Hi,
Some excellent posts giving you guidance on how to start a flight school. My $0.02 worth is ensuring you have a strong market (location), and that the weather is good enough to be able to keep students flying year round (again....location), and finding instructors that will help you build an excellent reputation. Quality is the key in instructing, since we're all selling the exact same product (FAA certificates).
As has already been said, unless you're in it to become the next Flight Safety, profit margins are small, risk is high and it has to be something that you LOVE doing because it takes a lot of hard work, time and money to see it through.
I do not own a flight school, but I have been responsible for the creation and development of our local school, including a 141 operation that is linked to a college.
If I were to start my own flight school tomorrow, I would think about starting a combination flying club / flight school. I was discussing this idea with an area airport manager and he seemed very enthusiastic about the prospects.
Ray