Check out the terrific advice in the article "The Essential To-Do List for First-Time Entrepreneurs" from CBS Money Watch. Below is an excerpt.
Before we go into how to increase your chances for success, first a few dire facts. Only about half of small business start-ups survive 5 years or longer. The top two reasons for failure are:
1. Lack of experience — not operational (building or selling your better mouse trap) but lack of business experience.
2. Running out of cash — the earning curve never catches up with the learning curve.
So, our best piece of advice to you is this: When you control your money, you control your future. Here’s a to-do list to help you get to the five-year mark — and beyond.
1. Overestimate (generously) your costs to start up.
A few years ago, a rock climber in Phoenix needed rescuing when he tried to rappel a 400-foot rock face with a 250-foot rope. Your initial cash for your start-up is like your rope. Are you going to leave yourself dangling 150 feet from your destination?
Don’t make the mistake of underestimating the cost of your new business and overestimating sales and your break-even point. Instead, try this: Take your best, conservative estimate for your start-up costs, then double it. Then add 20%. Surprisingly, this is usually pretty close to reality.
2. Know your break-even point.
Ten thousand dollars in sales does not cover $10,000 of expenses. Your cost of sales could easily be $7,000, leaving you $3,000 in gross profit, which you will need to pay all of your sales, general, and administrative costs. It’s simple arithmetic: You reach the break-even point when your gross profit equals all remaining business costs.
3. Realize that you can’t make up in volume what you lose in profit — so price accordingly.
One of the great myths in business is that by offering lower prices you will attract more customers and then, down the road, you can raise your prices. Without proper profit margins, you will not generate the cash flow to stay in business. You can’t be all things to all people. It is far more important to establish a clear and unique value proposition, then price your goods and services accordingly.