Success in an SME isn’t the result of luck, but rather the result of the owner’s good insight, judgement and management skills.
Success can never be guaranteed. A new business start-up always involves risk and the prospect of success is rather small if the planning and execution is not done properly from the outset.
The Small Business Administration in the US estimates that 50% of all new enterprises fail within the first year and only 5% survive the first five years.
A lack of experience, especially management experience, is one of the main reasons why new businesses do not succeed.
No successful entrepreneur will employ someone without experience to manage his or her business. Therefore it is ironic that often the owner of the SME employs himself as a manager without having the proven management experience.
The locality of the business is another important factor which can determine the success of an enterprise. A business owner often just rents the first available premises simply because it’s available or inexpensive.
Always ask yourself whether the premises are favourably situated with regard to both your target market and your suppliers and whether there is room for future expansion.
Insufficient cash flow management is another reason for the downfall of several businesses. Cash flow continually needs to be controlled by a cash flow budget. At the end of a period it has to be evaluated with a cash-flow statement.
Another important cause of business’ failure is the control and management of the gross profit. Inventory shrinkage due to theft and bad management has brought too many businesses down.
Recipe for success
On the other hand, one can also ask why certain businesses are successful. Successful entrepreneurs usually focus a great deal on the client and the market.
Client services in all its forms is high on the list and the well-known slogan ‘the client is king’ becomes a manner of life for everyone in the business.
Successful businesspeople are constantly experimenting new marketing techniques while continuing to build on those techniques that work. Enough emphasis is placed on marketing as well as personal sales and these two management tasks see to it that sales targets are regularly being exceeded.
Innovation and creativity are being encouraged by management while quality enjoys high priority throughout the business.
An effective management team with a loyal and motivated personnel corps puts the cherry on top for successful business undertakings.
It is ironic that sound financial management is also a characteristic of successful business enterprises.
The independent entrepreneur definitely needs to have a range of skills to ensure success. The application and development of these skills are the foundation of long-term success. Luck has little or nothing to do with it.