As the old adage goes, hindsight is 20/20. I thought that youth was on my side, so I rushed head first into self employment. Unfortunately, youth was about all I had. Experience and common sense were what I was lacking. I learned the hard way, but you don't have to. Avoid some of the biggest mistakes that new entrepreneurs make.

This hub is meant for those who want to start a business but don't have much if any capital, especially those who plan on being independent contractors. People with start-up cash may still find some of these suggestions relevant.

There is a statistic bandied about in business circles that most small businesses don't last beyond their first five years. These tips may just help you beat that statistic.

This section could also be titled "Don't Quit Your Day Job." My suggestion is essentially this - before you consider climbing out on the long limb of self employment, have at least six months to one year's worth of monthly living expenses in the bank.

While this isn't always feasible, especially as many of you might be considering self employment due to a job loss or layoff, I strongly urge you to take this first tip seriously. Business can be feast or famine, especially independent contract work. A personal example is from my former massage therapy business. Clients go out of town on vacation or have personal or family emergencies (and so do you sometimes). If you are your own boss, you have to remember that there is no paid time off and no sick days. If you don't work, you don't get paid. You need to have cash on hand to float by during down times.

You also never know how quickly your customers' situations could change. You might think things are going swimmingly and you've got the perfect amount of work coming in to pay the bills. But then a client loses their job or moves and it just happens to be a weekly, high-tipping client, and you're scrambling to find more work.

If you're employed, try to work your business on the side before leaving your day job (if that is your plan) to save the cash for expenses. Not only will you have a cushion to fall back on in slow times, but you will have already started building up your customer base. And it goes without saying that some is better than nothing. You know you're own situation. You might have the need and the opportunity to be self employed right now even though you don't have much cash or time to save.  Go for it, but try to set aside a little each week to build up that cushion.

This one goes hand in hand with not having enough savings. If you don't have cash, you figure you can go ahead and put business supplies on a credit card and pay it off eventually. You might even have a credit card with a great rate. But please reconsider.

For the same reasons as above, your steady income could dwindle significantly. You not only have to find new work, you also have credit card bills to deal with. If you start to have problems and are late with payments, the downward spiral into high fees and lowering your credit score can happen quickly.

I'm not saying cut all of your cards up. Just try to get to the point where you use them minimally until you have at least 50% more cash coming than you spend on living and business expenses. Preferably, you'll refrain from using credit cards too often even then.

Before you go out and start your business, do your research about your chosen field. What are other people charging? Call individuals and larger companies and ask their rates. It's understandable and advisable that you give initial discounts to lure customers in, but make it clear to them what your full price for services is and when it will kick in.

I started a home cleaning business as a side to my massage therapy business. I knew that people wanted a better deal than hiring a regular service like Molly Maid. What I didn't take into account was that I already had word-of-mouth recommendations by people who knew I was trustworthy. This counts for a lot when it comes to dealing with people, so charge accordingly. You can still undercut the bigger businesses, but don't lower your price so far that you're left struggling to earn a living.

Word-of-mouth advertising is an excellent way to get a business going. The mistake would be to rely completely on this. Print ads cost money, but it's money well spent, especially small local ads that reach your target audience. It may take a few months of repeat ads before you start getting business or it might not pan out at all.

Advertising is a business risk worth taking and a tax deductible expense, so take a few steps out of your comfort zone.  There are also article writing sites like HubPages, Squidoo and Ezine Articles that you can write about things that pertain to your business to get the word out.

There is a saying that applies to self-employed people (as well as for anyone trying to stick to a budget), and that is pay yourself first. When you earn money from business, the order in which you distribute it should look something like this:

1. Your savings.
   
2. Your wages.
3. Needed business supplies.

Wages can mean either cutting yourself a paycheck from your business account or setting aside a weekly amount that covers your household bills.

Try to refrain from spending payments from clients as soon as you get them. It's easy to treat this as instant cash and go out for a nice dinner and a movie. Instead, try to budget as if you have an employer who pays you weekly or biweekly. This way you are less likely to spend friviously and stick to a budget based on your household bills and business expenses.

Of course, sometimes sticking to a budget on paper is easier than in the real world. But if you followed tip #1 and have savings, you will be able to weather minor storms such as an unexpected auto repair.

Some people will probably say that a business plan is the first thing you should do before considering anything else. I agree that this is an integral part of starting up a business, but your plan should also be flexible depending on circumstances. If you've taken these 5 steps I've given you to heart and learned a little something from my mistakes, you will be able to more easily implement your business plan.

Remember, you're not in race against yourself or anyone else. There is nothing wrong with waiting until the time is right and taking small steps to start your business. In fact, it could just be the smartest thing you do to get you past the five-year statistic.