Don't Overlook the Boring Details That Torpedo Flashy Startups
Developing a sound growth strategy is key 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, that failure is due to market fluctuations outside a business owner's control. But often, it’s because the company launched without a solid plan that took every potential pitfall into consideration.
I know the excitement and glamor of the startup lifestyle all too well: You can hardly wait to quit your day job and be your own boss. But before you jump in too quickly, forget the glamor of the prospect and understand the practical truth: If you don’t have a rock-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 sturdy business plan and understanding where your money is coming from and going to takes a great deal of organization. Even before you're ready to launch, the costs add up quickly.
When starting my first business, I quickly realized that I needed an accounting service to review expenditures and prepare my tax returns. Next, I needed legal support to provide counsel and prepare an estate plan. These services were just the tip of the iceberg.
If you’re like me, you are so focused on business growth you don't consider professional services like these at first. These and other essential expenses, from web designers and copywriters to office space and equipment services, are easy to overlook but failing to account for these in your business plan will cost time and money when you are short on both. What's worse, a blunder like this can seriously damage your business reputation.
After all, if you find that you can’t afford to pay a service contractor, then how will you afford to weather fluctuating market conditions and other setbacks?
You need a solid business plan from day one so that you don’t run into cash flow issues, burn bridges with contractors or misappropriate your revenue stream. Use these three tactics to hammer out a high-quality plan:
1. Know the laws.
You need to be well-versed in the rules and laws surrounding your business, from worker regulations to the shifting tax codes. Confirm that your business plan is legal in the first place, or learn whether a simple accounting adjustment could save you thousands when tax season hits.
Avail yourself of great resources such as the Small Business Administration, which provides a wealth of information about small business analysis, startup costs, how many businesses make it to year two, and much more.
2. Know the market.
Your market will inevitably change. From industry trends to laws and regulations, shifting circumstances will force you to stay on top — or preferably ahead — of the emerging situation. Learn how your market tends to evolve and how to anticipate trends so you can capitalize on them. The more you can build adaptation into your business plan, the better prepared you will be for what may come.
Starbucks CEO Howard Schultz followed this plan while building the small-town coffee shop into the juggernaut it is today. He discovered an untapped demand in the industry and seized upon it to great success.
3. Know yourself.
Your idea may seem so great that nothing will stand in your way, but limitations and setbacks are facts of life. Spend some serious time estimating your startup costs, and make a plan for emergencies or unforeseen events.
My first business cost me a tax return. I literally built my business off a tax return, settling into a profit-building niche that I could funnel into sustainable growth until I was ready to expand. Once I sold the business for a nice profit, I used the cash to start my second venture. But neither of these opportunities would have become reality had I not set out with a plan and stuck to it.
Before you leap into the glamorous world of startup ownership, do your research. Otherwise, you might not be living in the startup world for long.