How do you keep your company alive and build something that lasts? Successfully running a business takes more than a great idea and hard work. If your company is to thrive, it should be highly adaptable to market changes and provide competitive and superior service.
Businesses fail for several reasons, including poor leadership, cash-flow problems, and the inability to shift with the times. It’s crucial to plan ahead to avoid these pitfalls and set your business up for long-term success.
Understanding the business landscape
Australian Bureau of Statistics data shows that up to 60% of Australian businesses fail within their first three years, with 20% failing in their first year. This has gotten tougher in recent years, with the total number of business exits swelling to more than 360,000 in the 2023/24 financial year, from less than 280,000 in 2020/21.
Businesses fail for many different and often related reasons, from poor cash flow or supply chain issues to challenges adapting to changing market conditions and economic headwinds, which is a significant pain point right now.
But navigating these challenges starts with a solid understanding of your business’s specific operating landscape. Consider the following factors to help you make smart decisions that contribute to the survival and prosperity of your company:
1. The importance of data-driven decisions
Random business decisions often lead to failure. Ensure you use data to guide and validate your action plan before committing to it. This may take various forms, such as conducting surveys to determine products or services that might appeal to your target market, or introducing a new service or product to a small subset of the population to see how people react.
2. The significance of key performance indicators (KPIs)
Establishing and proactively monitoring key performance indicators is essential for the long-term health of your business. KPIs help you identify issues or opportunities and inform when and how to act. Examples of some essential KPIs include:
- Customer acquisition cost: this is the money you need to acquire a customer. It includes the cost related to sales and marketing activities and the overhead of bringing in fresh leads and converting them into customers.
- Net profit margin: this is the percentage of revenue that remains after deducting your operating expenses.
- Accounts receivable days: this tracks the average time it takes for a customer to pay an invoice. It helps you measure your cash flow.
3. The value of your customer base
Your customer base is the group of people who regularly purchase your company's products or use its services. These loyal customers are valuable to your company's financial health. Identifying who they are and why they use your products or services helps you revise your marketing strategies to attract your target demographic and acquire more customers.
The importance of business analysis
Management success often hinges on a thorough business analysis, which helps you address the factors affecting or limiting your business growth. This analysis helps you review your current operations and decide what changes might be necessary for the success of the company.
Examples of key factors to analyse include:
- Marketing strategies
- Customer acquisition process
- Sales process
- Technology use
- Differentiation
A comprehensive business analysis helps maintain your company's stability and longevity. It also improves your understanding of your customers’ needs and helps you create the better products and services.
Take customer acquisition, for example. The core of customer acquisition success is a clear understanding of your target customer, which you can use to make sound decisions about product development, pricing, and marketing strategies. Some questions to ask yourself as you analyse your customer acquisition process include:
- Who do we sell to?
- How can we meet and exceed their needs and expectations?
- What drives their purchasing decisions?
- What communication channel do they prefer?
Building a strong foundation
Trust is at the heart of every long-lasting business. When planning how to run a successful business for the long term, gaining your customers' trust may be one of the most valuable qualities your company can develop.
Here are some actions you can take to help build trust for long-term success:
- Keep a close eye on metrics that are in line with building trust between your company and your customers and employees.
- Recognise and address any gap in trust.
- Prioritise customer service.
- Create a culture of trust with your employees.
- Be diligent about maintaining your company's reputation.
To thrive in the long term, you may need to revamp your business strategy to sustain growth. Some ways to do this include:
- Investing in enhanced technology and infrastructure
- Exploring untapped markets
- Adding new locations, if feasible
- Looking for franchise opportunities
- Developing a broader product line
Developing a business plan
Planning is a vital part of long-term business success. Business owners often talk about business plans in relation to startups. But business plans should be a living, ongoing process that evolves with the company.
Regularly reviewing business plans and strategies helps your business adapt to ongoing environmental and political challenges and rapidly evolving customer expectations and demands . You can’t rely on maintaining the status quo.
Think of your business plan as a business survival plan. If sales are down, your plan should consider how you intend to improve your financial performance, for example, by cutting costs and boosting sales. Address actions for the short term (1 to 6 months), medium term (6 months to 18 months) and long term (18 months and beyond).
Today's business plans should also consider addressing an exit strategy if you must leave your company for health reasons or to pursue other avenues. This includes planning the timing and type of exit.
For example, you could sell the business or pass it on to a family member. You might decide to close the company or go for a phased exit, where you leave the business but don’t exit it completely.
It's a way of gradually handing over a company to a new owner who is still being trained and whose stake in the company grows as he takes on increasing managerial responsibility. Planning may allow you to maximise your return when the time comes.
The path to business prosperity
In addition to laying a solid foundation for your company, here are five considerations for running a successful business in the current climate:
1. Be flexible with where and how employees work
Top talent is more important than ever to help ensure your company's survival. In today's environment, employees expect more flexibility. If you want to attract the best talent, giving people a choice of remote or flexible work is often an effective strategy for keeping people on board and invested.
2. Broaden your vendor and supplier base
In this time of economic uncertainty, it's important to diversify your vendor or supplier list. Diversification helps provide stability in the face of uncertainty. Spreading out your supply sources helps mitigate the risks of disruption in the supply chain, which may pose a threat to your company’s survival. Consider, as well, shifting from a global supply to a domestic supply source to help handle supply chain instability.
3. Reinvent your business
A company should consider reinventing itself from time to time if it wants to stay in business, in order to adapt to changing market conditions or shifts in customer demographics. Examples of reinvention strategies to consider include adopting new technologies related to your business and forming strategic partnerships that can enhance your business.
ONE OF THE MAJOR CHALLENGES IN TODAY'S BUSINESS LANDSCAPE IS NOT LAUNCHING A NEW COMPANY BUT ENSURING ITS LONGEVITY AMIDST CONSTANT MARKET FLUCTUATIONS AND EVER-GROWING COMPETITION.
4. Introduce an aggressive cost-cutting strategy
During times of economic uncertainty, cost control can be critical. Look at your budget line by line, prioritise essential expenses, and allocate less of the budget towards items that are not essential for survival. For example, a small restaurant might choose to spend less on marketing.
5. Prioritise speed
Speed is paramount in today's rapidly changing business environment. This means remaining vigilant and responding quickly to changing trends that can affect your business. Some ways you can adopt a speed culture now to be prepared for long-term success include:
- Delegating decision-making
- Flattening your company hierarchy with fewer middle managers to allow people to execute rapidly without the burden of bureaucracy
- Addressing poor leadership skills through reskilling and upskilling, with a focus on agility
Refine business processes
A company's processes are the backbone of all operations, from onboarding to shipping. As your company expands and evolves, continue to refine your business processes to create good corporate habits.
Processes encompass various elements, such as:
- Systems for recruiting and talent development
- Performance management procedures
- Feedback systems
- Decision-making structures
- Sales processes
- Customer service guidelines
- Business development processes
These and other processes are an integral part of management success and can provide the necessary structure and consistency for your business to run smoothly in the long run. Consider setting up metrics to track how well your processes are working and refine them as needed to help ensure ongoing success.
Making large-scale changes to your business processes takes time and can be overwhelming. Consider making incremental changes as you go along. Take inspiration from the Japanese idea of kaizen, which entails making small, manageable changes over time to achieve large-scale benefits.
Key takeaways on managing a business for long-term success
Long-term business success takes more than just a great idea; it requires adaptability, strategic planning, and continuous improvement. From data-driven decisions and regular business analysis to building trust and refining processes, successful companies actively anticipate and respond to market shifts and customer needs. A solid foundation, combined with innovative thinking and operational agility, is essential for navigating the complexities of today’s business landscape.
By embracing flexibility, diversifying resources, and prioritising speed, businesses can position themselves to thrive even during uncertain times. Whether through reinventing operations or developing a dynamic business plan, the key is to stay proactive and resilient. With thoughtful planning and a commitment to continuous growth, your business can not only survive but flourish in an ever-changing environment.
This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
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