Business Success Criteria: How You Know Your Business is Succeeding
December 26, 2022 | Last Updated on: April 28, 2023
December 26, 2022 | Last Updated on: April 28, 2023
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Starting a new business is an exciting and rewarding venture, but there are also several risks to entrepreneurship. Of the 500,000 new businesses started each month, only 50% see success by the five-year mark. So, how can you succeed as a small business owner? Unfortunately, there is no direct path to overcoming all obstacles, but there are some steps every entrepreneur can take to increase their chances of success.
Successful business models begin with clear intentions and defined business goals. Why did you start this business? Was it to achieve freedom, to follow a passion, or simply to earn a better living? These will provide your driving motivation when you face trials.
Whether you have an innovative business idea, or you’re buying into a franchise, typically, you’ll also have goals linked to achieving growth, profit, and control.
For small businesses where growth is the primary objective, the short-term goals generally include a consistent increase in the financial value of the company. You may see evidence of the success of your own business through increasing annual revenues, the need for additional locations, or reaching more members of the community
For small businesses where profit is the goal, the business’s success is often measured in liquidity. Liquidity makes it possible for the small business owner to pull cash out of the business to fund their lifestyle, expand philanthropic efforts, or purchase investments. If the business owner is seeking both liquidity and control, they may consider going public to fund growth or seek out investors or business financing options.
Entrepreneurs that set out to be their own boss and maintain control can measure the company’s success by the decision-making power the business gives them. Control can be a driver for success in the shape of building long-term wealth and independence or creating a business to stay in the family for multiple generations. Some entrepreneurs may have a combined goal of growth and control which means they want the company to grow in terms of size and net income but want to maintain control over operations and financial planning.
Once you’ve established your goals for the future of the business, you’ll want to create a strong business plan. A solid business plan will act as a guideline for financial planning and decision-making throughout the life of the business. It’s also a requirement when applying for a small business loan or government grant funding. Business plans are typically written when a company is in its infant stages and reviewed and revised annually.
A business plan typically includes each of the following elements:
It’s not enough to just create a plan, you need to actually measure things to make sure you’re making progress. There are countless key performance indicators (KPIs) that you can use to track progress within your organization. Not every success metric or KPI applies to every type of business, so it’s important to find performance measures that can easily be calculated and applied to your specific business model.
Metrics that indicate financial health are typically calculated using data retrieved from financial statements, like the balance sheet and income statement. Financial metrics can be evaluated regularly with monthly or quarterly financial reports.
Continuously evaluating the customer experience of your business is another way to measure success. Whether you’re running a local restaurant, an online e-commerce store, or offering consulting services from your home office, customer satisfaction can make or break a business.
In some business models, employees are the key to success. If your small business has any staff members, you can use employee-driven performance metrics to measure success.
If your goals include making an impact by serving your community, being able to give more to your favorite charity, or running a carbon neutral organization, then your metrics may be tied to impact. For example:
If the metrics used to measure your business’s success are not showing favorable results, you may be wondering if your new business is going to fail. Some signs to watch for to indicate an unsuccessful business model include:
If you think your business might be failing, there is a tough decision to be made. Consider your options and the likely outcome of increasing your efforts to get back on track or deciding to cut your losses and close the doors.
If you’re not ready to throw in the towel, there are some strategies you can implement to change the direction of the business. Consider making the following changes:
If you’ve decided that you can’t save your small business, it may be time to cut your losses. If you decide to close your business, follow the following steps to make the transaction as smooth as possible.
Building a successful business begins with a strong foundation that contains clear objectives and a well-written business plan. Once your business is up and running, you can look for signs of success like repeat customers and referrals or creating a strong presence in the community. To measure your company’s success, you can use financial metrics or other key performance indicators. If the results are not as you’d hoped and you are concerned your business may fail, decide to turn things around or cut your losses. If your goal is to save the business, consider revisiting your marketing strategy and business plan. You should also speak with a financing expert at Biz2Credit to learn more about business financing options, like the merchant cash advance that allowed this software developer to get their business back on the right track.