10 Reasons for Business Success or Failure
Since the housing bubble burst in 2008, many businesses have struggled to stay above water. The lack of discretionary income on consumers left many business operators scrabbling for strategies to keep their organizations alive and well. This hub explores 10 reasons why some business succeed while others fail.
The first factor for business success is empowering leadership. This type of business management style has also been called transformational leadership. Transformational leadership is the type of motivational style that draws others in and inspires them to achieve something greater than themselves. However, the employees and staff members do not merely do the work; they also become better people in the process.
More and more enlightened employers are learning that employee satisfaction has a direct impact on the quality and sustainability of the enterprise. In fact, companies like Google have paved a new road of follower-centered leadership by offering services that help employees feel wanted and make their lives more efficient and effective. Such services can include company buses to pick up employees, in-house fry cleaning and in-house day care services. When employees are able to worry less about day to day issues outside of work, then they feel empowered to think creatively about their work.
The second factor to business success is a well-defined vision. A corporate vision is a scripted understanding of what a company wants to do and how they want to accomplish it. A well-defined vision allows members of an organization to unite for a common cause with singular aim and all energy focused in one direction.
No matter which leadership theory one espouses, all leadership theories identified with positive outcomes include vision as part of the make up of a successful company. Organizations that actively scan the horizon and tweak and sometimes redefine their visions will more likely maintain a sustainable competitive advantage.
Relevant Knowledge of the Business Market
A third factor for business success is relevant knowledge of the business market. In order to do anything well, a person or company must do their homework to gain a deep understanding about the factors that are essential for success. These days as the World Wide Web continues to expand, there is no excuse for a would-be entrepreneur to lack knowledge of whatever business they feel led to pursue. Sadly, many businesses are dead out of the gate because they do not take the time to gain a proper perspective on the industry.
Detailed Business Plan
Another factor for business success is the formulation of a comprehensive business plan. Knowing about an industry and sketching out a vision is only the beginning of a successful enterprise. The next step is to take what you know and what you want to accomplish and write a detailed strategy for how to make it happen. A business plan covers all the related factors that are essential for a winning enterprise including vision, description of the market, projected financials, employee relationships and customer relations management (CRM).
Assessment of the Direct and Indirect Competition
When getting ready to implement a new business, another important factor for success or failure is the nature of the direct and indirect competition for the same product or service. For instance, a person or group wishing to open an online outlet for used furniture should take adequate time to research how many other competitiors are trying to do the same thing. When doing the research the group should ask: who is the competition? What products and services do they offer? What is their pricing structure? What kind of shipping do they offer? and the like. Gaining a firm grasp of the competition can definitely make the difference between staying alive long-term or filing for bankruptcy.
Availability of Financing
A sixth factor important to the success or failure of a business is available financing. The current economic crisis in America has made venture capital difficult to find. Of course, if a company can manage to avoid using credit altogether then this is not a problem. Still, most new businesses need some kind of seed money to get them up to speed and thus the ability to secure working capital is critical to keeping the doors open.
Solid Customer Relations Management
A seventh reason for business success or failure is how a company realtes to their customers. This seems like a no brainer, but the better an organization handles their client base the more apt it will be to stay in business. Enterprises that take time to think out common and uncommon situations before they encounter them will be more likely to keep customers coming back. Those groups that merely define their customer relationships on the fly or in the heat of the moment are doomed to fail.
Well-Managed Supply Chain
Another reason for business success or failure is how a company manages its inventory. in order to keep the right mix of products on the shelves, an enterprise needs to think through its supply chain processes. Too much inventory can tie up working capital, but too little inventory can lead to shortages and lower customer satisfaction. JIT (or just-in-time) inventory management is one supply chain strategy that has benefited such large organizations like Wal-Mart, Dell Computers, and Toyota Motors.
An eighth reason for business success or failure is timing. In 1998, when the latest housing boom began it was probably a good time to enter into the home mortgage industry; in 2006, when the housing bubble began to burst it was probably a poor time to set up a new mortgage outfit. Part of learning about an industry is getting a good feel for its business cycle; although trying to time the market can lead to indecision.
Well-Devised Decision Making System
Decision-making is at the heart of any business and the best organizations have outlined a step of procedures involved in the decision-making process. Those entities that tend to practice participative leadership allow representatives from all departments to be involved in the process and seem to gain stronger employee buy in. Most poorly led organizations do not encourage participation and often lack a well-defined procedure for making decisions. One solid decision-making scheme is the nine-step problem-solving model. The steps in the model are:
1. Describe the situation in detail
2. Frame the "right" problem
3. Describe the end-state goals from a broad perspective of values
4. Identify the alternatives
5. Evaluate the alternatives
6. Identify and assess the risks
7. Make the decision
8. Develop and implement the solution
9. Evaluate the results
Government Regulatory Measures
A tenth reason for business success or failure is how much the owners of an enterprise have a good grasp on the rules and regulations governing their sector of the economy; this includes having a clear understanding of the tax structure. Many would-be entrepreneurs charge into a good idea not knowing what restrictions apply to the execution of the idea. For instance, a businessperson may take a vacation in Southeast Asia, go shopping in a local bizaar, and think that he can make a huge profit importing garments and handicrafts. Accordingly, he may purchase 1000 shoulder bags for $3000 thinking he can surely sell them for $10 a bag back home. However, before throwing down his cash, he did not realize he would have to pay a duty of $3 a bag to export them from the foreign country; another tariff to import them into his home country; not to mention taxes on the income. Not knowing the extent to government interference in an industry can mean the difference between success and failure of a business.