at Prime Computer, as vice president for sales and marketing. In 1983 he became chief executive. The growth in his salary measures Adelie's success. He started, as he puts it, in ''the low four figures'' -- $3,700 in 1983, to be exact. This year Khuen, 38, will draw $110,000. With clients such as AT&T and Xerox, Adelie's sales zoomed to $6.7 million last year. Professor Albert V. Bruno of Santa Clara University confirmed the importance of good management in a study of 250 San Francisco Bay Area companies. He found that the overwhelming reason for failure was a poor management team. The team or the lone adventurer often lacks essential skills, such as marketing or finance. That is why venture capitalists follow the dictum issued by General Georges Doriot, the legendary investor who backed Digital Equipment Corp. at the outset: Better to invest in a first-rate team with a second-rate product than a second-rate team with a first-rate product. AS MUCH AS THEY may love their own ideas, executives with entrepreneurial urges must realize that professional investors, whether right or wrong, usually set the rules. Venture capitalists will give painfully created business plans a fast, jaded read. Unless the plan starts with a one-page summary, the money men won't even look at it. They assume from experience that an entrepreneur's estimates of the capital and time required to create a product are wildly wrong. Says Gordon B. Baty of Zero Stage Capital in Cambridge, Massachusetts: ''We figure it will take twice as long as the entrepreneur says, and if we faced up to reality, we'd say four times as long.'' The professional investor is torn between not believing what he reads and wanting to be convinced. He disbelieves the numbers, but at the same time wants to see a potential $50- to $100-million company with a ten- or 20-fold return on his investment a few years out. Sources of help for entrepreneurs are rapidly increasing. The venture capital market has exploded in the past decade. More capital is coming from private angels organized by Professor William E. Wetzel Jr. of the University of New Hampshire, who founded the Venture Capital Network Inc. Paul E. Johnson says that when he came to MIT in 1978 to establish the Enterprise Forum Inc. to help start-ups, ''entrepreneurs were like lepers.'' Today budding entrepreneurs can expose their plans to advice and criticism at some 14 well- attended MIT forums held across the U.S. every month. At the Wharton School in Philadelphia, Ian MacMillan presides over the Pennsylvania Small Business Development Centers, a statewide chain of advisory services for neophytes in business. All of the Big Eight accounting firms now provide discounted or even free services for promising little companies, hoping to help turn them into prosperous, big clients. Unfortunately for most beginners, the investors, accountants, and others who want to help start-ups focus almost exclusively on high-tech projects that may grow quickly into multimillion-dollar companies. For other entrepreneurs, a start-up will be like a first solo flight with no lessons, no instruments, and no parachute. If you want to start the Nifty Cab Co. or Honest John's Cement Inc., you'll still need that second mortgage and a loan from good old Uncle George. The sobering facts make giving up that spiffy corporate office seem almost foolhardy. So why does the prospect remain so enticing? V. John Guthery, founder and president of Seagate Associates, a New Jersey outplacement firm, states the contradictory and strangely attractive bottom line. The entrepreneur who bails out of a corporation, he says, can be sure of only three things: ''You'll work harder than ever before. You'll make less money, on average. And you will enjoy it more than anything you have ever done.''