Business is an art as well as a science. It’s a matter of practical experience, judgment, foresight and luck. To be successful in business, you must master the basics of business success.
Fortunately, all business skills are learnable. You can learn anything you need to learn, to achieve any goal you can set for yourself. There are no limits–except the limits you place on your own imagination.
There are three major reasons why businesses fail: lack of money, lack of knowledge and lack of support. By mastering the basics of business success, you’ll gain the knowledge necessary to acquire the support and money you need for your business.
So just what are the essentials of business success? There are seven key areas of activity that determine whether your business will live or die:
1. Marketing. Your ability to determine and sell the right product to the right customer at the right time
2. Finance. Your ability to acquire the money you need, and account for the money you receive
3. Production. Your ability to produce products and services at a high enough level of quality and consistency over time
4. Distribution. Your ability to get your product or service to the market in a timely and economic fashion
5. Research and development. Your ability to continually innovate and produce new products, services, processes and responses to your competition
6. Regulation. Your ability to deal with the requirements of government legislation at all levels
7. Labor. Your ability to find the people you need, deal with unions, establish personnel policies, training and organizational development
And from this list, comes the very specific, identifiable reasons for business success:
- Having a product or service that’s well suited to the needs and requirements of the current market
- Developing a complete business plan before commencing business operations
- Conducting a complete market analysis before producing or offering the product or service
- Thoroughly developing advertising, promotional and sales programs
- Establishing tight financial controls, good budgeting practices, accurate bookkeeping and accounting methods, all backed by an attitude of frugality
- Ensuring that there’s a high degree of competence, capability and integrity on the part of key staff members
- Having good internal efficiency, time management, clear job descriptions, accompanied by clear and measurable output and responsibilities
- Developing effective communication among the staff and an open-door policy for managers, especially the business’s owner
- Generating strong momentum in the sales department and placing a continued emphasis on marketing your product or service
- Making concern for the customer a top priority at all times
- Putting determination, persistence and patience at the top of the list on the part of the business owners
And now that you know the seven essentials of business success and the identifiable factors involved in helping your company succeed, let me share the top reasons for business failure. Thousands of companies were studied to determine the reasons businesses fail. Here they are, in order of their importance:
- Lack of direction. Business owners often fail to establish clear goals and create plans to achieve those goals, especially before starting out, when they fail to develop a complete business plan before launching their company.
- Impatience. This occurs when business owners try to accomplish too much too soon, or expect to get results far faster than is truly possible. A good rule to remember is that everything costs twice as much and takes three times as long as expected.
- Greed. When entrepreneurs try to charge too much to make a lot of money in a short period of time, failure isn’t far behind.
- Taking action without thinking it through first. An entrepreneur acts impetuously and makes costly mistakes that eventually cause the business to fail.
- Poor cost control. An entrepreneur spends too much, especially in the early stages, and spends all their startup capital money before achieving profitability.
- Poor product quality. This makes it difficult to sell and difficult to get repeat business.
- Insufficient working capital. An entrepreneur expects–and requires–immediate, positive cash flow that doesn’t occur, leading to the failure of the business.
- Bad or nonexistent budgeting. An entrepreneur fails to develop written budgets for operations that include all possible expenses.
- Inadequate financial records. An entrepreneur fails to set up a bookkeeping or accounting system from the beginning.
- Loss of momentum in the sales department. This leads to a decline in cash flow and the eventual collapse of the enterprise.
- Failure to anticipate market trends. An entrepreneur doesn’t recognize changes in demand, customer preferences or the economic situation.
- Lack of managerial ability or experience. An entrepreneur doesn’t know or understand the important skills it takes to run a business.
- Indecisiveness. An entrepreneur is unable to make key decisions in the face of difficulties, or decisions are delayed or improperly made because of concern for the opinions or feelings of other people.
- Bad human relations. Personal problems and conflict with staff, suppliers, creditors and customers can easily lead to business failure.
- Diffusion of effort. An entrepreneur tries to do too many things, thus failing to set priorities and focus on high-value tasks.
Business success isn’t a mystery waiting to be solved. It’s an attainable goal, if you simply avoid the reasons for business failure and continually focus on improving the areas that are responsible for business success.