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.