Cash flow is important, but so is understanding where your profitability is coming from. Probably the most important aspect of sustainability is to continually reinvent your company to be relevant to today's needs and wants. Lastly, I see a lot of companies go out of business because they took on too much debt..
Hi Yaping, I think cash flow is the biggest for the success of companies, In recent times there has been a large number of big and small business in Australia that have over committed or not reduced costs to preserve cash that when business has returned, they have no cash flow to work with, cash flow can keep a company going for 2+ years with very little profit, then when the economy changes, they take advantage, thats my spin anyhow!..
I agree with Nigel that cash flow is ton of the biggest dealbreakers in most companies. I have learned though that with creating trusted partnerships with suppliers and having a workforce that is flexible and willing to invest gives you some flexibility with cash. If you also ensure that you are able to focus on only those things that will help you attain your vision + make sure that you continuously improve everything your doing to save time and money, improve quality and build better relations with partners and customers you will very likely to sustain yourself. Most companies lose this focus, get distracted by quick money or 1 big client and forget that they can/must always always always improve even when things are going great. All the best!
While cash is king, there are other variables that add up to the value of cash in businesses that fail or are prone to failing. I've noticed that lack of effective and effecient talent can be one of the foremost contributors to failing businesses. Meaning, the owner is great at the business itself but not so much with business as a rule. Lack of niche marketing and planning also contributes but this most often relates to lack of team oriented talent. I've seen small businesses migrate into successful businesses becasue the owner knew and understood the value of incorporating strategies for sound reinvestments.
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!
Many companies have problems with Cash Flow management, especially start-up or SME. Beside cash flow, the company executive/chairman sometimes slow/failed to respond market trend changing like Nokia late/don't want to implement Android but implement windows os for Lumia smartphone.
So, businessman need to have ability to handle cash flow and have a good respond to market trend that changes quite fast these days
Research shows that most small business fail within the first 5 years. You can blame cash flow but mostly it means they don't make enough money for even the owner to survive on and there are lots of reasons behind that.
If you get past 5 years then you are probably there for the long haul unless you get hit by a global economic crisis / recession. You need to recession proof the business.
Other than that success can sometimes kill. Some companies grow too fast and fail because they cannot supply demand. This is where business plans come into play. They need annual review.
Others fail because someone invents a better mouse trap and they lose their competitive edge. This is where strategic planning comes into play. You need to do annual planning.
Few business are set and forget: plan, do, check, evaluate.
Companies have life cycles just like the human cycle. Once the CEO of a mature company becomes complacent and starts to make assumptions for the company's customers then they have started down the slippery slope to irrelevance. Sustainability is about migrating with customers changing requirements and treating them like the appreciating assets that they are. The goal is to offer solutions to problems before the customers know that they have them.
Sustainability has almost nothing to do with cash-flow. This is a short-term measure. Amazon lost over $1 BILLION to establish its long-term dominance. By that measure they were a failure for 10 years!
Sustainable competitive advantage comes from:
1) Differentiated Market Position(ing) (which allow pricing power and margins to grow)
2) High value added products/services to drive repeat business and word-of-mouth marketing and referrals
3) A vision of the future, working towards a future market, not today's which everyone is doing
4) Building your team - everything is about the people and culture you create. Using management best practices will create a killer company over time.
5) A long-term Strategic Plan and proper management cadence to adjust to outside factors and unknowns.
I have taught a CEO Boot Camp since 2002 and have 2 days of intense material on this on video. See: http://startupplanet.com. This both art and science and requires long experience to do well. You can be lucky but with experience and the above you will dominate your market(s).
To scale well, after proof of concept, you also need to Systematize your business (after about 7-15 employees). See www. AirTightMgt.com.
All truly great businesses figure this out. That is what creates sustainability. Read Good To Great by Jim Collins.
I've seen a lot of answers here, but they're all only a piece of the puzzle. Developing sustainability is actually a defined process. Follow the process and the result is a self-sustaining business. Churchill and Lewis' Harvard Business Review Article in May 1983 defines the process. It's getting to the Success stage of the growth cycle. Once you've achieved this level the business will sustain itself. Everything from this point is dependent on the management's teams ability to manage the processes that have been created for self-sustainability. The problem is most people don't understand the stages of the growth cycle and how to get to the success stage. Here is a video that we produce that helps introduce the concept: http://dinoeliadis.net/business-improvement/small-business-growth/ I hope it helps. - Dino
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One of the main reasons that companies do not survive is due to not having and executing a strategic plan. Many companies have initial success because they develop a new product, service or process that fills a market need for a period of time. However, if they don't continue to upgrade that product, service or process, or if market conditions change, they start to lose market share. In my career, I have been surprised by how many businesses I have seen that lack any specific growth plan (Strategy). Through the development and implementation of a good strategic plan, a company can always be looking ahead at what they need to be focusing on in their business to stay competitive and profitable. It's like the old cliche' goes, "You wouldn't think of taking a 1000 mile trip without having a good roadmap, so why would you begin taking a long-term business journey without a plan of where you intend to go i.e. a Strategic Plan"
I read through all of these responses and I am going to try to provide you with a different perspective. Assuming that a business has had some success meaning they have a product/service along with customers and a reasonable financial conditions, etc.
I believe that a company sustains itself because of the leadership and the people of company. I personally don't know of any company where there are no people involved, so to test this theory, take a snapshot of your financials and your customer satisfaction then give everyone (including yourself) a 90-day vacation at the same time. When everyone returns check the numbers and see the difference. What happened to cash flow what happened to profit, growth, customer satisfaction.
Of course no one would really do that but it does cause you to pause and think. What if leadership created more than a vision, what if leadership truly inspired and connected with people to the point where everyone was valued and loved their job.
Again, assuming that the business model is sound and there is a market for your product/service sustainability is usually not a primary concern.
If I made you think differently then I hit my goal.
Hope this helps,
Annual Business Profit growth (5-7% minimum). Sounds simple but if you grow PROFIT every year you tend to stick around.
That question is so vague that I can only assume that you are trying to start a very lengthy discussion that would touch on the myriad of factors. But the obvious answers are: management skills, product quality, and marketing effectiveness.
It boils down to who takes care of their customers and who don't!
and if management takes care of its employees.
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.
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.