Unlocking Success: 8 Key Traits of a Thriving Small Business
Starting a small business is not without risk, but if you approach business like those with successful track records, you're more likely to avoid becoming a statistic. Wherever you are in the entrepreneurial journey, understanding what separates success from failure is the first step toward longevity.
Of course, there will be factors unique to your industry, region, and organization. However, many successful small businesses share several key characteristics worthy of emulation.
1. A CLEAR DEFINITION OF SUCCESS
People start businesses for different reasons: to pursue a passion, help others, build wealth, or avoid clocking in and out each day. You don't need to limit yourself to one of these examples or a narrow definition. But if you want to build a successful business, you need to decide what success looks like for you.
Sometimes, answering these questions can be difficult on your own. You could look for a mentor from SCORE, a nonprofit that partners with the U.S. Small Business Administration (SBA) to support small business owners. Or, find a local entrepreneur networking group to connect with other small business owners and share your thoughts.
2. A DETAILED BUSINESS PLAN
No matter your long-term goals, a business plan is integral to understanding your weaknesses, recognizing your strengths, and identifying new opportunities.
Business plans often contain an overview of a business's products, mission, and values, and an analysis of the market and main competitors. These can help guide your decisions when you hire, launch new products, or want to expand.
Your business plan also contains your key financial statements—the balance sheet, income statement, and cash flow statement. Financial professionals can help you create these and verify the numbers, but taking the time to understand what goes into and affects each part of your business's finances can be a revealing exercise.
3. LEADERSHIP WITH GRIT
Almost every successful business owner will tell you things don't always go as planned. You'll hopefully have some big wins, but there will also be setbacks along the way. You might need to dig deep to persevere through these difficult moments or recognize when it's time to pivot and try something new.
You could try starting with books and articles on these topics if you're trying to change your outlook or develop resilience. Sharing ideas and concerns with other business owners who understand what you're going through can also be helpful.
4. SPECIFIC CORE CUSTOMERS
Small businesses don't provide everything to everyone. Instead, they focus on their strengths and cater to people who will love their products and services. But if you haven't defined who your core customers are, it will be more difficult to meet their expectations.
Surveys, competitor analysis, and gathering feedback can all help you develop a deeper understanding of your core customers. Once you've identified who they are, you can tailor your business's offerings to align with their needs and desires. If you're struggling to find a good product-market fit, that could be an indication that you need to rethink the business.
5. EFFECTIVE MARKETING
An effective marketing strategy is also dependent on knowing your target customer. Word-of-mouth referrals are great, but many companies need to spend money on marketing to achieve sustainable growth.
If you create something brand new, you need to explain the benefits it offers. And when you're trying to break into a competitive market, you have to tell potential customers what makes you different—which could be the customer services, product, price, or experience.
6. GOOD MANAGEMENT
Business founders often run the day-to-day operations in the beginning. However, the skills that help to start a business aren't necessarily the ones you'll use to inspire and lead employees.
If the founder wants to take on a managerial role as the business grows, they might need to invest time and energy into developing management skills. If not, they'll need to look for business partners or employees with strengths in that area.
7. ACCURATE BOOKS THAT DRIVE DECISIONS
Keep an eye on the health of your business by hiring a bookkeeper or accountant to help manage finances and taxes. At a minimum, these need to be correct, or you risk an expensive audit and late payments that could wreck your reputation and credit. However, accurate books can also help businesses make better decisions.
For example, if you offer 20 products, you'll want to understand how much money you make from each sale after you account for supplies, labor, marketing, and other associated costs. You could use the results to start a new marketing campaign and highlight the products with the highest margin. Or, you might discover that you need to discontinue products because you're losing money on each sale.
8. ADEQUATE FINANCING
A small business can have a great plan and loyal customers, but it could still fail if there isn't enough financing. Sometimes, this happens when there are unexpected emergencies, and the company doesn't have enough reserves. Or, when companies try to expand too quickly and run into cash flow problems.
Understanding when to get financing and the pros and cons of different options can be tricky, but that doesn't make it any less important. And if you need help, you can speak with a banker who specializes in small business finances.
MAKE YOUR BUSINESS A SUCCESS
A willingness to learn from others can also be an important trait for small business owners. Even if there isn't a specific formula for finding success, focusing on what worked for others is a good starting point until you find what works best for you.