Recently I took a look as one does at the end of financial year at how the business was doing. And despite the lingering tail of the GFC that is still affecting business confidence, our business was doing okay, well even.
Given the SOI business has now operated for more than a decade and most businesses don’t make it to their fifth birthday, it got me thinking about what businesses that survive and thrive into their second decade do right.
First let me say, I’m sure some of those businesses that don’t survive to their fifth birthday close for reasons other than ‘failure’ – for reasons like;
- ‘Freelancing’ – maybe the business owner was having a go at self-employment between jobs, but wasn’t ready to make a commitment to being in business per se – I’ve seen these folks come and go, but often after they’ve tasted the freedom of being in business, they come back around for a second, sometimes even a third pass – becoming business owners in the end.
- It was a ‘pop-up’ business that had its short day in the sun and was done.
- It morphed into or became part of another business – but the original business was still, according to the Department of Fair Trading, no longer trading.
That’s not to say all ‘failure’ is bad – not at all. Sometimes those harsh lessons that kill one business lead the business owner to their next great success. And frankly, anyone who’s run a successful business at some point has made wrong, often very wrong decisions – but we fix them and keep going, hopefully learning the lesson along the way.
So What Makes for a Successful Business?
Cashflow
As you may have read recently there’s been a raft of businesses that have been closed by the ATO because they were unable to pay their bills – so that would lead you to thinking a successful business has some cash in the bank with which to pay their bills and their employees entitlements, if push came to shove. Cashflow is and always has been king!
Sales Pipeline
If cash flow is king, then sales pipeline is queen. Having a decent pipeline of sales, repeating sales and future sales likely to come across the line, keeps the lifeblood of money flowing through the business’ veins. Without real sales, the business will eventually die.
Customers
That all-important sales pipeline cannot exist without customers. And just so we’re clear, sales and customers are not the same thing. Sales (or revenue) is a line item on your books – it is what it is – there’s nothing deeper involved. A customer on the other hand is a person who has a raft of needs, wants and emotions that need to be tended lest they seek business solace elsewhere.
Strategy
As I write this, Google returns 80million hits if you search for business strategy. Lots great, but just as much is misguided, misleading or just plain wrong. The key to strategy is to think long term.
Think of it in terms of planning a trip to the snow for the weekend. It’s not so much about the activity (driving) or the destination (the snow) – it’s how you plan to get there. So, it’s not about what colour the car will be, or what street you’ll drive down first. You think about which weekend you’ll plan your trip for, what time you’ll leave to beat the traffic, whether you’ll need chains, when you’ll break the trip and what contingencies you might need to make along the way.
Business Process
For so many business owners (unless you’ve an engineering or accounting eye for detailed planning), thinking through their business processes is somewhat of an afterthought. Something they develop on the fly – often when they’ve gotten themselves into a bit of a mess. So if you have the chance, step yourself through how you’re going to complete the first 10 customer orders. Look for the places in the process where blockage points can occur. Then think about what happens when you get 100 orders or whatever your business’ big number is. That way you’ll be prepared ahead of time and your customers (or staff if you have them won’t suffer too much pain along the way).
Team
Get one. Even if you’re a solopreneur, it’s vital that you have access to a team of people with whom you can share ideas, who you can call on for help or can outsource to when necessary. It will also help you achieve the economies of scale necessary for those bigger jobs. Whether you’re just starting out or building to that next level, building leverage through suppliers, customers or staff/contractors is a valuable exercise.
Over the coming weeks, we’ll explore each of these in more detail. I hope you’ll visit to read the next instalment.
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