By Michael Gunther
As we start another year, I wonder how we should actually define business success. I noticed that throughout the year, business stories celebrated in the media always include lists of the fastest growing companies and chronicles of entrepreneurs creating a business from nothing to, seemingly overnight, a multi-million — or sometimes billion — dollar entity. We have all heard of stories of individuals raising venture capital for the next ‘get rich’ product or idea and everyone thinks they are a huge success for doing so.
Yet, is being a fastest growing company or raising capital a true measure of success? I did some research and discovered that only about 20% of entities that raised venture capital exist after 10 years. In fact, half of them are out of business within five years. In addition, many of the fastest growing companies aren’t profitable or end up taking a nosedive within a few years of making the list. Could it be that we are celebrating the wrong aspects of running a business? Fast growth and capital raising should be acknowledged, but isn’t a greater evaluation of success highlighting profitable, sustainable businesses that have an impact beyond profit and growth?
Therefore, how should business success be defined? Ultimately, a business needs to create a consistent and sustainable profit to survive. But in my opinion and experience, success is so much more than just generating a profit. The organizations that achieve ongoing growth and accolades often are focused on a strong mission driven by their passions, employee enrichment, solid customer experiences and giving back to their communities. They understand the importance of every element that goes into creating long-term value for themselves, their shareholders and the multitude of stakeholders intertwined with their business.
Think of Southwest Airlines, TOMS Shoes, Life is Good, and many more organizations that are focused on more than just the bottom line. These businesses understand that the bottom line is an output of balance between the critical components outlined above. Now, think of firms solely focused on the bottom line, namely those in the banking industry. Often, the ones focused on profit are focused on the success of a few stakeholders, like investors and executive management, for a short-term gain. They are not focused on the well-being of all the players who actually could create lasting success.
I am not suggesting that you exclude profit or growth as part of your strategy. But keep in mind that developing sustainable, profitable, and scalable entities will take more than just raising VC money or growing quickly. It takes methodical and strategic leadership with a drive to create something larger with an intent to see success for all stakeholders. Businesses need to be profitable, but if that is your only motive it may be short-lived. If your payout is your only motive, you may be better off going to Las Vegas and playing craps – your odds are probably the same.
How do you define business success? If you find you are not achieving sustainable results, it may be time to rethink your motives or focus. Should you focus on your own bottom line or do you need to revisit your ‘why’ and develop a focus that includes success for all stakeholders? You might be surprised about your own answers. Realize there are some strategic leadership shifts you could make to create stronger long-term value for you and your stakeholders.