Defining Success Is a Crucial Step for Entrepreneurs

Before you start a company, there are many crucial steps to take. One of the most important is to develop a definition of success that you can measure your company against, because if you haven’t defined success for yourself, you’ll have no way of gauging whether you’ve achieved it.

What defines a ‘successful’ company?

Defining what constitutes a successful lifestyle or build up company is relatively easy.

For your company to be successful as a lifestyle company, it has to support the initial goals of:

  • Enabling you to operate in an industry that you enjoy being a part of.
  • Providing you the opportunity to enjoy life with flexibility and freedom while operating this business.

For your company to be successful as a build-up company, it has to:

  • Increase significantly in size in a timely manner.
  • Generate enough value as it grows so there will be a way to exit the business at some point.

There is a general understanding of what a successful company needs to accomplish depending on the initial goal. With a lifestyle business, the criteria of success is clearer since there are no numbers and time tables to follow for determining size or when to exit. There is not even a requirement for having any employees. Yet these points are not clear in the case of the build-up company.

Let’s take the concept of size, for example.

Is the size of the company based on how much revenue it generates or on the number of employees? And what is a good rate of growth?

Let’s have a look at some statistics that may help us define these terms:

  • Only three percent of US businesses have 500 employees or more, according to the Small Business & Entrepreneurship Council. More than 60 percent of businesses have two or fewer employees.
  • As of 2012, according to the US Census Bureau, more than 60 percent of all businesses have less than $400,000 annual sales and more than 90 percent of them have less than $800,000.
  • Only the largest 0.3 percent of companies in the US have more than a billion dollars in sales and more than 3,000 employees on average. The second tier of companies in terms of revenue make up 1.5 percent of all companies in the US with an average of 200 employees and slightly less than $50 million in revenue. And we don’t know how many of those companies are profitable or going to be around in three years.

So are those the ‘successful’ companies?

For size, maybe it is the number of customers that use the product or services of that company.

What about profit? According to a March 2015 publication from the Bureau of Economic Analysis, more than 25 percent of all profits made by US corporations are made by Financial Corporations whereas less than 10 percent are made in either the retail or wholesale trade, and less than three percent are made by Food & Beverage companies. Does that mean you have a better chance to create a successful company in the financial industry?

How important is the worth of the company and how should that worth be measured? By market cap, balance sheet, net worth, or some other form?

What about the positive impact on the community? How much value do employees having jobs, vendors sustaining their businesses and those businesses in turn sustaining their neighborhoods and cities provide? Is that a consideration at all for defining success?

This successful company thing is getting awfully complicated. How about we settle on this: If you are trying to build a lifestyle business and you are able to do what you love while making a positive difference in the world, and you are able to make a decent living from it, that should be considered successful.

For a build-up company, if you are able to develop a financially healthy company that is constantly growing in revenue while filling a need or taking advantage of an opportunity in the market, that should be considered success.

Besides these definitions, I need to add a few more criteria in order to be considered successful:

  • Your employees should be happy to be a part of your company
  • Your customers should be happy with your product or service
  • Your investors and community should be happy to be associated with you

Your new company does not have to be the next Google or Tesla to be a success story. You do not even have to hit a seven digit revenue number, or employ even one person. All you need is to build something that will survive and grow and that you can be proud of. There are thousands of successful businesses all around us. Some of them we know by name, some of them we will never hear about and starting one is more achievable than you probably realize.

Article Courtesy of INC.com CLICK HERE to access original article.

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