10 Aspects of What Makes a Business Work (And Why They’re Essential)
It can seem as if all it takes to get a business off the ground is a smart idea and a plucky attitude, but the reality is that there’s a lot of hard work, learning, patience and a good dose of luck required as well. Running a business requires a huge number of different elements; as an entrepreneur, you don’t have to master all of them yourself, but you do have to ensure that someone in your team is looking after each of them. And that means understanding why each element is so important to the success of your business. Here’s our look at what it takes to make a business thrive.
1. A USP
A USP is a unique selling point – the thing your business does that no one else does. It might be that you’ve come up with something completely innovative that no one else in the world does – the world’s first hamster moped company? Or it might be that you’ve found a more prosaic gap in the market, such as noticing that there’s no corner shop within a comfortable walk of a new housing development. Whatever it is, having a USP is vital – it’s the answer to so many questions from, “why should I invest in this business?” to “why should I buy this product?” If you can’t answer those questions, your business probably isn’t going to succeed.
Don’t make the mistake of thinking your product has to be completely unique to have a good USP. That’s not what this is about. A USP is simply the thing that differentiates you from your competitors – so it could be that you’re doing something that dozens of other companies also do, you just do it cheaper, or your product is higher quality, or you’ve ironed out one minor irritation that you think will be enough to make customers favour you.
2. A strategy
The best idea in the world is no good if you can’t make it happen. Having a strategy means being able to deliver on that idea. The huge numbers of people in the world who firmly believe they have an idea that will make them rich, and who fail to ever put that idea into practice demonstrate how challenging that can be. If your idea feels obvious, it might be that no one’s ever put it into practice because that’s where they come unstuck, whether it’s because getting a permit for a corner shop in that area is difficult or because there are very few factories with the capacity to produce miniaturised mopeds.
A strategy should cover the next three to five years (or longer, if appropriate). It’ll address how you plan to get your business off the ground (include where you hope to get the money to launch your business from), what products you will produce and what you might expand into in future. Looking at your strategy, you should be able to answer questions about your business such as what your top priorities are, and at what point you’ll be in a position to turn a profit.
3. Competitor analysis
So you’ve got an amazing idea and you know how you’re going to make it happen. Great! But do you know what the competition looks like? Your competition are the people you’re going to be sharing trade shows with, competing for investment with, having people get your company confused with, and above all, trying to get customers from while keeping your customer base from falling into their hands.
To make all of that work, you’ll need to know their businesses nearly as well as you know their own. You’ll need to keep your brand distinct from theirs, make sure that your USP truly is unique, and constantly ensure that you are doing better than them, whether that’s offering a cheaper, more convenient or higher quality product than they do. Otherwise, you’ll have put all of that work into getting your business up and running, only to find your customers choosing your competitors over you. That means browsing their websites, ordering the catalogues, keeping track of their marketing activities, scrutinising them on Companies House and generally making sure you know as much about them as you possibly can.
Lots of people – even successful entrepreneurs – are disdainful of marketing. They claim that advertising doesn’t work, and successful products will earn a reputation through word of mouth. Famously, Elon Musk – CEO of SpaceX and Tesla Motors – spends no money on advertising his companies.
But this is a gross misunderstanding of what marketing is. Part of it can be advertising, which decidedly does work – while you might never have consciously decided to buy a particular company’s product as a result of advertising, you probably aren’t aware of all the times that advertising made you aware of a new product, or helped increase your familiarity with a brand name, and therefore made you likelier to buy. But marketing goes far beyond this, into branding, communications, customer service and more.
Elon Musk doesn’t spend money on advertising – but he was responsible for one of the most expensive marketing stunts in history, when he put a Tesla Roadster on a SpaceX rocket and fired it into space. It probably didn’t make anyone put in an order for a Tesla car there and then, but it meant that many, many more people had heard of the company and that will undoubtedly influence their purchasing decisions in future.
5. Customer service
You can never invest too much in outstanding customer service. Some businesses manage without it – a few rare exceptions, like Ryanair, even manage to make a selling point out of how badly they treat their customers. But for most businesses, treating customers well is a priority; you want your customers to come out of every interaction with your business feeling content with how it went, or, better yet, with their expectations of service surpassed.
What does great customer service include? It’s not just about how you navigate your immediate interactions with customers, whether via email, over the phone, through social media or in person (though obviously these things are important). It’s also about how easy it is to navigate your website, how generous you are about refunds, whether your pricing structure is clear, and a myriad other things that could irritate or delight your customers depending on how you approach them. Customer service has a big overlap with marketing, and part of good customer service is living up to your marketing promises. That’s how Ryanair gets away with it – their marketing suggests that though their customer service is poor, the customer will still benefit from how this keeps prices down. Companies that promise good customer service are penalised much more harshly by customers who feel they’ve let them down.
Anyone who’s had a long career will have had this experience: working somewhere where there’s one person (frequently an administrator, PA or receptionist) who would know the answers to every possible question about the business. How much of a profit did we make in 2011? This client name sounds familiar, why is that? Where do we keep the box of treasury tags that we use about once a year? Whatever the question is, they’re the go-to person for the whole company. And then they leave the company, and no one knows the answers to anything.
The solution to this is good record-keeping, from the start. There are some records that you have to keep for legal purposes, but those shouldn’t be the only records that you keep. It might seem like a lot of effort, but you’ll be grateful when you come to fill in your tax return. As a rule, your company should be able to survive without the knowledge held by any one individual – otherwise the survival of your company is only as reliable as that person’s continuing commitment, motivation, or health.
7. A great team
While it’s best to avoid depending completely on one individual, it’s also important to build up a good team who you can rely on collectively. Remember that you also don’t want to be in a position where the success of your business depends on you; ideally, you should have a team in place so that if you end up in an accident and wake up from a coma three months later, you’ll find that your business has been ticking along just fine without you. In establishing a business, your aim, in the long run, should be to make yourself dispensable.
What makes a great team is a larger question than we have room for in this article. You’ll need people who make up for the areas where you are inexperienced or that don’t play to your strengths. At the beginning, if you’re relatively inexperienced, you will want to hire people who can hit the ground running; later, you may want to transition to hiring on the basis of potential, to build the best possible team you can.
Unless your business is based around an app that you’re creating in your bedroom and marketing through word-of-mouth, you’ll need capital to get it off the ground. Without capital, there’s nothing to pay your team’s salaries (or your own) until the business becomes profitable; nothing for marketing to grow your customer base; nothing to keep the lights on in your office.
Where can you get capital from? Maybe you have some of your own money to invest, or generous friends and family members who are willing to support you. (Beware: if your business goes under, it can take your friendships with it). Then there are investment companies, though their support is hard to win. Or there are traditional loans, if you can persuade your bank that you will be able to pay it back.
9. A good network
‘Networking’ can sound like nonsense, an excuse to waste time in chat rather than doing the hard work of growing your business. But networking can be just as vital (and just as challenging) as poring over spreadsheets or writing the perfect pitch for investors. Your professional network acts as a source of all sort of things: you might get a connection to a possible investor, or a brilliant employee who is just what your team was missing, or a prospective client. Even if your network doesn’t solve your problems this directly, professional contacts can be an invaluable resource when you’re new to the world of business in providing advice and mentorship.
Your network shouldn’t just be professional, though. Running a business is hard work, and getting one off the ground is even harder. You’ll need the support of friends and family, who might not be able to help you decipher corporation tax or figure out the best way to position your product in relation to your competitors, but will be there to give you a hug and a cup of tea when you need it.
10. A good balance of adaptability and determination
Sometimes, succeeding in business is about powering through, hitting the low points and riding them out until your business is on the up again. But sometimes, the opposite is required: knowing when your approach just isn’t working, and you need to adapt and move on if your business is going to survive in any form. And of course, you need to have the ability to figure out which response is appropriate when times get tough.
Some of this is about knowledge and experience – if not yours, then that of your team and professional network, who can advise you on how to act. But some of it is just down to instinct, especially if you’re facing hurdles at an early stage when your team consists of you and the office goldfish. Running a business requires judgment, resilience and the ability to let go of an idea that isn’t working, even if it’s something that you were passionate about. It isn’t easy, but the rewards are worth it. Good luck!