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Small Business Critical Success Factor

Defining Success

Startup Critical Success Factors

Success has different definition. What is the definition we are going to define when we see success from our eyes. The success must be seen from the eyes of the entrepreneurs and not from what we think. This is very important how he has defined his own success.

A student when saw his result got overjoyed and very happy when he saw his results. He has just passed with 50% marks, all subjects cleared. Other boy was very sad and not willing to see eye to eye. His result was above 80% but lost merit by just one mark. What do you think, who is successful. The first or second boy, this is how definition of success change with person. The first one was not expecting to clear all subject and feared that he may fail in mathematics, when he saw all clear, he is overjoyed. The second one expecting to get into top 10, when he lost merit he was very sad.

This is not criteria, success is universal still varies with person. Are material gains, or profits only criteria of success? No necessarily. Most people will judge with this only. Making money may not be the only criteria of success.

Social entrepreneurship is all about making people happy. Generating employment and helping the need, clean and ethical and transparent business may be the criteria for others.

Defining success will be the first step in discussion about critical success factor. Based on this definition we will define K.P.I. for business.

Why Does Start-up Faill

Why small startup does fail

Why small businesses fail, there are many reasons. Many people wrote on the subject matter. I am putting my experience why really business fail. I have just five reasons for their failure. These are reasons of failures but definitely they are not reasons of success if corrected. They will add up to success. There are huge success stories but there is a story behind it, which needs study and understanding.

Failure is learning experience. All human being makes mistakes. The best one is who accepts these mistakes and correct them. Success comes to such people who are ready to learn. Learning is never ending process, every time a lesson is learnt to improve upon.

Reason 1 – People

We are in 21st century. This century is knowledge driven. The industrial era and labor intensive production is gone. Now everything is knowledge driven. The knowledge which bring smile to the faces of your customer and make them feels the value they have derived from the money they have paid for. In this era Peoples are most important. They can make or break the project, the venture. Success stories are always People driven, never anything else.

Who drives the success?

Entrepreneur is the first line. He is the one who will make it successful. He is the one who is to be blamed for the failures along with his team. What is the reason, which makes the best of the ideas fail? The basic element is motivation. When entrepreneur loses his motivation to pursue the idea, decline start. The Vision to create an enterprise which can grow with time and efforts is his. When he loses hope the project goes down. The ability to stand, up and downs of the market and confidence to take-on the challenge the market has created is what makes the difference. When the vision is not clear, the plan is not streamlined, it is difficult to get the success.

The wrong man

Startup is for entrepreneur. They are the one who get success. But most of the startups are the creation of technical man or the manager. The man knows the technology and he knows it best, he has created the best. Unfortunately the project fails to deliver. Because he doesn’t have the passion and the commitment required to be entrepreneur. Manager starts a business, he knows how to manage the business but even he does not have passion and commitment to run the show long enough.

These are wrong people doing this project for wrong reason. An entrepreneur needs to be passionate about his idea and his commitment to it. This is what makes the difference.

The Team

This is another element in success. The right people are most critical assets. These people will be the core of the success. They are the one who will bring success and drive the company. Choose the right people who have same vision and are willing to work hard and sacrifice is required to make it happen. The team will play a decisive role in getting success. Team is the one of the most important of failure. The wrong people can bring more wrong people and destroy the company. You need a nice and committed team for success.

The Partner

Entrepreneur need partner. Every project needs partner. If the partners are not good and cohesive with idea of entrepreneur they are one of the reasons of failure. When partner does not share vision of the entrepreneur and are not committed then problems starts coming up. They do not have confidence in the promoter. They do not have enough patience to wait. They create problems which ultimately resulted in failure.

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Reason 2 – Customer

Who is your customer?

What they want?

How they can be delighted?

What is their proposition of value for money?

Where he is located?

Does your product fit into his list of priorities?

These are the questions entrepreneur must reply before starting his venture. Identify the segment, its demand in value and volume terms. Does this much will make money for the business? If entrepreneur can identify his target customer then he can cater to his needs and can make him happy. When customer sees value for money, he will be delighted when he gets more than what he has expected. This will bring the real business and profit. Repeated customer will bring more customers.

Customer satisfaction or in modern world customer relationship management is all about delivering more than expectation of your customers. This value chain of internal and external customers and bringing them to one platform to satisfy the needs is all about success. When this goes wrong the venture goes wrong.

Marketing, sales and advertising is all about targeting the right customer. I have made it very simple just by saying customer. Whatever you do to reach him and satisfy him is all marketing.

When this target audience goes wrong or there is not enough demand then venture fails. When venture fail to live up to the demands of the customers or they does not exist the venture fails. There is possibility that the venture is never been able to reach its targeted audience, i.e. customers effectively and efficiently. This is failure of marketing and advertisement.

Reason 3 – Product

This is third point in why small companies fail or startups fails. When the services or the product on offer does not fulfill the expectations of the customers the venture fails. This is one of the reasons of failures. I saw many products even though they are good but just did not click, so are the services. I saw many qualified doctors and designers, who by all standards are very good just does not make a success. So is Grocery shop, even though two of them keep same product, one do very well the other never. Motorola is a classic example, even though technically speaking they have best products but they never succeed, in customer expectations. The product is all about making the customer delighted and happy. These customers will come again and again and also bring many more. But one dis-satisfied customer can destroy all your marketing campaign.

The service or the product which are easy will be successful. They must be easy, as easy as customers wants. When innovative products or services are planned, read the minds of customers and try to understand them, pre-launch as well as test marketing. These are the ways to get close to success.

When these product does not fit in the frame and mind set of customers and does not delight them enough the failure is the destiny.

Reason 4 – Money

Nothing moves without money. Planning it and looking at invisible before starting a business the way to success. The managing money is a key to success. Most of the small business and startup end of because of this. They just don’t have enough money to carry on. That does not mean they did not have the money. They had, but they finished it too early. They have really not thought of it, how much money they will need, at what time they will need, how much money is required at every stage.

The most important, if whatever is planned and that does not worked out, what will happen. Even though venture is doing well, it is making money but response is slow but picking up. The trend is steady, but money is finished. This is unfortunate that money will kill the business, the lending for startup or small business is not really good enough, under these circumstances small businesses crumble and die.

Reason 5 – Planning

Planning, even though I put as my last point but definitely not least important. It is very important to have detail plan, it must be very detail which should have all factors included. This should also include invisible and visible things which can go wrong. When entrepreneur fail to see through the invisible the plan goes awry and result is failure of the project. This plan must be flexible enough to the demand and still on track to success.

Planning plays very important role in success which starts with idea and vision of the leader and he builds on to shape up his dream to the reality. While building this dream on the paper really makes it difficult and it misses many points. When crucial points are missed the plans goes awry and fail to deliver to the expectations of the entrepreneur.

The wrong planning is another reason, when entrepreneur fail to see how the journey will be taken, the rout and sub-rout and mile stones are not decided then the plan remains hazy and shaky. Such incomplete cannot give the success.

What are Key Performance Indicator for Small Business?

Key Performance Indicators

These are the milestones. They will tell you about your journey, where you reached and how far you from destination. It is most important part of the journey so that you should miss road and time and track of journey. These indicators are for analysis, study and correction if there is any deviation, why it happens, what to do to avoid any such deviations. These are the indicators on the journey to success, how far is success. They are defined in different ways but most important and critical are as defined below as I understood.

They are abbreviated as KPI’s. They must be quantified and should be qualitative also. KPI’s must have three properties in them. They must be the key to the success; they must represent set goal or part of the destination or journey. They must be indicative of success or journey completed and road ahead; at the same time they must also represent resources available to complete the journey and are they enough.

Financial Indicators

Why money comes first is very important question? The second important is why put them as most important.

· Burn Out Rate - What I always advises small start-ups to have patience. My number is 1000 days. Small business entrepreneur must have enough money to operate the venture for at-least 1000 days. These can be divided into quarterly target, monthly and weekly rates of money used and still available. If not enough is available them from where the money will come and when it will come. When you do not have enough money then don’t expand, work only as much you can handle. Aggressive premature expansion is most of first and foremost reason of collapse of small businesses.

· Breakeven point – This is second important indicator, how far venture is from making no profit and no loss. There will be operating breakeven point and overall breakeven point. If you are not missing on operating breakeven point then you are on mark. Then look at over all breakeven point, are you on target and if not then why? Measure everything very well so that the journey is easy and everything is on track.

· Profit – This is most important of all. You must make money, on time, every time. There is no other road to success unless you make money for yourself and your stakeholders.

These are Key performance indicators for small startups. They are most important and monitored and analyses and corrective measures to keep the journey on track.

Customers Related Indicators

· Who is buying: - Find out who is buying your product. Is your target audience is correct. If target segment and market is correct then product or the services will hit and you will complete the journey very successfully.

· Customer Satisfaction – Customer Relationship Management is extremely important. CRM plays most critical part in connecting with your customer. Knowing the customer well. Is your customer satisfied? Know him well? Will he come back and what he wants? These are the things which will make your company ahead of others.

· Delivering what customers want – It is very critical to success. Sell the products which customers want to buy and enjoy rather than make the product and sell it to the customers.

· “A customized solution to Customers need is the future.”

Marketing, Sales and Promotion

· Marketing is all about reaching the right audience, at right time at right value proposition. This is most important goal for the success. Set perfect goal how much you want to sell, whom you want to sell and at what prices you want to sell. These are the target which can be defined and accountability clearly mentions to bring the sales.

· Sales – Sales is all about reaching people where they feel most convenient and easy to get it. Smiling front end is all what make the difference, even if your product is available online and it is perfect, and customers want to buy it but cannot open the e shop or it get jammed before the transaction is completed. This will destroy the sell. The delivery must be perfect and post delivery services. Define them which channel will sell, how much will sell and who will get the services perfectly. These channels are the game changer just not the product.

On time every time – Managing the value cycle

· What is value chain? Why it is important? The best raw material, the best process and delivery system manage by the best people in the industry makes the smile on the face of the customer. This smile on the face of your customer will make you successful, and nothing else. Define the quality standards from one, for raw material, for process and for product. On-time delivery of raw material, on time production and delivery of product and services are very important point of success. Quantify them, manage them and deliver them. This will bring you success.

Stakeholder satisfaction

· Stakeholders are all about everyone, investor, shareholder, vendor, supplier and customer society and environment. All these are stakeholder, manage them well, make them happy and happiness and smile will come back to you.

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Business Model or Business Plan?

What is more critical, Business Model or Business Plan?

There is big debate on what is more important, Business Plan or Business Model? Let me first define what does business plan and business model mean to small business.

Business Plan is all about how you are going into the journey. What are the resources available with you? How these resources will be utilized? How far you going on the journey, till you reach the destination. Every detail is available and will be analyzed against actuals. This is business plan; step by step guide of the business you going into. It will not have guiding stars if you miss mid- way or lost the road, even it will not talk about the road to be taken and if it is correct or not. Think what will happen when you lost in desert without guiding stars in the sky?

Business model is all about the road you will choose. Why chose this road for the journey. Why it is correct path. These are the questions answered by Business Model. Business model is all about how you are going to do business and why? I personally think Business is much important than business plan. It is The Road to reach the destination. It will have stars which will guide you through the journey when you miss the road or tell you if you are on right way or not. If there is deviation, it will also tell you how to correct it?

Every business model needs a business plan. A detail business plan for execution is required. You cannot execute your venture without a plan, but will only come with correct business model.

Critical Success Factors

Critical Success Factors

· Passion to Win

Leadership – is the first and foremost factor. It will make the venture or break it. The passionate leadership who is willing to sacrifice everything for the success of the venturewill make it happen. Leadership will remain single most important factor in the success. Leader must lead by example. He must lead from the front. Like in the battle field when soldiers know their leader is ahead in the ranks of the enemy, yes they do their best for win the war. The leading by example and leading from front are two most important traits of leadership.

Vision- Vision is all about how the leader looks into future. How big he is looking into, how clear it is? Yes clear vision is very important point so that team can start marching to achieve it. Vision makes task of the team very clear. Clear Vision is near to success.

Commitment - Thecommitment of the leader to the venture clearly makes it a point for the team. When team looks at commitment of the leader they just believe in the idea and work passionately to succeed. This passion to succeed cannot come without commitment.

Motivation - The motivation of leader, but more than that his ability to motivate his team to success is very important. Motivation is energy, energy to move on, energy to see the future and march ahead.

Patience – This is another quality of leader to wait patiently for success after trying hard with all energy available, continuously trying hard. Patience is important in for leader to keep the team motivated and moving towards success.

Team – Success is always of team. Remember very important point, when success comes it is always of team, but failure comes it is always of the leader. Learn to take responsibility. Team is most vital component of success. Choose the best talent who can be the partner in success who has same wavelength as that of you and are equally committed. The People will remain the only source of success.

· Customer is King

The delighted customer is everything. The smile on the face of customer is very important, when you deliver product or services better than expectation, will make him delighted. Produce what customers want, don’t sell what you produce. The customer first is core to the success of everything. Keeping him ahead of everything else will create a stunning success.

· Product and Place

The 4 marketing P’s are very important; define your Product, Price and Promotion and Place. The best product and services can only be offered to the customers who are willing to buy at the price they see the value for money. This plays very important role.

Marketing – The marketing is all about reaching the right audience at right place at right value. The whole value chain of marketing and its front end plays vital role in the success of the venture. The well-greased machinery and well planned marketing will deliver fantastic results.

Positioning of Services and Product plays very important role in marketing success. Who is the target buyer? Every information about this buyer, his buying behavior and where is like to buy. His choice and habits must be studied beforehand. This will help in product position, which you want to sell, make the product available in the format and packing he like to attract him. This strategy of getting close to the buyer will help in succeeding the product as well as services.

Advertising and Promotion – This is all about appealing the target customer. Reaching him, educating him about your product, education him about yourself. Why this product or services are best suited for him. Advertising and promotion should also study the how to and where to advertise and where to make promotion. The choice of youths will definitely be different than that of families.

After Sales – Sales is the beginning of the relationship. Know your customer well. See how he will come back again and again buying again and again, also bring his friends and family to you. Service with smile will encourage the buyer to visit gain.

· Money

Financial planning for every penny is very important, you need to see every penny you will need while planning for venture. 1000 days cash is what entrepreneur should think of. Small business needs lot of initially input before it can break even. Operating break-even usually comes over 18 months and overall break even will need 24 to 30 months before company starts making bucks. 1000 days cash requirements are what should be planned at start of venture. This money can come as and when required but must be arraigned before. Most of the small companies see cash squeeze which results into the collapse of the best idea.

Middle East


Zia Ahmed (author) from Kuwait on February 12, 2013:

@business-stuff - thanks

business-stuff from India on February 12, 2013:

Hi, you have stretched a very key topic, indeed i found it cool to know about the wrong choices of small businesses...

Looking forward to learn from you...

Thank you!

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