Millions of workers dream of starting their own business, but the odds of being successful are daunting enough to keep most hopefuls on the sidelines.
For those who do go into business for themselves, without a background in business, it can be a steep learning curve.
But hope springs eternal. According to the Small Business Administration, or SBA, 637,100 small businesses with employees were opened in 2007. Based on its research, the SBA estimates that two-thirds of new establishments will survive two years; only 44 percent will survive four years. The survival rate plummets to 31 percent, when the life of the business reaches seven years.
Although small businesses can crash and burn for many reasons, avoiding some of these common mistakes can help your small business beat the odds.
Use your heart, not your headMost people start their business out of passion, but passion won't pay the bills.
"You want to have fun and you want to be passionate about it, but a business is not a charity. You have to bring the dollars to the bottom line, and the way you do that is by measuring everything," says Hattie Bryant, creator and host of "Small Business School" on PBS and author of "Beating the Odds," a book on running a small business.
The energy and optimism that fuels an entrepreneur's startup dreams are mandatory to keep them slogging when the going gets tough. But hard-nosed business sense will keep the business afloat, and that means keeping a tight fist on the money and inventory.
"What surprises me is when businesses have been in operation for a year or two, and I ask the owner what his revenue was for the last month, what his earnings were and they just sort of guess," says Fred Glave, a Washington, D.C.-based counselor with SCORE, a free consulting service for small-business owners and entrepreneurs. The counseling staff of SCORE is made up of working or retired business owners and corporate leaders who share their expertise with their communities.
"They don't really know, and that says to me they're not really keeping on top of their numbers and performance," he says.
When business owners lose sight of exactly what's coming in and going out, it can mean that they also don't have a handle on who buys their products and why they buy them. Understanding why things work or, conversely, why they're not working, is vital to being successful.
"If people don't know what their revenue is, it's very difficult to manage the business in a tactical sense," says Glave.