Success lies in mastering 6 basic factors in business and avoiding the number "one" factor responsible for business failure - and success is guaranteed to follow.
The truth is that business success lies in mastering the basics. It's about focusing on producing greater results and performance from the same activities, the same capital, and the same people. It’s about getting substantially more for less, optimizing and multiplying the results in your Key Success Factors with minimum effort, expenses and risk.
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"Great success and mastery in any field always go to those who are brilliant on the basics"
- Brian Tracy -
The real reason for business success or failure, is your ability to manage these simple and basic but very important key success factors. By focusing on improving these elements by a small percentage each week, month, and year, can make a huge difference in your success, growth, profit, and income. Sometimes by focusing on one particular success factor can Double or Even Triple business almost overnight.
Note:
Once you figure out what the key success factor are in your business, they can be measured, they can be quantified, and they can be vastly improved. You will be amazed how small changes in these areas can have major results in income.
“Success comes from doing the RIGHT THINGS in SMALL AMOUNTS over a LONG PERIOD OF TIME.”
- Eric Dombach -
Identifying and monitoring these success factors is critical to boosting revenue, cash flow and profitability. Let's look at Top 6 Basic Key Success Factors of any business.
- Management (Owner)
- Money
- Marketing and Sales
- People
- Product and Service
- Process and Systems
Certain success factors have a greater impact depending on where the business is in the business growth cycle. For instance for a new start up business Money, Marketing and Product is very important, As the business is growing and becoming bigger the other factors like developing the Owner, Team and Systems also becomes very important. Although every one of them is just as important as the other one, the most important ones will always be Money, Marketing and Product.
Most business have the Product thing covered delivering a good enough product or service to be successful. From countless research results, Marketing and Sales and Money is the small business biggest challenge. But the One key factor responsible for most success and failure is Money management.
Why Money?
Let's have a look at some interesting facts from numerous sources of research done on small businesses:
- According to research 83 % of business is not profitable,
- 60% of them is running at break even, living from payday to payday
- Only 20% of owners said that they think they know enough about "business finance" to be able to make the right decisions.
- 95% of business fail due to cash flow problems.
- 50% of owners never even bother to look at the business year-end financial statements.
- Almost 80% of business owners do not know the important financial numbers in their business.
- About 50% of businesses that failed was profitable the day they closed down.
- 56% of small business owners hate financial tasks
Numerous business analysts say that "Money Management" is the number one factor responsible for business failure.
These are all money management related reasons. After owning 40 of my own businesses and failing many times in business, I agree with numerous business analysts that out of the top 6 key success factors, poor Money Management is the number one factor responsible for business failure. That’s why I believe good Money management is the biggest reasons why certain businesses succeed and others don’t. -. Success is a numbers game.
"The answer to most problems in business is math. The math will guide you. The math will set you free. The trick is to map out the numbers
- Frank Kurn -
Success Is A Numbers Game.
You see every key success factor has its own leading indicators, "numbers" that drives their performance. The real secret is to know your numbers, to measure them and to make small but consistent improvements in each of them. What gets measured gets done and what you don't measure you can't manage.
If you want to be in business for the long haul and also to afford the lifestyle that you dreamed of when setting up your business, then you need to “Know and Understand Your Numbers”
"If you don't know your numbers you don't know your business"
- Marcus Lemonis, The Profit Show -
One of the most important lessons I have learned in business and that made the biggest contribution to my success was from Steven Walker, (CA) who taught me that all the information you need to make the right decisions regarding your business can be found in your numbers. It will provide you with foresight to make the right daily decisions. Want to know where to spend your advertising money, where is the most business coming from, what is your most valuable products and customers? How profitable are you, what is happening with your cash flow? Listen to your numbers, they will guide you.
Here Is The Problem
He also taught me that the problem is, you’re not going to get that information from your year-end financial statements or your accounting system. And unfortunately, this is about all the numbers the average business owner has. That’s why most owners simply don’t know their significant numbers.
The second problem is you have enough on your plate managing your business on a day-to-day basis, to do a proper financial planning, it is very time-consuming. Plus, we don’t have the privilege of having a CFO's (Chief Financial Officer) like in larger companies that has years of experience and outstanding finance skills looking after financial goals, objectives, targets, budgets and financial planning.
And it is not your accountant’s job either. Your accountant’s job is to provide government with a legal document, to show how much taxes you have to pay. That’s it!
Looking at your financial statements, tells you what happened but not why. It does not show us what would happen if you make incremental changes to current costs, prices and revenues. It’s also extremely difficult and almost entirely useless for decision-making purposes, because the minute you receive them the information is outdated and limited.
You can add a budget and a forecast to it, and you can see what was intended and how well you did. A big improvement and useful, but not sufficient. If only one element in your forecast change, everything change and you have to do it all over again. These reports are lagging rather than leading indicators.
This is a major problem because if you do not have the relevant information regarding your business performance, and consequently may not know when a situation requires corrective action. Making it impossible to identify the problem on time, which is causing you to lose money that may lead to a situation where your business run out of cash and are unable to pay the bills. In most cases we can only respond to current situations, usually to late when the damage is already done.
We have been trained to look at the past to make decisions for the future and your past or the present does not determine your future; only what you do now determine your future revenue, profits, cash flow and growth. In our fast-moving world, bench marking and traditional financial planning models and outdated assumptions of looking backward rather than forward no longer work.
Hans
"In a fast changing word, success cannot be achieved by looking in your rear view mirror, you need to develop foresight, so you can figure out what is coming, and do the right things now".
You've got to add up some of your own numbers
If you don’t understand exactly what’s going on in your business today, any plans for the future are no more than dreams that will never be realized. You've got to add up some of your own numbers to see if you’re making the progress you want and if it’s taking you where you want to go now and in the future. It must be based on your current reality so that you can measure your progress from the point at which you are now. Knowing this will empower you to make the right daily decisions for the future
“Foresight is the ability to predict what is likely to happen - and to use this information to prepare for the future.”
- Carlos Días -
Measuring the leading key numbers in the 6 key areas will allow you to have Insight, the ability to understand why you have certain results(numbers) in your business. After that, you can start to ask various “What if questions, such as “What if we increase the income by 20%?" Or "What if we reduce cost wit 10%?” These changes probably will have numerous results, many of which might never have been anticipated. By asking a series of "what if" questions will give you the ability to have foresight that will allow you to manage your business a 100 % better, Reduce risk, have confidence in your decisions and make you considerably more profitable and grow your business substantially