Going from rags to riches by running a successful business is an American dream. However, Tom Harris, author of the book, “Start-Up: A Practical Guide to Starting and Running a New Business” offers these sobering statistics: Investors finance just one out of 100 businesses, and just one-third of all start-ups last longer than two years. Though businesses must worry about several factors, such as managing inventory and paying employees, all businesses share a few essential factors.
All business owners are operating with the expectations they will earn a profit. Ask any business student the primary goal of a corporation and she will recite, “to earn profits and increase the wealth of shareholders.” How profits are earned varies depending on the industry, but the bottom line is of great importance to all business owners. Profits can either escalate the business to new levels of growth, or it can cause the company to dissolve after filing for bankruptcy.
Keeping abreast of industry trends is imperative to business owners. If, for example, a music store attempting to attract a wide audience of music listeners sells eight-track tapes instead of DVDs, it will go out of business.
Even companies that sell cheaper imitations of popular products must be aware of trends. Should floral prints be ubiquitous on the Paris runways, WalMart and Target must recognize this trend to be able to mass-produce similarly-styled clothing for a fraction of the prices of Barney’s or Nordstrom.
Growth is a double-edged sword to business owners: Expansion increases the likelihood of earning more profits, but expanding too quickly can create several complications. Cathy Enz, author of “Hospitality Strategic Management: Concepts and Cases” explains that Starbucks’ rapid growth is jeopardized by other popular chains such as McDonald’s and Dunkin Donuts offering gourmet coffee for less. Additionally, local culture must be considered when expanding: an upscale California sushi chain might be able to expand into wealthy areas of Arizona, but such a concept would likely fail in rural Midwestern towns.
Generally, no business, by law, can become a monopoly. Therefore, competition is an inevitable factor of running a business. Understanding opponents is a make-or-break component of operation: If a pizza place fails to lower the prices of its deep dish pizza despite a new Italian food restaurant offering this dish for less money, the pizza place will likely witness a cut in revenues. Business owners must replicate the strengths of competitors and learn from the competition’s greatest weaknesses.
Few things can stop a business from ceasing its operations faster than failing to abide by legal regulations. Though business owners believe many of these regulations are a bureaucratic annoyance, abiding by them is one of the most important aspects of running business. Paying taxes, reporting earnings, getting permits, abiding by safety regulations and undergoing inspections are just a few of the legal regulations business owners face.
William Pride, Robert Hughes and Jack Kapur explain in their book, “Business,” that environmental concerns place additional legal regulations on business owners: Emissions, packaging and ingredients are examples of legal regulations that arise because of these issues. Such regulations might come at the expense of profit, though society as a whole is usually better off.
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