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Developing a healthy growth strategy is essential for a business of any shape or size, but it’s absolutely vital for a startup.
Ninety percent of all startups end in failure. Sometimes this failure is due to market fluctuations beyond the control of a business owner. But often it is because the company launched without a solid plan that took into account all the potential pitfalls.
I know all too well the excitement and glamor of the lifestyle of startups: you can’t wait to quit your day job and be your own boss. But before you get started too quickly, forget the glamor of the prospect and understand the practical truth: if you don’t have a solid business plan, you won’t be your own boss for long.
Related: Business plans: a step-by-step guide
Sneaky service costs.
Building a solid business plan and understanding where your money is coming from and where it is going takes a lot of organization. Even before you’re ready to go, costs add up quickly.
When starting my first business, I quickly realized that I needed an accounting department to review expenses and prepare my tax returns. Then I needed legal support to provide advice and prepare an estate plan. These services were just the tip of the iceberg.
If you’re like me, you’re so focused on growing businesses that you don’t consider professional services like these at first. These and other essential expenses, from web designers and copywriters to office and office equipment services, are easy to ignore, but failing to factor them into your business plan, you will cost time and money when you miss both. Worse, such a mistake can seriously damage your company’s reputation.
After all, if you find that you cannot afford to pay a service provider, how are you going to allow yourself to cope with fluctuating market conditions and other setbacks?
You need a solid business plan from day one so you don’t run into cash flow problems, build bridges with entrepreneurs, or divert your income stream. Use these three tactics to develop a high quality plan:
1. Know the laws.
You should be familiar with the rules and laws surrounding your business, from worker regulations to changing tax codes. Confirm that your business plan is legal in the first place, or find out if a simple accounting adjustment could save you thousands when tax season arrives.
Take advantage of great resources such as the Small Business Administration, which provides a wealth of information on small business analysis, start-up costs, number of companies entering second year, and much more.
Related: 5 legal tips for small businesses and startups
2. Know the market.
Your market will inevitably change. From industry trends to laws and regulations, changing circumstances will force you to stay on top – or preferably ahead – of the emerging situation. Find out how your market tends to evolve and how to anticipate trends so you can take advantage of them. The more you can integrate the adaptation into your business plan, the better you will be prepared for what can happen.
Starbucks CEO Howard Schultz followed this plan while making small town coffee the juggernaut it is today. He discovered unexploited demand in the industry and seized it with great success.
3. To know itself.
Your idea may seem so great that nothing will bother you, but limitations and setbacks are a fact of life. Spend time estimating your start-up costs and plan for emergencies or unexpected events.
My first business cost me a tax return. I literally built my business on a tax return, settling in a niche that generated profits that I could channel towards sustainable growth until I was ready to grow. Once I sold the business for a good profit, I used the money to start my second business. But none of these opportunities would have come true if I hadn’t drawn up a plan and kept to it.
Before you embark on the glamorous world of startup property, do your research. Otherwise, you may not live long in the startup world.
Related: 50 tips to start your own business