When it comes to ensuring the success of a small business, several factors play a crucial role. From having an entrepreneurial mindset to focusing on cash flow and prioritising customers, these attributes contribute to positioning a business for sustained growth and long-term success.
Here are five key elements that are likely to contribute to small business success.
Embracing an Entrepreneurial Mindset
Having an entrepreneurial mindset is vital for discovering, evaluating, and seizing opportunities, according to Stephanie Fernhaber, Ph.D., a Professor of Entrepreneurship and Innovation. While this mindset is essential when starting a business, it’s equally important for sustaining it. An entrepreneurial approach enables business owners to capitalise on opportunities during prosperous times and adapt to changing circumstances during periods of uncertainty.
Prioritising Cash Flow
“Cash flow is the essence of your business,” emphasises Gary Minkoff, an Assistant Professor of Professional Practice. Business owners must carefully track revenue and expenses, ensuring they manage the timing of cash receipts and payments effectively. This allows them to cover essential costs such as payroll and upcoming bills. Understanding the costs associated with products or services and effectively managing them is also crucial. This involves implementing inventory management systems for product-driven businesses and investing appropriately in talent and technology for service-based businesses.
Staying Close to Customers
Maintaining a close relationship with customers is a key differentiating factor for many small businesses. By understanding their needs and preferences, businesses can tailor their offerings and provide exceptional customer experiences. This could involve offering niche or specialty products that larger companies struggle to replicate or providing faster response times than larger firms. Investing in customer capital, which represents the value of the business’s relationship with its customers, is essential. Strong customer capital enhances long-term revenue streams and shields businesses from potential competition.
Delegating and Building a Strong Workforce
Entrepreneurs often try to handle every aspect of their business themselves. However, Brad Sprong, a National Tax Leader, advises against this approach. Instead, business owners should recognize and reward talented employees while delegating responsibilities accordingly. This allows for a diversity of thought and ensures that tasks are accomplished efficiently. Maintaining an efficient and lean workforce is also important, as excessive layoffs and subsequent rehiring can be costlier than retaining a stable team. Outsourcing certain tasks can help businesses reduce costs during economic downturns while staying informed about industry trends during expansionary periods.
Implementing Performance Measurement Systems
To achieve sustained and profitable growth, businesses need to focus on sales efficiency and marketing effectiveness. Jay Jung, the Founder and Managing Partner at Embarc Advisors, emphasises the importance of setting sales quotas, measuring customer retention rates, and evaluating cross-selling and upselling opportunities. Many companies overlook these metrics, despite their critical role in driving improvement. By assessing performance, businesses gain insights on areas for improvement and can develop a systematic approach to building their business.
By embodying an entrepreneurial mindset, prioritising cash flow, staying close to customers, building a strong workforce, and implementing performance measurement systems, small businesses can increase their chances of success. These attributes contribute to sustained growth, profitability, and resilience in an ever-evolving business environment.
