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5 Keys to Business Success

Written by: Howard Shore

Article Overview: While some owners are lucky enough to have the right product at the right time, the rest need to have the right vision and purpose, strategy, financial planning and review Company goals and commitment to their Company's goals.

5 Keys to Business Success

While some owners are lucky enough to have the right product at the right time, the rest need to have the right vision and purpose, strategy, financial planning and review Company goals and commitment to their Company's goals. If owners don't do the five things in this article well, they are likely to discover that they would have earned a better living by getting a job. The difference between success and failure in a business can really be broken down into these key factors.


According to the Small Business Association, 1/3 of all small businesses close their doors after 2 years, and 60% do so after 5 years. If you think your business is immune because it's past the 5-year threshold, you might find it interesting to note that, according to the National Federation of Independent Business, only 39% of all businesses are profitable. Thirty percent just break even, and the rest lose money over their LIFETIME.


The good news is that keeping a business open and profitable is much simpler than these statistics would indicate. In our experience, many of these businesses failed or did not make money because their owners thought that knowledge of their trade or business and hard work were the keys to success. While both are essential elements, they are not the keys to success. And contrary to popular belief, "lack of funding" would be number 7 or 8 on MY list of reasons why businesses fail.


If you want your business to succeed the following are the top 5 keys to success:
1. Vision and Purpose: Have them, communicate them, and drive them
2. Strategy: Review it with your management team at least quarterly
3. Financial Planning and Review: Monitor at least monthly, focusing on Key Performance Indicators
4. Company Goals: Establish them and constantly communicate them
5. Commit to the Company Goals


If you answer "no" - or don't 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.
• Is your management team eager to participate in your annual planning processes?
• Does your organization regularly achieve all or most of the financial and non-financial goals in your strategic plans?
• Does everyone in your organization know specifically what the goals are and what part they play in achieving them?
• Do the actions in your organization regularly adhere to 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 the trends are in your industry, who your competitors are, what your competitors are doing, and what your opportunities and threats are?
• Do you get regular input from your customers (not just complaints) and use that information to develop your plans?
• Do you focus on specific market segments?
• Do you know what capabilities, management systems, people, and other resources you must have in place now and for the future, what that "future" timeframe is?


Many small organizations mistakenly think that the answers to those questions apply only to large companies - that they can wait until they become bigger to worry about those things. They are among the 50% that fail in the first 5 years.


Conversely, 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 operational reality. The plans go into a desk drawer or onto a bookshelf. At the end of the year, financial success or failure is met through other means.


Planning is the journey on which you take your management team to balance near-term performance with the long-term objective. 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 who focus their planning process on creating budget numbers that will yield the profits they want to see at the end of the year, going into phenomenal amounts of detail to get precisely to the wrong numbers. 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 achieved profits in some unexpected (non-sustainable) way, such as across-the-board price increases; or 2) they missed their numbers, which they attribute to everything except poor leadership.


Howard Shore is a business growth expert who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation.

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Article Tags: company goals, financial planning, keys to business success, right time, right vision



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