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Why Businesses Succeed or Fail

When I first started out in public practice some thirty years ago, I investigated the sources of business success and failure because I felt a responsibility to my clients to help them succeed and avoid bankruptcy. No self respecting accountant wants a client to experience such devastation in their lives if they can help it.

This investigation also had a profound impact on my own direction.

The first thing I created as a result of my findings was an electronic library of business know how I first used to support my clients and my practice. This later became a product onto itself. Around the same time I gained a better understanding of resources, especially those not traditionally measured by accountants.

This understanding progressed towards knowledge management and corporate memory development, and to my current specialization in building communities of practice that help companies work smarter, learn better, communicate more securely and effectively, and remember more.

Here are the ranked findings of that first study I found which gave me my important insights. The survey polled successful, high growth firms and sought to identify a common set of factors and strategies that contributed to success. As ranked by the firms themselves, the following factors contributed to the success of their respective ventures:

%     Factor Contributing To Success

96% Product Knowledge
95% Knowledge of the market
93% Knowledge of the industry

88% Flexibility\adaptability\responsiveness to change
82% Adaptability to change

77% Sticking to given mission
71% Devotion\hard work
70% Distinct competitive advantage

65% Sense of commitment to succeed and to the business
65% Aggressive marketing
62% Adequate plan
61% Responsiveness to customers

59% Clear market niche
55% Quality of product\service
55% Personal selling talent
54% State of the art technology
53% Differentiated product\service

49% Discovery of unsatisfied need

39% Adequate financing
38% Good reputation

23% Cost controls
22% Integrity\honesty

16% Special attention to motivation\productivity
11% Good management\employee respect
10% Attract\retain good people

07% Stated overall strategic goal
07% Employee devotion\spirit
01% Formal business plan

         
 
Source GE Hills & HP Welch- High Growth Entrepreneurial Ventures: A Content Analysis to Identify Common Strategic Factors


As you can see, the greatest percentages involve having a core set of business skills and business knowledge.


Keys are

1)  having a working knowledge of your product, market and industry
2)  the ability to make the right decisions in the face of change and the unforeseen,
 3)  hard work,
4)  and having a product or service that stands out in the market.

I do not think it prudent to simply disregard the rest.

For example, the formal business plan itself may not contribute much to success but it is a good means of organizing thoughts to present to potential investors and others who need to know. And interestingly, the low ranking adds ammunition to the argument that ideas are a dime a dozen... that execution is everything.

I think overall that the usefulness of this ranking is to see what those who've been there think about why they got there.

Conversely, a number other studies, including one released in 1997 by Statistics Canada, found that a lack of important knowledge and skill sets was the most important cause of business failure.

The lesson in all this is that it is all up to you. You control success and failure. To blame others, or circumstances beyond your control, is inappropriate in all but the rare case. The lesson says don't tackle more than you can handle

It is your responsibility to obtain the the necessary knowledge, know how and skill sets to structure and operate your business and that allow you to anticipate, recognize and mitigate negative events and circumstances before they become insurmountable problems.

To do this you must be continually well informed about all critical aspects of your business. This includes the day to day operations of your own business and those of your primary competitors. You want to keep tabs on technical innovation in your industry, the on going needs of existing and potential customers, and all significant market and industry developments that will impact on how you do business.

You also want to surround yourself with staff and advisors who have the skills and experience you lack, and who have the skills and experience to maximize your chance of success. You might need to pay a premium, but you will have a business that can afford it.


© 2016 John B Voorpostel CPA, CA, CMB
iaccountant.ca


 
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