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Why do some businesses succeed while others falter?
One reason is that the successful business owner is able to make adjustments if things don't work out exactly as planned. In effect, the successful business owner is able to save a sinking ship, while the unsuccessful owner just goes down with the ship. Let's take a look at how you can fix common problems that may occur in your business.
01 Determining If You're Succeeding
A look at how you figure out whether you're meeting your goals and whether your business is where it should be.
Success is measured differently depending on which stage of maturation your business is in. The three basic stages on the road to success are:
- nominal success
The First Step to Success: Infancy
A startup business, in its infancy, concentrates on:
- how to get customers
- how to deliver the product/service to the customers
- how to broaden the sales base to get more customers
- how to get enough cash to cover the startup phase
At this stage of its existence, the owner is spending all of his or her time in the business. In fact, the owner IS the business. Systems are minimal. The strategy is simply "stayin' alive!"
Causes of failure. The causes of business failure in infancy are almost always found in three areas:
- capital runs out
- the market niche was misjudged and no one will buy the product/service
- the owner can't take it anymore, so he or she sells out or folds up
- Are you succeeding? If you're in the startup stage and you're managing to stay alive, the customers seem to like your product, and you're not burning out, you're probably succeeding.
The Second Step: Survival
The first stage in a business's life was infancy. The next stage is a state of survival, and it could take anywhere from a month or five years to reach this plateau. The keys to this phase are:
- income is sufficient to cover expenses, to break even, and to renew assets as necessary
- income is growing so that a small profit might be realized
- employees may be necessary, but systems are still minimal
- cash forecasting is possible as well as necessary
Causes of failure. The causes for business failure at this stage will likely involve:
- owner burnout
- inability to grow and expand due to a variety of factors, including insufficient cash flow, limited owner ability, and marketing shortcomings.
Many, many businesses reach the survival level and remain there indefinitely, earning just enough to get by. This is the case for most "ma and pa" stores, for example, and is acceptable if the owners don't rely on ultimately selling their business for a gain after it has marginally supported them over the years. Most survival-type businesses are sold at a slight loss or simply closed when their owners choose (or are forced) to retire.
The Third Step: Nominal Success
Okay, you're past the "ma and pa" stage (the first two stages in a business's life are infancy and survival). This third success stage, nominal success, will require a fundamental decision. Are you going to hire a skilled manager and let him or her run the business in its static form while you sit on the beach or are you going to start up another kind of business? Or, are you going to try to grow this business by utilizing the borrowing power of the firm to finance an expansion?
If you elect the former, your business will likely remain stable. But if you choose the latter, investing all the company's resources in more and better facilities, equipment, products, and managers, your firm might achieve solid growth or it might falter in its new direction. If you still closely monitor your business, you should be able to recognize that your business is no longer thriving, and you can manage your way back to stability, or at least back to the survival mode.