The Key Components for Business Success (Part 1)

At some stage in their lives, quite a few people dream of starting their own business. The attraction of being your very own employer supplying even more freedom and also potentially higher earnings is tempting. While there’s no magic potion or secret formula that ensures business success, very effective businesses have some common characteristics that we will check out across a collection of short articles.

Are You Suited to Entrepreneurship?

Prior to uncovering the common denominators of effective business organisations, let’s consider whether you have the right DNA to run a company. People go into business for a multitude of factors, yet some individuals almost fall into business by accident. While entrepreneurship seems appealing, it isn’t for everyone. The characteristics of an effective company owner usually requires being disciplined, organised, passionate, competent and imaginative. If you intend to enter into business you need to be prepared to make sacrifices like working much longer hours, plus self-employment comes with stress, tension and risk. The survival rate in the first 5 years isn’t encouraging with around 50% of Australian small companies folding during this time.

Of course, this could be due to bad financial management, an absence of demand, low quality products, inadequate advertising and marketing, the incorrect location or ineffective business administration. Or it could be due to having the wrong team, sales and/or pricing structure with your business simply starving and bleeding money.

While there’s no simple formula that guarantees company success, we can learn from the errors of others. The COVID-19 pandemic highlighted the importance of timing, and all markets undergo the four stages of the business life process– start-up, growth, maturity and ultimately decrease and exit. Where is the market for your company today? Ideally, you want to join the market in the growth stage instead of the decline stage so you require to do your research since a market or item can transfer to the next stage very swiftly. As an example, is there brand-new technology coming up that could interrupt the market as well as possibly make your idea or product out-of-date or redundant?

Being a good professional is not nearly enough anymore. You need to be able to handle the business management and also monitoring aspects, particularly if you intend to grow and also build a team.

The enjoyment of entrepreneurship can blur your decision making and start-ups need to make crucial decisions concerning business or tax obligation structure, accounting software and also insurances.

If you’re seeking to employ staff and build a team, from the outset there are human resource concerns to think about including employment agreements, payroll software program, employees payment insurance policy plus superannuation guarantee responsibilities. For a business owner this unlimited list of ‘to do’ things can be irritating but hurrying the process can trip you up with disastrous financial effects.

For many years we have mentored thousands of entrepreneurs during the start-up and growth stages of their business. Along the road we have created a series of tools, processes and checklists to help you get your service off to a flying start.

What Are the Attributes of Effective Organizations?

Every organization is different but in this article we will check out the most common traits of very successful businesses.

1. Planning.

In business, failing to plan is planning to fail. Developing a business is a little bit like developing a home, you need to have a plan and also build on solid structures. Your business strategy needs to include an advertising and marketing strategy and a cash flow projection for the very first 12-months of operations. Without any trading history you’ll be required to make great deals of assumptions to piece this together, but remember, no one comprehends your service offering better than you.

Frequently we find start-ups overstate the need for their products and underestimate their prices. That usually translates to a cash flow shortage in the beginning which can prove to be tragic. Developing a budget plan and financial strategy are vital, especially if you ‘re planning to secure money from a financial institution or third party.

Your business plan should show financiers that your business idea works. Make sure you look for professional recommendations to validate your numbers. If the numbers do not stack up, you need to make huge decisions. It’s best to revisit your business plan and also see if you can make critical changes to boost the earnings or decrease costs. Ask yourself some hard questions:

• Put your five biggest expenditures under the microscope to see if they can be trimmed.
• Tally your costs – will the marketplace endure a 10% increase in cost and also what impact will that have on your bottom line?
• Can you resource more affordable inputs from providers without compromising the high quality of your product?
• Could you run from smaller sized or more affordable premises in the short-term?
• Do you need all the personnel you have allocated in the very first 6 months to one year?
• What can you do to get a better ROI from your internet marketing tasks?
• Should you lease instead of purchase plant and also devices?
• Could you use extra related services to boost your revenue?
• Are there brand-new markets you could try without overextending your sources or financial resources?
• Is there a different niche target audience you have neglected?

2. Point of Difference.

If your organization doesn’t have a clear point of difference contrasting that of your competitors, it’s unlikely you’ll win a huge slice of the market. In numerous market sectors there is a ‘sea of similarity’ so you require to have a point that plainly differentiates your service from the pack. Starting a business and competing in a busy market without a major point of difference is most likely going to be an uphill struggle.

Getting in a mature market suggests you are up against established businesses that have a head start on you. They possibly have a huge customer database, popular sales items as well as systems, an internet site and also a social media footprint. If your business does not provide something new or ingenious then you should have one more differentiating attribute. The much less ingenious business suggestion, the much more compelling your factor of distinction needs to be.

If you run a pizza shop, hairdressing & beauty parlor or coffee shop, you quite possibly have a great deal of competitors around you. It could be really tough to distinguish your product or service but that’s where you’re required to think outside the box. Your advertising and marketing could be your differentiator. Your factor of difference doesn’t require to be distinct, but it does require to be of value to your clients, customers or individuals.

Examples of such value propositions are to address an issue, guarantee quicker, less expensive or better high quality service or products. Bundle a special mix of service or products with each other as well as make them functional, excellent as well as convincing. Lastly, do not forget to heavily advertise your point(s) of difference!

As an overview, your differentiators should tick these 3 boxes:

• Honest– you can not just make it up and you need to deliver on your assurance.
• Conclusive– You should be able to verify it’s real to a sceptical, potential consumer.
• Pertinent– it has to suggest something to a prospective client.

Naturally, markets progress, and you could capture your competitors off guard if they stop working to adjust to changes in consumer demand or innovation. Look at the background of previous market leaders like Kodak. They stopped working to adapt to modifications in customer behaviour and emerging new technologies and paid a high cost. As a brand-new player out there, this could be your point of difference, ie having the current innovation or systems that deliver a much better, quicker or simpler consumer experience.

3. Know Your Numbers.

Effective entrepreneurs know their numbers. They include:

• The price of goods they sell.
• The gross profit margin on every product they sell.
• The number of sales they need to make every day or week to recover cost.
• The essential performance indicators (KPIs) in the business.
• Weekly/Monthly Payroll.

Probably one of the most critical numbers is your cost. While you might have the newest, most interesting product and services in your market, can you bring it to market at a price customers will accept and still make a sustainable profit? Despite how special you assume the goods or solutions are, there’s constantly a ceiling regarding what people are prepared to pay. Remember, your rivals have alternative products and most likely at different cost factors.

Your rival’s costs or the industry standards can give you some idea on the cost factors you need to target, but be extremely careful about marking down. That method might obtain you a toehold in the market, but reduced margins can bring a service to its knees. It could drive sales in the short term, yet it can produce an issue with future cost assumptions and also develop an understanding that the high quality of your items is listed below your rivals.

This can also reflect poorly on your brand name, specifically when you’re hanging your hat on the quality of your items. While discounting has its place, there requires to be a function behind the cost drop. Maybe to clear old or obsolete stock; you could need to create some capital, or it could be a ‘loss leader’ to win a new client.

If you need help with setting your prices or bedding down your business processes, speak with us today. Contact us via our website to arrange a FREE Business System Review Session. (add usual hyperlink)

Companies don’t succeed by accident and also your own won’t either. Running a business is a work in progress and you need to continuously examine what is working, what isn’t functioning and also what demands working with. The numbers tell a story, and also they can signal emerging problems.

As an example, if your regular or monthly sales fall below break-even point you need to check out the indication. Industry benchmarks can help you obtain an understanding of the efficiency of your competitors and also where you might require to boost procedures. For a start-up business these benchmarks can be very useful since you have no economic record and there is a lot of price quotes and also assumption work when preparing your budget plan.

In Conclusion

Entrepreneurship isn’t for everybody. No amount of blood, sweat or tears can ensure the monetary success of your organization and businesses fail for a variety of reasons.

Effective companies have a plan, develop a unique selling proposition and work with their critical numbers. Timing is of the essence and being lucky sometimes can be the difference between a languishing or growing business.

Successful businesses systemise their operational processes and do their research on their competition.

Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.