1.8 What makes a business successful

1.8.1 Measuring success in business

Revenue

  • Revenue is the total income generated from the sales of a business.

  • This can help measure success by allowing businesses to understand their activity level and calculate market share.

  • Can be assessed based on goals set by the business.

Market share

  • Market share is the percentage of total sales in a market that are made by one business.

  • It can be useful in understanding a business’s competitiveness in its market.

Customer satisfaction

  • Customer satisfaction measures how customers feel about products.

  • Customer satisfaction is crucial in order to understand the needs of customers and the performance of the business.

Profit

  • Profit is the amount of money a business makes after subtracting the total costs.

  • High profit can mean the business is successful.

  • Profit can also be reinvested into the business to grow or motivate employees.

Growth

  • Growth is when a business increases in size or expands.

  • Growth can show a business is successful as it may be making more revenue or building a larger customer base.

Owner/shareholder satisfaction

  • Owner/shareholder satisfaction is based on how the owners/shareholders feel about the business's financial performance.

  • If satisfied, they would be more likely to reinvest in the company, therefore contributing to growth.

Employee satisfaction

  • Employee satisfaction measures the feelings of employees based on their job.

  • High employee satisfaction is crucial to ensure high employee retention and efficiency when working.

1.8.2 Reasons for business failure

Cash flow problems/lack of finance

  • Businesses may develop cash flow issues due to a lack of finance.

  • This may lead to being unable to pay bills, therefore, the business may have to close down.

Not competitive

  • If a business cannot compete with competitors it may lack customers and therefore revenue.

  • Without sales, a business would not receive enough profit to pay expenses.

Failure to adapt to changes in the market

  • In order to succeed businesses must remain responsive to changes in the market.

  • If a business fails to adapt, it will become irrelevant and lose customers. Therefore sales would also decrease.