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:
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
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
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.
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
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
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