What are the reasons a business succeeds?
One of the sad realities of business is that only a small percentage can succeed. When we start a business, we all want to succeed. Starting a business, the right way is critical.
On average, only 1 out of 10 new businesses survive. About 50% of businesses fail due to incompetent management. Starting a company is a risky business. Entrepreneurs face obstacles at every turn. We all know there are plenty of reasons why businesses fail, but what are the reasons they succeed?
By examining successful companies, we gathered the following reasons businesses succeed:
What are the key success factors in business?
Thinking About Success
To succeed in business, you must think about success. From the day you start a business, you have to think that success is possible. Believe me. Nobody else will feel the same way you think about your business. Success begins with you believing in yourself, believing in your business idea, believing in your team. Picture yourself as a successful entrepreneur. Thinking success can take your business to the next level. It can and will inspire you and the team behind you. If, on the other hand, thinking business failure can stop you cold. Having negative thoughts about your business makes you less effective, less able to work on the hard problems you need to solve, and less likely to get ahead of your competition.
Don’t confuse thinking about success and taking action with daydreaming. Unfortunately, for many people daydreaming is a way to escape and avoid doing the difficult tasks required for business success. Having your head in the clouds isn’t productively thinking about business success.
Thinking about success will make you more effective in every situation, from motivating your employees to concentrating on business strategy, to developing creative business ideas.
Understand the Direction of the Business
Every startup needs a leader with a vision. As a business leader, you must know where you are and where you are heading. You need a clear direction to move your company forward. You can’t there unless you know where you are going. Every day, you have to remind yourself of the big picture. A good business leader keeps the long-term in mind while dealing with the immediate needs of a new company.
To keep your business moving in the right direction, ask yourself the following questions:
- Do I have a clear definition of the direction of my business?
- Have I created a business plan that my team and I can follow?
- What have I done today to move my business in the right direction?
- What distractions did I have to deal with today?
- What can I do to minimize distractions from the ultimate goal?
- Did I succeed in motivating my team to reach our goals?
Speed to Market
You can’t be second if you want to dominate the market. If you are slow to market, you allow your competition to dominate the market. Especially with the rate of technology development, the faster a startup can produce its service or product, the better chance it has in delivering to customers. Companies that are slow to market have to compete with established industries. One of the reasons businesses succeed is that they reach consumers first.
The fastest companies to market have the best access to customers. Customers are more likely to talk to you if you are first to market. If you are late to the market, customers and prospects have already talked to your competition. It is tough for latecomers to steal customers from established businesses.
The first companies to market can easily dominate the market. It’s much easier to dominate a market without competitors. If you are first to market, you are more likely to succeed, even if your product or service is substandard.
If you are first to market, you will become an industry leader. Instead of competing with other businesses already in the market, you can set industry standards.
It’s no surprise that financial savvy is one of the keys to business success. The good news is that you don’t have to become a CPA to understand and manage your business finances. Experts are always available to help you with any questions you may have. But understanding the basics of business finance can put your business on the path to success.
What does financial savvy mean? It means that you are well versed in dealing with the financial aspect of your business. You understand credit, expenditures, profit margins, and various critical business financial details. If you have sufficient financial knowledge, you just increased your chances of business success.
They devise a financial plan and a budget. They are actively managing business finances. Successful entrepreneurs understand that expanding their awareness of how money works in business is a great way to increase the odds of success.
Here are a few important business finance topics for you should think about:
- Accept the fact that cash flow keeps a business alive. It is the lifeblood of business. It is cash flow, not revenue, that keeps the lights on in your business. Carefully manage incoming and outgoing cash. The life of your business depends on it.
- Learn to read and understand financial statements. The three most critical financial statements are; cash flow statement, balance sheet, and income statement.
- The amount of capital you need to start and operate your business. Some businesses can be started with no money. Others may require a small fortune to get off the ground. And even if you start a business with no money, you still need money to pay your bills.
- Every business expense should contribute to the bottom line and get you closer to break-even. You should focus on expenses that directly result in income generation. Paying for high cost commercial real estate space when lower-cost options are available can soak up precious cash that could be used for hiring more salespeople.
- Understand your risk tolerance. As an entrepreneur, especially early on in the life of your business, you might be the last one to get paid. Changing economic trends, competitive pressures, changing customer needs, supply chain interruptions, and various other factors can make business success far from a sure thing. Make sure spouse and business partners have the emotional and financial capacity for a high degree of uncertainty.
- Get a clear picture of how your business structure impacts your taxes. There are many types of business structures available to you as an entrepreneur, sole proprietorships, corporations, and limited liability companies (LLC). Before you commit to forming any business entity, consult with a tax professional and business attorney. The business attorney can educate you on the potential liabilities and risks of business entities. The tax professional can help you understand the potential tax benefits and consequences of each business entity.
- Learn about the value of business insurance. Many entrepreneurs fail to think about liability issues until it’s too late. You should consider various business insurance products, such as property loss, professional liability, general liability, commercial hazard, life, auto, and theft. Don’t just talk with insurance salespeople; ask other entrepreneurs about insurance.
Measure Business Success
To succeed in business is to measure success in the right way. The only way to know that your business is on the right track is by keeping a finger on the pulse of how your company is operating. If you measure the right things, you’ll know where the challenges and opportunities lie ahead. Regardless of industry, businesses should implement benchmarks as a way to continuously measuring business success.
Here are examples of business success metrics you can implement:
- It is critical to measure profitability. Revenue is important, but it only tells part of the story. You could be going bankrupt with record sales and revenues if you don’t keep your eyes on your net income ratio and profit.
- If you have a marketing-dependent business, you need to keep track of leads generated and leads converted. Where do sales leads come from (social media, email, direct mail, search engines, cold calls, etc.)? Understanding leads and sales conversions is a critical business success metric.
- It is critical to understand what your break-even point is if you want to own a successful business. In its simplest form, the break-even point is when the total revenue equals total expenses or costs.
- The number of new customers, churn, or customer retention are important sales indicators.
Just like early career builders, young startup companies can gain a leg up by knowing a few well-connected individuals. These companies use their social network for their first clients, investors, and mentors. As the adage goes, it’s not what you know – it’s who you know.
Startups need leaders who are willing to work hard and stick to their goals. This leadership inspires others to commit to a strict work-ethic aligned with the company’s mission. All employees must be engaged and dedicated to the goal.
Even when times get tough, and the road to success offers bumps and blockages, startups need to persevere to achieve success. The majority of startups bail when money is tight or disagreements arise between founders. Successful businesses stick it out in turbulent waters and remember their end goal during difficult times.
Quick to Adapt
Successful startups are comfortable with change. Leaders who know how to make smart decisions without a clear roadmap can take advantage of opportunities that more cautious companies can miss.
Knowing How to Attract Investors
Money talks in the business world. Without the startup funds, companies can never get up off their feet. Smart business leaders know how to generate capital to give their million-dollar ideas a shot.
Startups need an unwavering commitment to their mission and goals. Without the confidence that the company will succeed, the startup will dissolve when facing initial obstacles.
Efficient Time Managers
There’s no downtime when it comes to startups. If the leaders of a company are not putting in time around the clock, success is unlikely.
Everyone can have a million-dollar idea. It takes grit and strategy to put an idea into action. It is knowing how to execute sets apart successful businesses from the failures.
Exceptional Product or Service
Every business claims to have something special for the market. In reality, only a tiny percentage of businesses offer something truly unique. Great marketing is not what gets people to buy. If you are going to succeed, you have to figure out a way to consistently provide exceptional products or services.
If you want to succeed in business, starting your business the right way is critical.