Every year thousands of new businesses are started by optimistic individuals with the entrepreneurial spirit. Unfortunately, the failure rate for new ventures is extremely high.

If you're planning to be among those starting a new business, take some steps that will increase your chances of being among those who succeed.

Buying a business
If you are considering buying an existing business, take time to investigate the business thoroughly.

Don't be too eager. Many people feel they should get into the business and then worry about the problems as they develop. An investigation of all the problem areas may indicate that you shouldn't buy that particular business in the first place.

Make sure the price is not too high. Many small businesses are not profitable enough to give an acceptable return on both the buyer's time and money. If the buyer wants $30,000 per year for working 60 or 70 hours per week and wants a 12 percent return on his $100,000 investment, the business must net $42,000. Analyze the past performance of the business you're thinking of buying to be sure it can satisfy your requirements.

If you are willing to take a reduced return on your time and money for the sake of self-employment, do so with your eyes open - know the facts.

Most buyers don't ask enough questions or require enough financial history to make an informed decision. Any business worth buying should have kept adequate records. The inability or the unwillingness to provide the proper financial information is an indication that the business may be overpriced.

The need for professional assistance when buying a business cannot be overemphasized.

Buying a Franchise
The idea behind franchising is that some entrepreneur develops a successful business and, in order to expand, sells franchises to others who set up new outlets. For a fee, the franchisor allows the franchisee to use the established company name, its secrets, and its method of operation. The franchisee typically pays a lump sum up front and a percentage of gross sales to the franchisor.

Going into a franchised business is similar in many ways to going into any business. To succeed you must be filling a need and have capital, the right personnel, and the willingness to work long hours. A franchise should give you what any business venture should; a reasonable salary for your time plus a fair return on you capital investment.

A franchised business can fail, so it should not be though of as a risk-free venture. Analyze everything carefully. Get your business and legal advisors involved; have them review agreements and financial data.

Starting a Business
If you start your own business, improve your chances for success by avoiding these common pitfalls.

Lack of money
You'll probably need capital to start your business, plus a cash reserve until your business becomes self-sufficient. Plan your cash needs carefully and realistically, and provide a generous cushion for setbacks and unexpected expenses.

Consider leasing equipment instead of buying. If you must buy, look into used equipment.

If your business is going to need a start-up bank loan or other financing, obtain the money before you make any major commitments.

People problems
Make sure that you'll be able to hire and pay for employees you need, especially if your business requires specialized skills.

Evaluate your own business skills honestly and objectively. So you have both the financial and marketing skills that your business will need, or do you plan to hire someone who does?

If you decide to take partners into your business, take a very close look at your potential partners. Partners don't have to be best friends, but they should like one another. Even more important, they should have mutual trust and respect for the contribution each will make to the business.

It is always a good idea to draw up a partnership agreement so that each partner can examine in advance the pros and cons of the partnership arrangement. Have your tax advisor and your legal advisor review the agreement before the document is signed.

Be sure to line up qualified accounting and legal advisors, as well as any other experts you may need. Good advisors, as well as any other experts you may need. Good advisors can mean the difference between success and failure, especially in the early days of your business.

Insufficient planning
Research your industry and your competition in depth, and prepare a written business plan covering several years. Write a short mission statement for your company, identify your target market, and state your business plans as specifically as possible.