How do entrepreneurs determine whether their business is a success or a failure? The question seems straight forward and quite simple. Yet, very few entrepreneurs seem to know when to hold 'em and when to fold 'em.

Launching a business, almost every business, requires startup money. These costs can be a small as $100 and reach into the millions of dollars. For the purpose of this blog, we'll keep to the example of the small business with typical expenses of equipment, website, software, marketing, legal, travel and entertainment, telecommunications, office supplies, and other basics. In the case of retail, let's add deposits for rent and utilities. Startup costs of $5000 - $10,000 are very typical for a small business.

Working diligently and efficiently this small business can be up and running within a month's time, if not sooner. A savvy entrepreneur has spent time developing a business plan. Even a one-page business plan providing a roadmap for what will be sold, who will buy it, and how much will be charged for it is critical for the first steps into small business. Developing a feasibility plan, in other words, a plan that demonstrates that your expenses WILL be covered by your revenues when you reach (how many?) customers lets you know the first way you can determine success or failure.

For example, you sell widgets for $100 each. You decide to sell them 5 days a week for approximately 20 days each month. Your monthly costs are $10,000. In order to break even for the month you must sell how many customers one widget?

Right 100 widgets = $10,000. So you need 100 customers to buy at least one widget each in order to break even each month. That calculates to 5 customers per day. It won't surprise you to guess that when you open your doors to your small business 100 customers will not be standing in line to buy your widgets. It takes time to build a following in every business. Even FACEBOOK took time to build.

In order to be a success in business you also must plan on making a profit. If it takes 100 widgets to sell every month for your to break even, how many does it take for you to make a profit? The answer is generally not 101.

Widgets cost money to make and if you haven't worked out a per widget cost your business may actually lose money the more widgets you sell.

(1) Entrepreneurial success or failure is based on increasing profit with increasing sales. If your increasing sales increase your costs dramatically you are in the situation in the picture above -- ready to fall apart when just one piece of the puzzle falls.

(2) Entrepreneural success or failure is based on your market wanting/needing more of what you sell. In other words, one widget is never enough. Your customer not only wants to buy more widgets, (s)he needs to pay more for better, best, gold label widgets.

Every small business requires time to build its market, grow its product/service and recoup startup costs. But every entrepreneur/small business owner must know when its time to call it quits. Failure is part of life and very often the beginning of success. Most entrepreneurs fail at some time or other. If you haven't failed perhaps you haven't tried hard enough. If you don't risk you can't succeed. But taking risks also means you must man-up or woman-up and admit when the business just doesn't work. 

The "only real failure in life is the failure to try" (quote by unknown). "Try and fail but don't fail to try." (quote by Stephen Kaggwa)

You only get to go this way once -- why not do whatever it takes and learn from the journey. (me)