How to Define Business Success
Getting Real About Success
Many leadership gurus talk about success, adding value, benefits, results, quality, excellence, and all kinds of fancy-shmancy ideas that mean nothing until we define them clearly and make them happen.
So, let's define success clearly. Then we can make it happen.
Here are the key points to consider:
- Every person, and every company, has his or her or its own definition of success.
- To work at all, success has to work for everyone.
- Success is a SMART goal: Specific, Measurable, Achievable, Realistic, and Time-bound
The SMART acronym was developed by George T. Doran in 1981, and was published in the Management Review. It has now become a widely-used term with lots of alternate versions.
When we develop SMART goals that work for everyone involved, we create win-win success. We get more than buy-in, we get strong commitment. Then we get to work and make our success real.
Table of Contents
- Who's Success? Defining Stakeholders
Figure out who matters to your success, and then figure out what matters to them.
- Where is your business today?
Goals are different for startups, businesses in trouble, or growing companies.
- Consider the Stakeholders
Success is only success if it works for everyone involved.
- Building SMART Success Goals
SMART goals are clear enough to set you on the path to success.
- An Example: Small Business Success Defined
This boutique owner really knows where he wants to go!
- Key Ideas: Defining Your Goals
Now is the time for you to define your business success goals!
A Business Guru - With a Difference
I'm a business guru myself - author of the Amazon best-selling book on business success: The Ultimate Guide to Project Management for Small Business, and a consultant who has cut Fortune 500 success techniques down to size for the small business owner. But I got into leadership consulting through project management, which is a hard-hitting, practical, get things done attitude. In fact, I call my work Get It Done Right! I help my clients focus on simple, practical goals. Then we get to work and make things fly!
Who's Success? Defining Stakeholders
The success of any business affects many people. The term for everyone affected by a business or a decision is a stakeholder. That is, each person or organization has a stake in the success of the business, and will lose out in some way if the business fails or runs into trouble. Key stakeholders are:
- The business itself
- The owners, or, in a publicaly-traded business, the stockholders
- Each executive
- Each manager and worker
- If the business has union employees, the union
- If the business borrows money, it's lenders
There are also indirect stakeholders. For example, if a business is failing, and a frustrated manager goes home and kicks his cat, then the cat is a stakeholder! Seriously, employees' families do matter. Ideally, our solution should be so good that our team members can go home and get support for their work from their families. Another example of an indirect stakeholder is the government. If the business succeeds, the company and its employees will pay taxes. This is why governments are willing to provide incentives that support local business. And those incentives might just be key to the success of your business.
We will define the success of your business as success for you, the company, and all its primary stakeholders. But before we can go on to define success exactly, we must consider one other thing: The situation your business is in today.
Where is your business today?
We define success differently depending on the situation of the business. Here are typical situations: which one best describes the status of your business today?
- New business. Not yet launched, or just started
- In Trouble. Up and running, but in serious trouble: It could close down within a year or two
- Up and Running. Running smoothly, but not growing
- Growing. Growing, but maybe not under control
- Facing Challenges. Facing changing markets, economics, or technology, and needing to adapt to survive
Each of these situations requires a different definition of success. Here we go:
- New business. Since 95% of all new businesses fail in the first five years, staying open and being debt-free is success.
- In Trouble. The goal here is to stay in business and create a realistic plan for solving the problem.
- Up and Running. Here, the goal depends on the stakeholders. Maybe a steady course is success. Maybe growth is what the owners really want.
- Growing. Fast-growing businesses are in danger of crashing and burning. A realistic plan for handling success is essential.
- Facing Challenges. Here, there is a need to redefine the business, and define success in terms of what can work for the future.
Once you know where your business is, you can create SMART goals for success. But if you don't face the reality of where you are today, you can't. For example, if you create a growth plan while ignoring the fact that your business is running on expensive, out-of-date technology, you are not setting a realistic goal. Or, if you are young dreamer heading to be an entrepreneur, then thinking you'll make a million dollars in the first year may be fun, but it isn't necessarily attainable.
Poll: Where is your business today?
Which of these situations describes your business right now?
Consider the Stakeholders
In addressing stakeholder concerns, there are two issues:
- What would be success for them?
- What are they willing to do to get that success?
Ideally, we should guide stakeholders to define success in their own terms, and listen. It is much too easy to think that we know what others want, and then create a plan. Then they say, "yes, yes" to the plan, but they don't really commit. Then everything falls apart.
Every new small business has a typical example of this. The owner is all excited about the business because it is his dream. And the team is excited, too. But they are excited about a job not about a dream. What usually happens is that the owner's excitement has him working all the time and loving it, making his dream happen. And he wonders why his employees don't care, don't work long hours, and don't take responsibility for delivering results. What these owners - and its most small business owners I'm talking about - don't realize is that his definition of success is "Making my dreams real; owning my own business" and his willingness is "whatever it takes." The team see themselves as employees in an exciting start-up company. Their definition of success is something like: "A job with change and excitement, learning, and growth opportunities." Their sense of ownership is lower, exactly because they don't own the business and because it is not their dream. And there are limits to what they are willing to do. Those limits depend on their idea of a healthy, fun, sane job. And they'll quit if their expectations are not met.
So, a small business owner is much better off asking questions and listening to his team regarding their idea of success. And the same is true for all business owners and managers across the board. Here are some more examples:
- In marketing, we must ask what the customer's definition of satisfaction or success is. Giving the customer what we think they want is a recipe for disaster.
- We can lower costs by thinking about what our vendors want. I know one small meat company that saves money by working with a major butcher's schedule. By delivering beef to be butchered on a schedule that fills in low points in the major butcher's schedule, the small company gets a lower rate on top-quality butchery. This allows the new startup to remain affordable when facing larger, currently more efficient, competition.
- When Gordon Bethune became CEO of Continental Airlines in 1994, he needed the complete support of the Board of Directors. Continental was heading into it's third bankruptcy, and major changes were needed fast. But he understood the needs of individual Board members, and that gave him leverage. He knew that the Board had been appointed by the previous bankruptcy court, and had members from the Boards of Continental's major debt holders, like Boeing. And he knew that if Continental went into bankruptcy, these Board members would have to explain to their other Board how they lost the company hundreds of millions of dollars. Understanding this, Bethune was able to get support, take charge, and rescue Continental from bankruptcy, making it the most successful airline in the US for the next five years.
When we can, let's find our stakeholders and really listen to them. If we can't, then let's really get out of our narrow perspective and understand their concerns. When we know what everyone wants, we can define win-win success for everyone.
Building SMART Success Goals
It doesn't work to say, "We all want the company to grow," or "We all want to get products shipped out on time." Those are much too vague; they are not SMART goals. Let's take a closer look at what a SMART goal is. Let's begin with a restaurant that has the idea we want "more repeat business." This goal makes sense because selling more to current customers means making more money with less advertising and marketing cost. The idea makes sense, but it is not yet a SMART goal
- Specific. "More repeat business" is not specific. "At least 20 customers who come for a meal at least once a month, each month for 6 months" is specific.
- Measurable. If we don't track customers by name and phone number, we can't measure whether we're actually getting repeat customers.
- Achievable.We have to have some idea of how to get 20 repeat customers. And we have to be willing to put in the money and time to make it happen.
- Realistic. 20 repeat customers is probably realistic. 200 repeat customers, at least any time soon, is not.
- Time-bound. We complete the SMART definition of our goal by saying "By December 31, 2012," or setting some other defined date when we can look at what we've done and see if we have succeeded.
Each goal you set for your business, or yourself in your business, or your stakeholders, must have all five SMART qualities. If even one of the five elements of SMART is missing, the goal is too vague. Vagueness is the short path to disaster for a business.
This is an example of just one SMART goal. A business plan is composed of dozens of interlocking goals, each one of them SMART. Some of those goals are financial. Others are marketing. Others relate to infrastructure, productivity, cost-reduction, and other elements of business success.
An Example: Small Business Success Defined
What might success for a new small business, with a single owner, and only part-time help from an administrative assistant and bookkeeper, and some indoors sales staff, look like? It would depend a lot on the owner. If he just wants to be his own boss and make a living, that is very different than if his dream is to build the business and turn it into a franchise, or open a chain of stores. In this example, we'll keep it simple, and start with moderate goals. Let's imagine it's November, and the plan is to open the doors to a new boutique in late January.
- SMART goals for the owner: The store looks beautiful with all signs and products in place on opening day. I am in the store all the time it is open through the end of April, but, by then, one of my sales clerks is capable of running the store without me for a half a day at a time, and I can either take time off or do other work on the business. By the end of the year, I have a manager who can open and close three days a week, so I can focus more time on buying new styles, marketing, and advertising.
- SMART goals for the business: The business is breaking even on operations (product cost, salary and commission, rent and utilities) by May 1. When the summer tourist season hits, we make enough money, each month, to cover all expenses, including marketing and advertising. During the Christmas rush, we earn enough to either really increase marketing, or to allow the owner to draw a salary.
- SMART goals for marketing and publicity: We have a distinctive brand and image, and good PR and media coverage, including at least 3 major articles in the first year. We host 4 events with over 200 people attending each event.
- SMART goals for sales staff. This store is a wonderful, friendly, flexible place to work for success-oriented salespeople who can expect to make (some specific income) per month.
- SMART goals for bookkeeper. This is a reasonable job, taking only 5 hours per week, completely tracking all income, expense, and financials for all aspects of the business.
- SMART goals for customers. When I need a dress for an evening event or a party, this is the place to go. And when I need a shopping spree, or shoes, or a handbag, this is my first stop. I love shopping here for the style and service, and I don't mind the price.
Key Ideas: Defining Your Goals
Defining your goals is central to building the business plan that will bring success. Or, if you are an active business, you might be updating a strategic or tactical plan. Let's review the ideas and examples we've talked about here. Then you can make them your own and apply them to writing your goals to make a SMART plan that you can really put into play.
- Create goals for the company and for each stakeholder, or group of stakeholders.
- If possible, guide stakeholders in defining their own goals, to ensure buy-in.
- Make every goal a SMART goal: Specific, Measurable, Achievable, Realistic, and Time-bound.
- Coordinate your goals. If you are opening a boutique that succeeds by fulfilling women's desire for fun shopping: It needs to be in a prime mall or central business district; The clothing styles need to make your customers eyes light up; You need both affordable and high-end accessories; and you need a sales staff who can make women want to come back.
When you have a SMART, successful definition of business success, get your team together and go for the gold!