What You Absolutely Need to Know to Create a Successful Business
Whilst Small and Medium Enterprises (SMEs) are of significant importance to the economy, it is their survival rate and durability that should be considered of greater concern. From a positive perspective significant research by the University of Surrey, sponsored by Kingston Smith LLP, has documented the key features essential for SME success.
The precarious nature of SME survival has been well documented. Recent UK Office for National Statistics estimates indicate that across the UK, on average, fewer than 65% of SMEs are still trading three years after start-up, with fewer than 45% surviving after five years. Others argue that only about 50% of small businesses are still trading after the first three years of initial start-up. After five years, only 20% of businesses will have survived.
Finance
A major contribution to success is the importance of monitoring cash flow and liquidity.
Successful SMEs use more than one source of finance to both start and sustain their business – a credit card and personal/family savings. Once traction in business growth is achieved the main source of finance is reinvested profit. The survey highlighted that not only do banks not provide the capital required, they seem to know very little about what businesses (particularly small businesses) need.
Innovation and risk management
Successful SMEs are significantly more likely to be innovative than competitively aggressive in their chosen market. They take calculated risks and avoid excessive risk taking.
Education
Successful SMEs believe that continuous learning gives them a competitive advantage. They are more likely to purchase external advice on managing people and developing management skills.
Management ‘know how’ helps the business to adopt better strategies and management methods.
They will also seek external advice regarding their website (including search engine optimisation).
Networking and Social Media
Successful SMEs consider direct referrals and search engine optimisation as central to their success. They pursue the benefits derived from social capital; direct referrals, participation in events, use of social media, business mentors, blogging, etc.
Success Metrics
- Greater customer satisfaction and retention
- Growth in business turnover and profit
- A growing sense of personal fulfilment with enhanced quality of life
- Enhanced personal reputation
- Growth in number of employees
In summary – key recommendations for Success
Diversify sources of finance
Monitor cash flow and liquidity proactively, taking quick and decisive action when necessary.
Respond to market conditions, learn to rein in the business as well as when to expand.
Focus on planning, sales, marketing, managing people, website development and using social media.
Get close to customers, establishing reputation and relationships to achieve retention and referrals. Work with customers to build the brand.
Define the unique selling point of the business and put it on the front page of the website.
Focus on search engine optimisation in website development.
Encourage employees to think and behave in novel ways.
Monitor and respond rapidly to the actions of competitors.
Learn proactively from crises and difficulties.
Engage the services of a coach or mentor.
Never ignore intuition, take calculated risks but avoid high risk projects.