Every business wants to succeed. That’s why you’re in it, right? You’re in it to win it, searching for the key to success. Success is there to be unlocked, but what does it mean and how do we measure it?
Well, the most obvious answer is the bottom line, profit. There’s no point in running a business without running a profit. It is the master measure, the ultimate rule, surely?
It’s ok to think of profit as the bottom line. Without it, you can do little else. But it is difficult to turn a profit in the early stages of a business, and of course profit margins fluctuate. So at times your business may be unprofitable, but does that mean that you’re failing? Are there other measures that can help your business survive?
Business guru Peter Drucker once stated that ‘the purpose of business is to create and keep a customer’. While this seems obvious, some business owners too centred on providing a specific product or service might lose sight of this simple fact. Of course there’s no point in having products and services with no customers.
Financial Times editor Lionel Barber tells us that longevity is a good measure of success. For this, businesses need good structure and good governance, and family-owned businesses tend to be the most successful in this respect. They also tend to create the best connections to their customers.
But even family businesses can fail, as Gerald Ratner found when in a speech to the British Institute of Directors he declared his products profitable because they were ‘total crap’. Ratner’s customers already knew this, but they just didn’t want to be told. It was insulting and condescending.
Nowadays, as customers are empowered through social media, businesses need to be even more aware of their reputation. As we saw with United Airlines, it only took one social media storm for their share prices to take a massive hit and investor confidence to be shaken.
Smarter corporations understand this. Ryanair’s abrasive CEO Michael O’Leary admitted just a few years ago that his business culture had to change. Built upon a numbers game of stacking seats high and selling them cheap, Ryanair’s game plan worked for a while. But then other airlines realised they could cut costs and compete by offering a slightly better customer experience.
O’Leary held on to his business model until he realised that other carriers were offering competitive pricing and a better service. His response: “We should try to eliminate things that unnecessarily piss people off”.
As O’Leary noted himself, customer service elements that really do make a difference “don’t cost a lot of money”, but their payout can be significant.
The point of Ryanair’s story is that even companies that have built their success on low-cost, high turnover, and low profit margins must at some point regard their reputation. Without attending to the experience of your customers, not to mention public perception more generally, there is always the risk that one day attitudes will change and competitors will emerge to plug the gap.
Marketing expert Pete Blackshaw’s suggestion that satisfied customers tell 3 people, but angry ones tell 3000 may not be entirely accurate but it’s indicative. And the importance of customer experience is even more important for smaller businesses.
Small businesses may now feel under more pressure with the advent of the internet. But their location in communities is a great asset that online businesses lack. The successful ones here are the ones that reach out to their community and create networks that link them to other local assets. The key here is to communicate your value to those around you.
So never let anyone tell you success is one-dimensional. It is a process. Profits rise and fall. Externalities will affect your business. But there are things you can do. Attending to your reputation is one. Integrity is always welcome, as is caring about your customers and their experience. Such inexpensive values can increase profitability and the long term success of your business. The point is that you need to communicate these values and let the world know what drives you to success.