|What Makes a Successful Business?
What Is A Successful Business?
Given the amount of time, effort and money put in to setting up and running a business, a good entrepreneur or business owner would want a long-term future from their business or a handsome offer to sell, the price being based upon the prospects of the business without the current owner there. So a successful business could be said to be one that has a long term and profitable future.
What nobody wants is for their business to fail, especially not in the short term before they’ve had a chance to recoup some or all of that time, effort, and money they’ve sunk in to it.
As a business owner you are unlikely to get a real return within the first 3 to 5 years of trading. There are exceptions and lucky ones but for the majority of us a business’s value is arrived at by its reputation and brand and in the way it is managed. These strengths take time to develop hence the 3-5 year time frame that is often used to assess the small and medium sized business sector performance.
So What Makes A Successful Business?
The answer to this starts with why people go in to business. To be successful in business you need to be doing it for the right reason/s.
· You want to be released from the constraints of an employment contract
· You want more control over, or choice in their life
· You see a gap in the market or opportunity
· You are offered an opportunity
· You have a wonderful idea
· You have a dream
· You have a passion
· It’s the family business
· It’s a way to making a fortune
· You want to be in control of your retirement plan
On their own some of the reasons aren’t strong enough to build a successful business upon, although many people have tried (and unfortunately failed). Certain combinations work but the wrong combination will only guarantee failure!
You can start up in business for the wrong reason, but as long as you realise this early enough you can change and still be a success.
Your business needs to have access to certain key talents or skills. This doesn’t necessarily mean that you, the business owner or entrepreneur, has to have all of these talents, you just need to make sure they are available to you and your business. This could be through a number of ways:
· Business partner/s
Get together with others who have the skills, talents, and experience you are not so hot on.
Not everyone wants to run a business, they’d rather put their entrepreneurial, technical or business skills to work for you. All you need to do is employee them to be your marketing, your innovation, your business manager, undertake your PR, be your production/quality control, make sense of your accounts, or whatever skill that you need to bring in to work in your business and help ensure success.
· Business Advisers
Not as expensive as employing the staff you need to fill the knowledge & experience gap you have and much more flexible, yet probably more capable and just as interested in helping you achieve your success! How else can you afford to have seasoned, experienced business executives working in your business and adding considerable value without having to pay their large salaries and boundless benefits packages?
Split your business in to its component parts and decide if it would be better to sub-contract elements that are not core skills, another cheap and flexible solution which can be crucial in the early stages or when cash is tight. Out-source these tasks to people or companies who have better skills and knowledge in these areas, you’ll get excellent value for money.
A good entrepreneur or business owner will know that they can’t do everything in a business; they will also have an idea of where they can add most value by getting someone else to handle certain areas or functions. They know that trying to do everything them self is unlikely to lead to success, in fact it is more likely lead to stress and/or probably failure, a failure made all the more bitter by the fact that they have put so much effort in to the business and it still didn’t work, but they were sure it was a gold mine!
What Other Factors Are There?
So you’re doing it for the right reasons and you have got the key talents and skills in place; are you going to have a successful business?
Over 350,000 businesses start up each year thinking they have got it right. The statistics show that at least 50% of these go out of business within 3 years and the large majority within 5 years, this suggests they didn’t have it right. That’s a lot of people who didn’t know that they didn’t know about the key to a successful business.
That’s an awful lot of hopes, dreams and bank accounts shattered!
So, apart from the factors outlined above, what makes the surviving businesses successful?
Although there are currently no statistics to prove this, we believe that those businesses that are still operating with a future after 5 years can largely be grouped in to one of four categories or Business Talents
Successful Business Talents
Given our definition of a successful business, we believe there are 4 types of business talent that lead to having a successful business.
Franchises are regarded as significantly lower risk to banks than an independent business; the likelihood of achieving long-term success with a franchise is far greater than any other type of business, hence their popularity. The reason for this stems from:
· Proven product or service
· Proven ability to deliver
· Structured reporting and monitoring
· Franchisors business support and input
2) "Naturally Gifted Entrepreneurs"
There are some businesses that have become successful largely because the owner/s have a natural talent for, and understanding of, the key success factors for a business, they can implement them effectively and, crucially, stick to them.
The only difficulty is knowing how gifted they are:
· Are they gifted enough to see the business any further forward?
· Is it a mixture of being gifted and luck (see below)?
· Have they gone beyond their natural ability and have managed to move in to ‘The Lucky Ones’ (again, see below)?
· Is their success getting them carried away?
Can you be sure your one of these? Or maybe you’re:
3) "The Lucky Ones"
There are successful businesses that many see as being successful simply because they were in the right place at the right time and with the right offering. This may be the case but the likelihood must be akin to the chances of winning the lottery.
You will probably find that within these companies the owner/manager recruited the right people in to the key roles because people matter most in business and make the biggest difference, or they made good use of the business advice and support available to them.
There are also ‘The Truly Lucky Ones’ who have yet to be challenged by competition and can therefore carry on as they always have been doing, developing inefficiencies, complacencies and false securities until it becomes too tempting for a new entrant to miss out on the opportunity.
So, with the exception of ‘The Truly Lucky Ones’, it is more likely they will be either ‘Naturally Gifted Entrepreneurs’ or ‘They Know their Strengths and Weaknesses’ (see below) rather than just plain lucky
4) "They Know Their Strengths and Weaknesses"
Many businesses have struggled and failed because of pride or fear or any other reason that stops them taking on board good business advice and implementing it.
The successful ones know their strengths and weaknesses and appreciate that they aren’t necessarily the expert on everything in their business. They also appreciate that sometimes they are too close to the problem or situation to be able to make a truly un-biased or independent decision that would be in the best interest of the business.
What About The Others Who Make It Beyond 3 Years?
There are businesses that survive the first 3 years and that have survived beyond 5 years largely down to the tenacity, charm or cash funds of the owner (we can’t call them entrepreneurs because if they were they wouldn’t be surviving by these attributes). They are likely to be still working all the hours of the day, probably rarely taking a holiday and just making enough to survive, thankfully they haven’t had a serious illness yet!
They are likely to be surviving because of access to cash funds, be it via personal savings, loans from friends, family or banks, or overdraft or fighting off creditors. Without this they would have had to have given up ages ago, but how long can these funds support an under-performing business?
All is not lost for these business owners, it is possible to turn things around and bring about true business success. Let’s face it, there is obviously a market for their ‘offering’, they have also got a reputation that is appreciated by their customers. Therefore the business has strengths which can be developed and will reap rewards for the owner!
How About You Then?
It's probably fair to say we've generalised somewhat. If you'd like a review of your position and how to make the most of your assets, get in touch, we'll be happy to give you some of our time to review you position from an independent perspective.
Click on the 'Contact Us' below or via the button above."