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Business success and failure
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How do we know if a business is successful? There are many measures, and several common reasons why businesses fail.
Measuring success
Revenue and profit: the most common financial measures.
Market share: the business's sales as a percentage of the total market.
Growth: more outlets, staff or sales.
Customer satisfaction: reviews, complaints and repeat customers.
Owner/shareholder satisfaction and employee satisfaction.
Market share: the business's sales as a percentage of the total market.
Growth: more outlets, staff or sales.
Customer satisfaction: reviews, complaints and repeat customers.
Owner/shareholder satisfaction and employee satisfaction.
Why businesses fail
Cash-flow problems or lack of finance: cannot pay bills, even if profitable.
Not competitive: prices too high, quality too low, or rivals better.
Failure to adapt to changes in the market, such as technology or tastes.
Not competitive: prices too high, quality too low, or rivals better.
Failure to adapt to changes in the market, such as technology or tastes.
Different measures for different businesses
A social enterprise may measure success by the people it helps rather than profit.
A start-up may see survival as success.
A start-up may see survival as success.
A business sells £6 million in a market worth £40 million. What is its market share?
- Market share = 6 ÷ 40 × 100
Answer: 15%
Success can be measured by revenue, profit, market share, growth, customer, owner and employee satisfaction. Businesses fail through cash-flow problems, not being competitive, or failing to adapt.
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