The UK is a nation of start-ups, with 660,000 new companies registered in the UK each year. But how many of these will survive in the long term? According to research from the Office for National Statistics, if you fast-forward five years, 60% of those businesses will have gone under.
Businesses fail for a variety of reasons. Many just don’t pass the market test. Then there are common culprits including lack of capital; inept management; and insufficient planning. But let’s flip that around and ask—what are common factors for SME success?
1. A culture to propagate success
If you don’t start out with great culture, it’s difficult to “tack it on” later as your organisation grows. Creating a productive, enjoyable culture, results in empowered, happy employees who put in an effort to help the business grow. An SME with committed long-term staff who want to be there, has a much better chance at success than one with high turnover.
2. Build talent in key positions
Your team’s the company’s backbone. Assembling the right talent, in tune with your vision, is vital to building your brand and the long-term success of your business. As Alden Mills, entrepreneur, author and speaker says “Truly great companies treat their employees like they treat their customers.” He notes further that companies who expect employees to buy into the vision but consistently treat them as “disposable units of production” fail to understand the human part of the equation.
Having the right systems in place to recognise talent, treat employees as people with value and offer the right training to progress their career, will ensure your company’s moving in the right direction.
3. Focus on operational excellence
Think of operational excellence as the mindset that embraces problem-solving and leadership as the keys to continuous improvement. Successful SMEs understand that operational excellence is achieved when every member of staff can not only see the flow of value to the customer, but when they’re actively trying to improve both value and delivery.
4. A drive for continuous improvement and innovation
Much hyped, for good reason, continuous improvement is the ongoing effort to improve products, services, or processes. While these efforts can cause a breakthrough in improvement and innovation, more often than not the results are incremental improvement over time.
Take the iPhone. It didn’t transform dramatically from version 6 to 7. Or 10 to 11. But compare an iPhone 6 to a 11 and there will be little debate over which is the best product.
5. Maintain ownership control
Take a family business. What advantage does it have over non-family business counterparts? Family companies have often persisted over generations and have done so because they have control over practically every aspect of their destiny. Control means taking a risk, but also offers the ability to take quick advantages when they present themselves. Keeping control “in the family” may make an SME nimbler to respond quickly to changes, without being bogged down in a bureaucratic chain of command. In the words of Frank Sinatra “I did it my way.” Maybe you should too?
6. Take the long-term view
It’s often easy to seek instant gratification in business, but nothing happens overnight. Whether you desire loyal relationships with suppliers, stakeholders, partners, or customers and clients, cultivating those relationships involves serious time and investment.
Although it may sound like common sense, successful SMEs reap what they sow. Assembling an excellent team of partners over time, plays a significant role in profitability for any business. Working together to grow not only your business but also that of partners alike is a good basis for long-term viability.
7. Find what you do well and let go of what you don’t
Business starts with value creation. Some say it’s the purpose of the organisation. Successful SMEs are skilled at focusing on value-creating activities and leaving activities and practices that destroy value. If your business is great at something, focus on it, perfecting what you do until you’re a leader in your space.
Instagram was originally a social-location app. It struggled, until the founders stripped away everything but photo sharing. It relaunched and the rest is history. Most long-lasting SMEs also do one thing extremely well.
8. Don’t become stuck in traditional businesses or outmoded practices
Branch out where necessary. Nike’s high profile move from just shoes, began with a move into golfing apparel and equipment in 1995. Barely four years later Nike had scored priceless marketing victories—not once, but three times. First, the British open champ in 1999 wore Nike’s golf shoes. This was followed in 2000 by Tiger Woods switching from the leading brand of golf balls to Nike golf balls. Next up, in 2001, David Duval won his first major tournament soon after switching to Nike golf clubs. Like big companies, successful SMEs become very good at identifying add-on industries where they can re-use their successful growth formula again and again.
Another way businesses can add value, is partnering with other providers to offer additional services. As an example, the Dial 9 Partner Programme offers a way for like-minded businesses to sell VoIP services to customers by leveraging an established and sophisticated platform and technology. VoIP has consistently been one of the greatest growth sectors in the telecommunications industry for many years. To get started, Dial 9 offers a Partner Handbook which provides everything you need to get started selling your own VoIP phone solutions.
The bottom line is that operating a small to medium sized business is appealing for many reasons. The high statistical failure rate doesn’t mean your business will necessarily be unsuccessful. Be nimble, flexible and have good forward planning. It’s possible to circumvent many of the pitfalls businesses encounter and be a part of the 25% that make it to 15 years.