5 Keys to Business Success
As many of you have learned from my seminar “Turning Strategy into Action,” the difference between business success and failure can be broken down into a few factors. While some owners are lucky to have the right product at the right time, most find that if they do not do these 5 things they will either fail or, worse yet, discover that they would have earned a better living by getting a job.
Only 16% of All Businesses Make Money over Their Lifetime!
While we do not like to discuss negatives, there some realities we need to present. According to the Small Business Association, 1/3 of all businesses will close their doors after 2 years, and 60% will do so after 5 years. If you do not find this concerning because you have passed the 5-year threshold, you might find it interesting to note, according to the National Federation of Independent Business, only 39% of all businesses are profitable, 30% break-even, and the rest lose money over their LIFETIME.
5 Keys to Being in the 16% Pool
The good news is that turning a profit and staying in business is much simpler than these statistics would indicate. In our experience, most of these businesses failed or did not make money because they mistakenly thought that knowledge of their trade or business was the key to success, and hard work was what it took. While these are essential elements without which you will surely fail, they are not the keys to success. Lack of funding would be number 7 or 8 on my list of reasons by businesses fail.
If you want your business to succeed the following are the top 5 keys to success:
- Have, Communicate and Drive Your Vision/Purpose
- Financial Planning and Review at Least Monthly
- Establish and Communicate All Company Goals
- Commit to Goals
9 Signs that Your Business is Under-performing?
If you answer “no” or do not answer with a strong yes to any of the following questions, your organization is probably under-performing in the areas of sales growth, customer service, employee satisfaction, innovation, and profitability:
- Does your management team look forward to participating in your annual planning processes?
- Does your organization regularly achieve all or most of the financial and non-financial goals set forth in your plans?
- Does everyone in your organization know specifically what the goals are in your plans and how they will contribute to achieving them?
- Do the actions in your organization regularly resemble the plans?
- Do you get regular input from all levels of your organization and use that information to develop your plans?
- Do you know what trends are going on in your industry, who your competitors are, what your competitors are doing, and what your opportunities and threats are?
- Do you get regularly input from your customers (not just complaints) and use that information to develop your plans?
- Do you have specific market segments you are focusing on?
- Do you know what capabilities, management systems, people, and other resources you must have in place now, for the future, and by when?
Proper Planning Is Critical for Companies of All Sizes
Many small organizations mistakenly think that answering the above questions applies only to large companies and that they can wait to become bigger to take this very important step. They are among the 50% that fail in the first 5 years.
On the other hand, many companies go through the annual rituals of strategic planning, business planning, and budgeting, and completely miss the value of these very important business processes. They spend valuable time, money, and resources to develop written plans that bear little or no resemblance to what actually goes on in the business afterwards. Instead, business goes on as usual, and the plan goes in a desk drawer or on a bookshelf. At the end of the year, financial success or failure is met through other means.
Planning is the journey that you take your management team through to balance near-term performance with that of the long term. Your goal is to maximize your long-term returns on investment in your business while meeting short-term financial needs. In our experience, we see many leaders focusing their planning process on creating numbers (budgeting) that will yield the profits they want to see at the end of the year. Amazingly they will go through phenomenal amounts of detail to get precisely to the wrong numbers. They are the wrong numbers because the reality is they have no idea how they will achieve these numbers, which is the point of planning in the first place. In these companies, it is not uncommon to hear one of two things at the end of the year 1) they achieve profits in some unexpected way, such as the pricing was extraordinarily good (not sustainable), or 2) they missed their numbers and offer lots of excuses that have nothing to do with poor leadership.
Let us help YOU take your business to the next level. Take the next step and contact us to learn more about how Business Coaching can help you and check out the testimonials page to see how we have helped other executives like you.