How can you boost the likelihood of small business success? Several attributes, including an entrepreneurial mindset,
a focus on cash flow, and an emphasis on your customers, are key to
positioning your business for sustained growth and success. Here are five things that are likely to contribute to small business success.
An entrepreneurial mindset
This refers to “the inclination to discover, evaluate, and exploit opportunities,” said Stephanie Fernhaber, Ph.D., and Professor of Entrepreneurship and Innovation at Butler University. While an entrepreneurial approach is, of course, critical when starting out, it’s also important to sustaining a business, as it will prompt a business owner to take advantage of opportunities when an economy is booming. It also can help business owners adapt and identify changing opportunities during times of uncertainty, she said.
[Read more: 7 Productivity Tips for Entrepreneurs]
A focus on cash flow
The
top reason businesses fail? Running out of cash, reports SCORE,
a resource partner of the SBA.
“Cash
flow is the essence of your business,” said Gary
Minkoff, Assistant
Professor of Professional Practice at Rutgers University. Along
with tracking revenue
and expenses, business owners need to monitor the timing of cash
receipts and payments, to ensure they have enough money to cover
payroll and other upcoming bills.
Also
important is knowing what
it costs the business to offer its products and services, and then
effectively managing those costs, Minkoff said. For product-driven
businesses, this often means leveraging a solid inventory management
system and identifying which products are selling, and why, he said.
Service businesses need to pay the appropriate amount for the talent
and technology that can offer them a competitive advantage, he added.
By remaining close to their customers, many small businesses can differentiate themselves.
A willingness to recognize, reward, and delegate to talented employees, while keeping a lean workforce
Business owners often try to do everything themselves, said Brad Sprong, National Tax Leader of Private Enterprise with KPMG US. “This is a recipe for sleepless nights, things not getting done, and a lack of diversity in thought [needed] to move the business forward,” he said. Instead, business owners are better served by hiring strong employees and then delegating appropriately.
At
the same time, businesses
need to remain as efficient as possible, said Tuan
Nguyen, U.S. Economist with RSM US LLP. This means keeping the
employee roster lean, as layoffs and rehiring following busts and
booms are often costlier than maintaining a stable workforce, he
noted.
Staying
lean also often requires a certain level of outsourcing. By exporting
some tasks to a third party, businesses can more easily trim costs
when the economy is tight, while staying atop trends during
expansionary times, Nguyen added.
[Read more: How to Retain Your Best Employees]
A rigorous process for measuring performance
One
key to sustained, profitable growth is sales efficiency and marketing
effectiveness, said Jay Jung, Founder and Managing Partner at Embarc
Advisors, which offers investment
banking and management consulting services.
Yet many companies focus on revenue and fail to consider the need to
grow profitably, which requires looking at sales efficiency.
For
instance, is the company setting and meeting sales quotas? What is
the level of customer retention? How are salespeople approaching
cross-sell and upsell opportunities? Few companies assess these
metrics, Jung said, even though this information is a critical
starting point to improvement. It shows where to focus and can guide
a more systematic approach to building the business, he added.
An emphasis on the customer
For
a business to succeed, it has to identify a group of customers that
has an unmet need for the products or services it’s offering,
Minkoff said. This group also has to be large enough to sustain the
company.
Having
identified its customer base, the business needs to satisfy them.
Customer satisfaction should start with the
initial
contact, and then continue during the purchase process and even
through the duration of product ownership and use, Minkoff said.
By remaining close to their customers, many small businesses can differentiate themselves, Minkoff said. This may mean, for instance, offering niche or specialty products that larger companies find difficult to replicate, or faster response times than bigger firms can provide.
[Read more: 5 Ways to Build Trust With Your Customers]
Businesses
also need to invest in
customer
capital, or the value of the business's relationship with its
customers, Nguyen said. This often is represented through brand
loyalty or long-term demand. “Strong customer capital will enhance
the long-term revenue stream, which can keep the business afloat in
difficult times,” he added.
In good times, customer capital is also key, as it can shield businesses from potential competition, Nguyen said. That’s particularly important for small businesses, which often face fierce competition from more established firms with deeper pockets, he adds.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
