Small Business Resource

A business is successful if it meets the goals of the business owner. It may or may not not be successful by my measure of success – net profit, competitive advantage, equity growth, efficiencies etc., but I don’t matter in this equation.

A business owner may want enough to live on, low stress and plenty of flexibility while another may want to build a business to pass on to the next generation. Different goals – each having different measures of success.

Every business owner has his or her own goals, whether they be free time, or short-term income, or long-term wealth, or whatever that may be. The same is true for investors ….. some may be happy with more cash flow and less capital appreciation, and others may want to sacrifice cash flow in order to get a saleable asset, while others may want to be influential in a particular industry. I spoke a little while back with an investor who wanted to put a good sum of money into a luxury food product basically to get access to hot clubs. All of these people can be successful, but they may not all be the right partners for each other.

Of course, from the outside, if you’re looking to acquire or partner with a business, then you have your own criteria for success. Those are the ones relevant to you at that given time. It may be worth it to partner with an unprofitable firm that nonetheless has good access — that firm may be successful from your measure of needing access. Or you may want to buy a company that has great customer loyalty, slim margins, and poor technology — your measure of the success you need to add to your current success may be that customer loyalty, not profitability.

The key thing is to describe success for yourself before you start the business, look at buying companies, or search for partners; that way, you know you’re measuring success by something meaningful, and not buying into someone else’s description of success.

To simplify an answer …. a business is successful if it meets the expectations of the owners. If you are fulfulling your mission and vision then you are a success – PERIOD!

Whether you are a success to OTHERS, is a whole ‘nother question. Basically, you compare the company to others in same industry, size – so apples to apples – on basis of revenue, margins, DSO, cash flow – any & all of the financial ratios that you are most comfortable with and understand.

Personally, I prefer trend analyses to see where they are coming from, where they are at, and project where they are going – then evaluate against like companies to determine how “successful” they are.

The easy answer is:

1) Are you making a profit?
2) Are you happy?

If you answer yes to both 1 & 2, the your business is successful.

Basically I’ll say this. You set your own criteria and benchmark it by what you want, not what others think is a good thing. If you don’t in all honesty know the definition of what success means to you (your/biz), give it a LOT of thought quickly, then write in down NOW before another day has passed. Otherwise you will forever walk in uncertainty over whether what others told you ever really suited you at all.

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