Many of us have given at least some thought to starting our own business. For the most part, these thoughts go no further than daydreams that help pass the time in traffic or are used to smooth over the rough edges of a difficult day. Over the past 10 years, however, more and more Americans have taken these dreams and turned them into reality. Whether owned by early retirees, MBAs just out of graduate school or the married couple on the next block, tens of thousands of small businesses are established every year. In fact, it´s generally recognized that small businesses account for more than half of the U.S. workforce. Ongoing advances in information technology and telecommunications have helped turn many a former employee into an owner-at least temporarily.

Successful entrepreneurship, however, remains an elusive prospect. Starting your own business is an extremely serious undertaking-especially for people who have become accustomed to the security of working for an established company. Without a doubt, the odds of achieving long-term success are small. It is generally recognized that most new small businesses fail within their first year of operation and that around nine out of ten last no longer than five years.

Yet, for all that, success can happen. Patience, hard work and careful planning are some of the necessary ingredients. Although a thorough examination of the ins and outs of starting a small business would fill several volumes, the following sections can help give prospective entrepreneurs a rough idea of the challenges ahead.

Know Yourself

The prospect of owning your own business may seem attractive, but it isn´t for everyone. People unable to thrive in a challenging environment, who are averse to taking risks or who find it difficult to make decisions and accept the resulting responsibility are poor candidates for entrepreneurship. As a small business owner you have to make a total commitment, since your business will require tremendous amounts of your time and energy.

Prepare

As is true of life´s other major decisions, such as choosing a college, buying a home or raising a family, starting a business requires considerable planning. Without a comprehensive business plan your chances of success are greatly reduced. Hopes for outside funding and credit from suppliers depend largely on how favorably banks and other lenders view your plan. In addition, inadequate planning will make it difficult to manage overall operations, since a good business plan serves as your blueprint for the future. To be effective, your business plan should answer these basic questions:

• What will the business do?
• 
  
• What are its resources?
• 
  
• Where is it going?
• 
  
• How will it get there?
• 
  
• How will you measure success?

•  

A well-prepared business plan also demonstrates that you´ve given serious thought to creating your business and that you view the future pragmatically. Professionally prepared plans, should you decide to take that route, will fully describe every major aspect of the proposed venture. These include, but are not limited to:

• principal owners
• 
  
• products and services
• 
  
• marketing strategy
• 
  
• problems and opportunities
• 
  
• realistic sales, market share and profit objectives
• 
  
• preliminary budgets.

•  

Managing Money

Inadequate start-up funding leads to many small business failures. Having too little money in reserve as your business struggles to get off the ground can quickly lead to disaster. Many small business owners overlook the time gap separating the ribbon-cutting ceremony from the first quarterly flow of profits. Having only enough cash on hand for a few months´ rent, essential equipment and a basic inventory will leave you vulnerable to unforeseen difficulties.

Operating a business would be considerably easier if enthusiasm, hard work and dedication were the sole requirements for success. But the fate of every enterprise ultimately depends on the numbers. An accurate, easily understood and timely accounting system, therefore, is an absolute must. Otherwise, accurate records will be impossible to keep-one of the worst mistakes a small business owner can make.

Managing People

Another leading cause of small business failure is poor management. Unable to rely on subsidiaries or other divisions to help carry the load when profits turn scarce, small business owners must stay in constant touch with the needs of their businesses. This will help prevent small problems from growing larger. Yet, managers must also be flexible in order to cope successfully with personality differences and changes in economic conditions.

The small business owner must also be capable of gathering and maintaining an effective workforce. Unless you are running a one-person operation, your employees will have a considerable amount of contact with your customers. And their actions will serve as a direct reflection on your company. To help assemble the right people for the right job, take the time to completely spell out all:

• job descriptions
• 
  
• required experience and education levels
• 
  
• salaries and benefits
• 
  
• training and promotion procedures.

•  

Help!

Most small business owners take pride in their independence and problem-handling skills. But, even the most skilled entrepreneur may need the assistance of a professional from time to time-often when it can least be afforded. Fortunately, however, professional business advice need not be expensive. Business and trade associations, chambers of commerce and the local library, just to name a few, are all sources of modestly priced (or even free) expertise. Don´t let a misplaced sense of pride prevent you from discovering the correct solutions to your business problems. Determine how much help you need and try to get it as early as possible.

This article does not constitute tax or legal advice. Consult your tax or legal advisor before making any tax- or legally-related investment decisions. This article is published for general informational purposes only and is not an offer or solicitation to sell or buy any securities or commodities. Any particular investment should be analyzed based on its terms and risks as they relate to your circumstances and objectives.