Why do people start small businesses?

Some say their job was eliminated by corporate down sizing, they were encouraged by a generally favorable economy or they harbor ill-feelings toward corporate America.

While small business growth may contribute to the nation’s continued economic expansion, entrepreneurs need to be aware that it takes more than a good idea for a small business to succeed. Small-business entrepreneurs must plan for success.

This includes market research, identifying the primary audience or consumer and developing a five- or 10-year plan that includes cash flow, financing and expansion. The old adage, “People don’t plan to fail, they fail to plan,” certainly holds true when it comes to small business success.

The failure rate for new businesses is 70-80 percent in the first year. And only about half of those that survive the first year will remain in business the next five years.

During the first half on 1997, more than 43,000 U.S. businesses failed. This failure rate was up 13 percent from the first six months of 1996. Dollar liabilities from business failures totaled more than $20 billion, 40 percent more than the same time period of the previous year.

Nine out of 10 business failures in the United States are caused by a lack of general business management skills and planning. During the early 1990s, worldwide business failures occurred at rates higher than any time since the 1930s.

No one should start a new venture preparing for failure. Entrepreneurs should have a clear plan for success that involves actions if things do go wrong.

There are no magic solutions to guarantee a business success. But a business can improve its chances of success by developing a business plan, obtaining accurate financial information about the business, identifying the target customer and the competition.

Proper planning is critical to the success of a new business. While some of the best-prepared and best-planned businesses still fail, an understanding of the reasons for failure can help assess the overall success potential of a business.

In planning against failure, be honest and objective. Know yourself and your limitations, and be prepared to manage the business. There are many ways to achieve business success. Study the success of others; identify business role models; and network with other business professionals.