What does a start-up need to get right in order to fledge into an established business? In this blog, we explore the key ingredients of business success.
The business idea can be unlike anything the world has seen before. The product may be of the highest quality and yet…
8 in 10 companies fail in the first year, a startling statistic found when a research company scrapped data from Companies House.
What is not included in this data are those sole traders or partnerships that didn’t register with Companies House as they were still in their infancy but didn’t make it.
There are many reasons why businesses fail. And yet, despite knowing these, the rate of failure is still high.
We live in an ever-changing world where consumer demands, wants, needs and expectations change at a lightning-fast pace. As a business, new or established, it is essential to keep step and to make changes that satisfy customers.
And yet, a business can be slow to respond or fail to read the signs that times have changed.
There are many other ingredients to business success. What is the perfect combination that signals success?
1. Getting the product or service RIGHT
This can trip up established companies just as it can new businesses but a poorly thought out and a poor quality-controlled product can spell D-I-S-A-S-T-E-R.
In effect, this is all about impression. And when you make the wrong impression, it takes a lot to come back from this negativity.
But it isn’t just that, its about producing a quality item that will enhance a customer’s life. Sounds far-fetched, but just think of the humble potato peeler and how much that has helped people over the years to peel potatoes easier, and without too much waste.
As well as quality, you need plenty of product research finding out what works and what doesn’t.
It is also about getting the branding right, something that can be far more complex than first realised.
HINT – If your product does fail, that doesn’t mean the end of it because there are valuable lessons in failure.
2. Marketing and promotion
There are two reasons why a business fails when it comes to its marketing;
- It didn’t do enough market or none at all
- It did the wrong kind of marketing
Both spell disaster for a business and so getting it right is an important ingredient of business success.
Not doing enough means that customers are not alerted to a business or its product. But it isn’t just that: marketing can be a valuable avenue of letting customers know why your brand can be trusted.
It is often assumed that any marketing campaign is, therefore, better than none. And so, leaflets are printed, adverts designed, and tweets sent out.
This scattergun approach rarely gets the results that a business needs thus, many entrepreneurs must learn about marketing.
Effectively, marketing needs to target the right customers and in the right way. And this means understanding who your customer is.
3. Understanding customer demographic
Effectively, a successful business has answered the question ‘who is our customer?’
How old are they? Are they male or female? Where do they live? What do they do? Why do they need the product or service? What problems is the product solving?
Defining your customer is not a hard thing to do but clearly, a business who has an in-depth of understanding of who they are aiming their product are, are far more successful than ones that don’t.
Customer demographic defines everything – from the packaging of a product to branding, to the marketing message to the marketing methods used.
HINT – businesses that have an innate understanding of their customer demographic also realise the importance of staying in tune with customer expectations and needs.
A successful business will have, at its heart, a pool of talent, skilled people that will drive the business forward.
And yet, so many businesses fail to seek our fresh and new talent to help them do this.
At one time, people left school and went to a ‘job for life’. They weren’t expected to or had little expectation of moving from one job to another.
The workplace has changed and is changing: people no longer want to be with one company for all of their careers. They want new and exciting opportunities, and they understand that to find these, they may need to look elsewhere.
This sounds bad news for a business that it could effectively leak talent at a time when it needs it most.
What it can do, however, is breathe fresh air through a business, with new people bringing new ideas and new ways of doing things.
On the other hand, however, a transient workforce in and out means larger recruitment cost and stunted growth as you continually induct new members of staff into your way of doing things.
Finding and holding on to talented people with key skills is essential and critical to the ongoing success of a business.
If you look at a successful business, you will see that the reason why they hold on to people and why people apply for roles with them in the first place is the culture within it.
Collaborative, creative, free to explore new ideas and so on, all contribute to a workplace where people want to be.
5. Financial control
Effectively, the first four ingredients examined have been important but of all the ingredients listed for a successful business, this is the one that most commonly stops a business in its tracks.
The recent recession has seen big brands disappear from the high street and online. From Woolworth’s, a long-established and favourite high street to the recent demise of Toys R’ Us, alongside tough trading conditions and failure to adapt, it was also spiralling financial issues that finally put paid to their trading.
Finances can soon be out of control and once it starts its spiral, wrestling it back is something few manage.
From managing cash flow to balance sheets that show the business net worth, being pedantic about the financial health of a business will pay dividends.
Keeping outgoings low means you keep your business competitive. Reducing financial waste by looking for the best deal is something that could have saved some smaller businesses, and for bigger businesses, keeping borrowing under control would no doubt have helped their survival.
From employing your own financial experts to investing in software accounting packages to working closely with your accountant, understanding the financial shape your business is in, makes you and it more responsive. A business administration course can be used to help teach you the skills you will need to help keep you on top of some financial elements of the business.
HINT – ‘cutting costs’ isn’t always the solution. Investment and borrowing have their place but there needs to be careful financial forecasting too.
As a business grows, it almost takes on its own character. It becomes a ‘thing’.
For the person or people who started the business, it represents their life’s work in many ways.
They have lived and breathed it. They have asked tough questions and placed themselves in uncomfortable positions. They have believed in their business idea, what they are offering. They have believed in themselves.
They have kept going when others have disparaged them, ridiculed their ideas or criticised their product.
Dogged and determined, their business did flourish. And it continues to do so because this passion still burns.
However, there can be a pitfall and that is leader dysfunction. As a business owner, there comes a time where maybe, you have to admit to yourself, you are not the right person to take the business further.
Heart-breaking it may be to sell or move on, but in other ways, it is a relief. This is no reflection on the person – far from it, it takes courage to admit when you no longer have the skills to grow the business – but a clear indication that you have created a successful business.
A successful business is a combination of ingredients from marketing strategies to branding, along with a sprinkling of luck.
It starts with a business idea and morphs from there but along with these ingredients, a successful business could be in the offing;
- Communication & dialogue – that is, understanding who your customer is and where they are at helps you understand what appeals and what doesn’t in terms of branding.
- Marketing and promotion – knowing who you are aiming at means you can create a tight promotional strategy that brings a return on investment.
- The right product – test, test and test some more!
- Talent – a business needs people to grow and staff are just as important as customers. Seek out the best talent or outsource critical business activities if this is a step too far.
- Excellent financial control – knowing the financial health of your business is critical, especially in a crowded marketplace.
- Passion and attitude – remain the key drivers of any business, whether the CEO is the original founder or not, as well as understanding when it is time to let go.
What else do you think makes for a successful business?