For millions, self-employment is a part of the American dream. The satisfaction of being your own boss, answering to no one and forging your own path in the world, is reminiscent of the independent spirit that has marked American life since the country was new.

As modern-day pioneers, small business owners put their dreams on the line for a chance to do business their way. Entrepreneurs, tradespeople and other professionals, their numbers are impressive.

As many as 22.9 million small-sized enterprises were open for business in 2002, the most recent year reported by the Small Business Administration’s Office of Advocacy, and their numbers are growing. Some estimates suggest that more than 2 million new businesses get off the ground each year — more than 200 each hour! Whether they develop new software, run a day care center, provide accounting services or make and sell gourmet foods, all small business owners have one thing in common — they are looking for the road to financial independence and the opportunity to work at something they love.

But along that road are potential detours and potholes — and without a basic understanding of what it takes to run a business, many small business owners unfortunately must close the doors too soon on their enterprises and their dreams. In fact, as many as half of all start-ups fail within the first four years, according to statistics available from the Center for Economic Studies, U.S. Bureau of the Census. Leading causes for failure are lack of adequate planning, poor money management and too little capital, and unrealistic expectations.

For many small business owners, the path to success begins with an appreciation for the realities of self-employment. Glenn Reed, a self-employed C.P.A. and tax attorney, sees his fair share of small business owners in his San Antonio practice and observes that business success often hinges on understanding the commitment necessary to running a small business. Beginning your own business is consuming in terms of your time, your energy and your focus, he explains. You can’t just pick it up one day and forget it the next. If you want to be successful, you live, breathe and sleep your business. If you’re in the mode of working 9 to 5 and turning off your mind on weekends, those days are gone when you’re self-employed.

So how can you ensure your new business venture doesn’t become just another statistical fatality on the road to success? Reed and others offer advice that current or would-be entrepreneurs can use to stack the odds in their favor.

Prepare yourself financially for self-employment
Unlike a job you take with an employer, there are few financial guarantees when you work for yourself — no regular paychecks and no benefits provided by a beneficent employer. In fact, many start-up businesses operate at a loss for the first year or two until their operations and reputation in the marketplace are established. Until then, you may need to depend on your own financial resources — savings, another job or your spouse’s income — to live. In fact, many management consultants who specialize in small businesses suggest you have one year of savings, at a minimum, available for the start-up phase of your business. Of course, this amount will vary, depending on the kind of business you start.

Before you begin your business, you will also need to develop a monthly plan of saving and spending. This plan will help you identify how much money you need each month to live. It will also tell you if your dream of owning your own business fits with your other dreams, such as sending a child to college.

And, recommends Reed, if you are married, you should discuss your plans to work for yourself with your spouse before you commit to open for business. Beginning a small business is altogether different than working for someone else, he observes. If one spouse wants the stability of a steady paycheck, benefits and regular working hours and the other spouse wants to be self-employed, there may be a problem.

But knowing the financial realities of self-employment is one thing; living with them is another and requires exceptional financial management and discipline, especially when your business is brand new. Start-up costs, for example, can be considerable. Obvious expenses such as office furniture, computers, software, printers, copiers, fax machines, stationery, business licenses and deposits for office utilities are only the beginning. Depending on the nature of your business and your need for space and equipment, you may require money — and lots of it — just to open your doors for business.

As a start, you definitely need to have your personal finances under control, says Reed. If you can’t manage and control your own personal budget and your debt, you can be in real trouble when you must also manage a business budget and debt. I see many people who have no idea how to manage money. They can have an exceptional business plan, but if they can’t manage their money, the plan doesn’t mean anything.

Reed suggests that small business owners take a conservative approach to every expenditure — personal and business — to make sure they don’t outrun their financial resources. And keep a tight rein on the budget. A small business can be cyclical, just like the economy. In addition, you should be prepared for the possibility that you could get sick, have an accident or experience a family crisis that could keep you from working for a period of time. To put yourself in the best position to weather those possibilities, be fiscally conservative and keep your overhead as low as possible.

Make a roadmap for success
The old saying Fail to plan and you plan to fail is never more true than when you begin your own business. In the excitement of a good business idea, many entrepreneurs skip over essential planning because they can’t see an immediate payoff for spending the time and energy to create what is essentially a vital business document. But, say the experts, these same entrepreneurs may be dooming themselves to later failures when they don’t take the time to consider and document how they plan to run their business and make decisions.

Most business experts agree that you should start planning from day one and keep at it throughout the life of your business. Then, as your business changes and matures, modify your plan accordingly. You may actually be required to write a business plan if you are negotiating a loan with a bank or another organization that assists small businesses, but this plan may not completely meet your long-term needs for strategy and goal accomplishment.

What you need instead is a strategic plan that describes your business mission, your present situation and where you want to be in the next three to five years. It should include operational and marketing tactics that you plan to use to reach goals and should also outline contingencies for business problems you can anticipate. When complete, your plan becomes a lodestar for future business activity — a guide to help you make the best decisions and exploit opportunities.

Plan for tax day
One of the biggest hurdles you’ll face in running your own business is to stay on top of your tax obligations, including both income and Social Security taxes. A big tax headache is only one mistake away, whether that is a missed payment or filing deadline, an improperly claimed deduction or incomplete records. And you can safely assume that the IRS won’t be impressed by your claim of I didn’t know I was required to do that.

Obviously, retaining a good accountant or other tax professional can prove to be invaluable in avoiding tax troubles. I suggest you associate yourself with a tax preparer or tax accountant right from the beginning, says Reed. And meet with that person every six months at a minimum to ensure your records are adequate and you’re not making costly mistakes.

Income taxes are a pay-as-you-go proposition. Taxes are due as the income is received. If you’re employed, your employer generally helps you meet this obligation through payroll tax withholding. But if you’re self-employed, you are required to make quarterly tax payments to the U.S. Treasury, called estimated payments. You will be required to meet IRS calendar deadlines for the payments — with payments typically due April 15, June 15, September 15 and January 15 of the following calendar year.

The discipline to budget for tax payments doesn’t always come easy, says Reed. I see more self-employed people get in trouble because they don’t remember that 30 to 40 percent of every dollar they make is not their money; it’s the government’s. Instead of saving for their tax payment, they spend the money and get into trouble because they can’t meet their tax obligation. The IRS really doesn’t have the tolerance for that; it expects you to pay as you make the money. Reed suggests that you put aside 30 to 40 percent of your income as you receive it by placing it in a separate bank account. At the end of the quarter, write a check for quarterly taxes from the account. And, he continues, if the business has employees, the owner must also match their Social Security taxes as well.

But with taxes also comes the opportunity to minimize your tax obligation with legitimate deductions and credits. The key to making the most of these tax reduction opportunities is keeping complete and accurate records. Save receipts, stay organized and depend on your tax professional for the best advice. For every dollar of deductions, you save 30 to 40 cents in taxes. If you overlook something, you could lose out on valuable deductions. Unfortunately, that also means you are losing money, says Reed.

Get professional help
Clearly, you can’t be an expert on everything. As an entrepreneur, you know your own business unlike anyone else does, but you are probably not an expert in law, banking, accounting or insurance — unless, of course, that is your business. That is why you will need the help of professionals who can provide guidance, advice and services, and you should seek their advice early enough to keep yourself out of trouble.

To find the best professionals, ask others for referrals. Most small business owners in the same or similar businesses are happy to share experiences. That is especially important because you want your accountant, attorney and other professionals to be small business friendly, that is, you need to be convinced they understand the unique needs and problems of small businesses so they can give you the best possible service.

You may also need other business expertise, such as marketing, communications, merchandising, financing and long-term planning, and luckily for you, there is plenty to go around. For starters, the Small Business Administration (SBA) offers a vast array of resources through publications and its Web site,www.sba.gov. Virtually any issue of interest to small business owners is addressed through information, training, counseling and other opportunities.

Also consider contacting SCORE (The Service Corps of Retired Executives). Headquartered in Washington, D.C., SCORE is a nonprofit association dedicated to entrepreneurial education and the formation, growth and success of small businesses nationwide. SCORE’s 10,500 retired and working volunteers provide free business counseling, mentoring and advice as a public service, including Ask SCORE e-mail advice online; face-to-face business counseling and low-cost workshops through local chapters; and free and confidential small business counseling. To get assistance from SCORE counselors or to locate a local chapter, visit the association’s Web site at www.score.org.If you have tax questions, consider visiting the IRS Web site, www.irs.gov, where you can find online seminars and information created especially for small businesses.

And don’t overlook the resources of professional organizations and associations related to your business. Many offer special-interest seminars with speakers who are well-respected professionals. More importantly, these organizational events provide valuable networking opportunities; there is nothing quite like comparing notes with others to learn how they do business.

Finally, check out the resources of the Small Business Development Center at the University of Texas at San Antonio. Graduate students from various business-related disciplines will work with you to put together a business plan and guide you through the process of setting up a new business. Expertise offered ranges from marketing to financial planning to tax planning and legal issues. Look for a link to services at www.iedtexas.org.