For a company to be self-sustaining it should:
1) Be sensitive and attentive to the marketplace, its customer base, and the competition so as to maximize revenues consistently given market conditions; the idea is to avoid disruption and market displacement -- companies who are not looking toward the future and its potential for change are virtually asking to become extinct -- companies, just like species, need to adapt and to evolve. Give the customers what they want - and not merely what you have.
2) Control fixed costs, and try to keep them at a minimum. I recommend a zero-based budgeting approach for evaluating which costs are necessary and which are not; unproductive costs must be eliminated;
3) Maintain multiple sources of supply and avoid sole-source vendors. Similarly, diversify your product mix -- if you are too steeply vertical in your marketing, you increase the chance of being out-priced by a stronger competitor or by the marketplace due to a technological or social change. Diversify you products or services and diversify your revenue streams as well.
Suggestion would be to essentially serve the interests of those far beyond just your company's interests. You live in a global community, there is little tolerance for companies that only live in a vacuum ... meaning only interested in the profits it can generate for itself ... Look to serve a wider community, this provides longevity.
Being able to stand firm over any problem or challenge a company or business may meet is something that may vary depending on how they act over the matter. Skills or knowledge is not enough to get over a particular problem. Attitude also count. That is why, I think, some may survive while others fail to do so.
Sustainability of organizations come from innovation. Companies that reinvent themselves and forever keep changing there offering strategy keeping market interest as the top agenda. This however has a competitive dimension to it and the comapny has to stay ahead in the innovation race. Often that mode of operations is fraught with risk and not sustanable for very long stretch. Companies that have long term contracts, low client attrition (because of stickiness of business and/or loyalty) and have the ability to keep adding to their client list have best chance for sustainability. A very healthy ratio of business would be 80 to 95% from existing clients and only the balance from new clients, which will become part of the existing client business in the following year.
A good book to read that addresses this is called "The Dip", by Seth Godin.
Good luck man! Looks like you got all the answers you needed!
Just at a quick glance through the answers and I'm seeing the same things I was thinking: cash flow, the need to constantly reinvent, listening to your customers, among others.
Firstly, there need to be total alignment of the organizational objective with the personal one. Having quality and committed personnel. Passion makes a major difference. Engaging an end to end risk analysis to assess sensitivities is key to ensure special attention is given to those items. Being visionary and foresight are key factors.
The answer to your question can be summed up as "fit and fitness." There must be a good fit between the organization and its larger environment (especially markets and suppliers) and the organization must possess no small about of fitness with respect to its operation and functioning. Three core processes come into play in this regard. First there are the transformation processes that convert resources into products and services. Second are the transaction processes that focus on exchanging products and services for revenue from customers and money for goods and services from suppliers (including employees). Third are the adaptation processes that achieve and maintain a good fit between the organization and its environment. For a model of a sustainable organization go to this link: http://www.nickols.us/The_Sustainable_Organization.pdf
I believe it is all to do with aligning your company with its surrounding business environment. Environment is no more as static as in the old days. It is now very dynamic and companies need to be more environment friendly in order to sustain its success.
How to do that?
---By continually revisiting environment changes or anticipating them before they take effect.
---By continually modifying your products and services to meet customers expectation
---By delivering your products and services in a way appreciated by customers. For example, do not hesitate to go virtual, if it is required to do so.
Wish you the best of luck.
Hi Li, Some great answers, some obvious answers.
1) You are in business to make a profit. profit relates in income - expense.
they are your two leavers.
2) Cash flow = funds in - funds out. Timing is everything. It's no good selling to people who can't / wont pay on time. They will cost you big time not only in delays, but in resources to obtain payment.
3) Business Management. apply the 80 /20 rule. You get 80% of your business from 20% of your customers. Identify who the are, replicate them from similar markets or from within their competitive sector. If they are # 4 in there sector, approach the industry #3 and #5.
4) Grow within your means. Know your limitations, some companies bite more than they can handle, and end up as a doughnut, which is something big but it has a hole in the middle.
Not so Obvious answers
5) Plan for hidden expenses. Some companies do not cover items like Tax within it's costing structure. Work out what your true costs are. True cost are direct and indirect + other costs like advertising, tax, super, growth, and contingency.pay increases, Then you apply profit.
Ask your self this question, If i buy apples at $1.00 / Kg and sell them at $1.25/kg this time,and I have 1,000 Kg of which I have sold 500 Kg but next time I already know that my price will be $1.10.
What price should I be selling my 500 Kg balance. Should I be selling them based on the $1.00 /Kg or at the $1.10 /kg price. If you say the $1.00 price. I will be asking you How will you be able to pay for the apples at $1.10.
6) Complete your S.W.O.T. Analyses on your company. From that work out what your "Sustainable Advantage" is compared to your competitors. That becomes your unique benefit / selling point.
If it is of value, highlight it as a reason customers should consider your product / service.
7) Know your business, and it's limitations.
Only go for the work you are 90-100% sure you can will.
I know of companies in road construction that only bid on projects between 50 - 150 $ Mil. and that only have 3 competitors bidding. Why, because of the cost to bit, the time it takes to win, the process it takes to get there. For instance for them it cost about $1.2 mil to bid. And there is say 3-4 bidders each has the same costs. (costs are time to quote, cost of quote, scale models, test reporting etc.) and in that there is only 1 winner, so say 3 companies have each lost $1.2 mil. I can tell you this cost is not fully lost, it is recuperated as cost of doing business. They budget for x number of projects against x number won.
If they don't know their limitations, they would quote on everything, and loose a lot more then they win.
The example in on a gig scale, but the same principle applies, Companies do go broke working flat out and wonder why.
Sound financials, Assets and Liabilities have to be equal. If the CEO doesn't understand the lingo of the CFO and the CEO and the CFO don't understand the CTO their will be rifts in the company. Although in the beginning during the successful, "honey moon" period, everything will seem fine and dandy, bad business practice sneaks up to haunt you.
In Physics they say, What goes up, must come down, the market takes down swings just like company culture takes down swings. Sometimes industries change, government regulations change, fad changes, the weather changes, and the company is ill-equiped to deal with change or a revolutionary new company.
The best example I can think of currently is the tendency of entrepreneurs to equivocate Facebook and Yahoo. Yahoo used to be the number 1 search engine until Google came around. Facebook used to be the cool social media to use until it became open to the public, it seems as if certain companies fade in time. Some respond well to change, others do not.
The best way of explaining this is a simple political quote from revolutionary times: The In's Becomes the Out's and the Out's Become the In's.
What worked in the 1990s might not work in the 2000s, and what worked in the 2000s might not work in the 2010s.
There are unforeseen upswings in particular industry sectors that are unprecedented due to unforeseen variables that can not be quantified and thrown into an algorithm.
This idea is explored beautifully in Malcolm Gladwell's tipping point - but to make a long story short - small changes can have unexpectedly large consequences.
Little, "at first seemingly inconsequential changes" in the market or similar industries can greatly influence outdated business ill-equipped business models.
Look up the idea of disruptive technology.
For example, when Steve Jobs presented the world with the first MP3 player, that totally fliped the music industry over.
Currently, big tobacco is struggling to keep up with new vaporizing companies.
Sometimes health concerns can dictates business matters. Sometimes business matters can dictate culture.
Culture is a very powerful force in business that is greatly overlooked.
The conflict between managers, entrepreneurs and technicians also creates a great deal of problems within the company over time...
Another problem with modern day companies, is that they outsource their development, and then when there is a major development problem a couple years down the road, the company burned through all their money and is unable to properly deal with the issue at hand. Users lose trust in the product and then quickly move on to the "next big thing."
Many studies have been done that show that those companies willing to take advice are several times more likely to survive than those who don't. However, it is important to ensure that you go to the right people for advice. Relatives and friends will tell you what you want to hear, so seek professional help. Whatever they call themselves, (coach, mentor, adviser, consultant etc) make sure that they work with you to achieve your objectives and not theirs. The real difference between the various names for professional help is a whole subject in itself!
Thanks very much for all these valuable sharing. The answer that I have learned is that at the end, "People believe what you believe; People buy why you do; but not what you do......" Without a full understanding of why we do, the meaning and shared values, we will not be able to be creative and sustained......Yaping
Based on you being able to anticipate needed changes and make them fluidly, would say the following is the key to lasting.
Positive cash flow is important for growth. Cash reserves are important for staying power. One of the biggest problems new and growing businesses is that they are growing fast but run out of low on cash which stifles momentum and can put someone out of business quickly, if they do not have a cash reserve at an early point in their growth.
We have survived for 34 years now and I believe our success and the success of other mid-sized business is your leadership team. Integrity, Customer Service both internally and externally,
The answer to this is Innovation - constantly reinventing your business to ensure that what you offer is what is needed in the market. Look at Madonna as a Singer - she constantly reinvents her self, her style, image and appeal. Most businesses that are still going after 20 years are almost definitely doing something different to what they started out doing, they will have diversified or changed markets - even if their core capability might still be the same. Organisations that enable their employees to act like entrepreneurs (spotting and acting on opportunities, taking risk and allowing them to fail (in a controlled way) and learn will have a greater chance of having a culture of innovation. Some organisations such as Cannon give their team free time to spend on a project of their own or a colleague which supports development and innovation of new products. Carlene Jackson, OU MBA, Cloud9 Insight Ltd
Continuing communication with your customers post-sales will provide insight into any market changes that might affect sales and revenue projections. Market conditions are constantly changing and what was right for the market at launch might be woefully short, too expensive, or feature-barren. The best way to stay on top of your competition is with communication with existing customers. If you do not yet have existing customers, a formal validation program would be recommended.
There could be a number of factors that influence a companies rise and fall.
Likely one of the most predominant is a change of management, or direction or quality fo service. Also policy changes, changes in structure, not being adaptable to changing conditions are just some of ther factors that can affect a companies progress in its' life.
This canvas is too broad to give a one shop answer and each case would need to be looked at individually. Even in our economic climate, although some companies have worsened as a result, perhaps, others have survived and even prospered, giving rise to the though that perhaps a companies future is dependent more upon the company that the environment.
Activities such as financial pulicy, customer service policy, cost cutting, promotional activities and more can all play a part in a companies survival and success.
Often the question why should be asked rather than just what. If there is a cash flow problem for example. Why is there a cashflow problem. Has there been a management or policy change? Has there been cost cutting in vital areas that directly affect the cash flow, such as customer service for example?
It can be a hard line perhaps, but more likely to lead to success when one takes the attitude that a companies survival and success is solely dependent upon their own actions. This put it in the realm of more control over their own success. I believe this is a very big and significant contributin to a companies survival.
It boils down to who takes care of their customers and who don't!
and if management takes care of its employees.