What makes one business succeed and the other fail? I’m pretty sure that most small business owners wonder this on a daily business and how to ensure their business succeeds. I personally have seen several businesses close and wonder what makes one succeed and the other one profitable.
I can give you a few hints. As part of my doctoral research on small businesses and financing options, I came across a few interesting journal articles. In particular, one study by Halabi and Lussier (2014) show that the success factors are: use of the internet, starting with adequate working capital, managing good financial and accounting records,
professional advice, and marketing efforts.
The 5 success factors for small businesses are:
- Use of the Internet. Are you using the internet for more than creating facebook updates or posting pictures on Instagram? How about improving your online ordering for customers, or easier search terms for your products? Even if you do not have an online business, can you use the internet to improve business processes, manage orders, vendors, or other ways to streamline your internal business operations?
- Starting with Adequate Working Capital. Does the small business have enough money to get it through the slow sales month or money to finance growth opportunities? If your personal savings and credit cards are tapped out, there are other resources. They are small business loans from the U.S. Small Business Association, bank loans, and crowdfunding. I highly advise staying away from those high-interest loan places and be careful of using your retirement accounts.
- Managing Good Financial and Accounting Records. Everyone seems to hate keeping records and organizing papers. Guess what? There’s a better way to do it. either find someone who likes to do it and hire them OR find some easy to use software. Quickbooks seems popular but I am not endorsing them. Find software that tracks your receipts, income, and expenses. Make sure that you are maximizing your IRS deductions, getting paid by your clients, and paying your bills on time.
- Professional Advice. Do you have resources and professionals that can help you navigate your business? I find that most people do it alone, to their demise. So start now and find people or groups to help you rather than waiting until you are so far down a hole that you can’t get out. The type of help you need depends on your knowledge and what you need. You can find business help from accountants, lawyers, business consultants, professional organizations, and even local chamber of commerces. Build those relationships now too.
- Marketing Efforts. Do you have a true marketing plan besides accepting every friend request on facebook or selling to your friends? Sorry to break it to you, but your grandmother doesn’t need 20 candles. How are your products or businesses different from others? Where are your customers? How do you reach them? Are you building relationships with your customers?
While this is one study, it is not definitive. Focus on the positive success factors and make the changes there: increase your working capital (money), use the internet for your business, increase marketing and building client relationships, and seek professional advice. Ask your accountant, find a business consultant, and find training to increase your business knowledge.
I can help with the business consulting and business knowledge part. Feel free to send me an email at firstname.lastname@example.org to see if I can help you. If I do not feel like I can help your business, I will help you find someone who can!
Go be successful!
Halabi, C. & Lussier, R. (2014). A model for predicting small firm performance: Increasing the probability of entrepreneurial success in Chile. Journal of Small Business and Enterprise Development, 21(1), 4-25. doi:10.1108/JSBED-10-2013-0141
Additional Note: The researchers used a small business performance model designed by Lussier in 1995, updated the model, and applied research from 430 entrepreneurs in Chile in 2014.