MONTREAL—Canadian entrepreneurs face many varied challenges in the course of running their business, but it’s often difficult to identify which tasks will best help grow the business.
Need help? Try checking out a recent report from the Business Development Bank of Canada (BDC). The study has identified five fundamentals of business success and five common pitfalls that are key predictors of business failure.
The report, The Five Do’s and Five Don’ts of Successful Businesses, identifies factors that appear to be common to many of Canada’s “most successful” business leaders—defined as the top 20 per cent of businesses based on recent financial performance and employment growth—regardless of the industry in which they operate.
The other 80 per cent of Canadian entrepreneurs surveyed were classified as “all others.”
The five “do’s” of successful entrepreneurs include:
- Innovate, don’t rest on your laurels
- Ask for outside advice
- Have a solid plan and measure your progress
- Hire the best and keep them engaged (Hint: it takes more than money)
- Build strong relationships with your key suppliers
“A common thread here is that it’s all about the power of strong relationships,” said Pierre Cléroux, BDC Chief Economist. “Whether it is about the importance of seeking outside advice, hiring and maintaining good employees, or building a solid rapport with your suppliers, never underestimate the value of relationships.”
Indeed, the report emphasizes that entrepreneurs should be thinking about these factors if they want to create winning conditions for their businesses.
“We can’t emphasize enough that there are simple, easy strategies that are within reach of all entrepreneurs,” stated Jean-René Halde, President and CEO, Business Development Bank of Canada.
The research also shows many businesses that have mastered their day-to-day operations can still run into financial difficulty because of some fairly basic but common problems. To determine why, BDC examined 118 well-established companies in its portfolio that had, at least temporarily, run into financial difficulty. On average, they had annual revenues of $7.8 million and 56 employees, and had been in business for more than 20 years.
Five common pitfalls emerged from the analysis, such as:
- Don’t rely on too few customers; diversify
- Don’t underestimate the importance of effective financial management
- Don’t leave contingency planning until it’s too late
- Don’t ignore what’s happening in your market
- Don’t wait too long to get help.
Innovation is the mainstay of success
In part, the current findings echo research published by Statistics Canada 20 years ago, which found innovation to be the single most important factor in business success. While the business landscape has changed over time, the need to innovate has remained a constant.
“The fact is that we’ve heard the same song for years: for Canadian businesses to remain competitive, they need to improve,” said Cléroux. “Well, it was true 20 years ago and it remains true today—innovation matters and entrepreneurs need to do more of it. What businesses need to do today is focus on continuous improvements and not the next big invention.”
BDC’s study also found the following:
- One-third of the most successful firms reported that more than 20 per cent of the products and services they offered did not exist five years ago
- Nearly one-third of successful firms see supplier relationships as vital to their success
- Nearly one in six of all companies will run into trouble because they lose a single customer
- One in four successful businesses has a detailed road map for future growth
- Over sixty per cent of successful companies are willing to take at least several months or longer to hire the right person for key roles and positions
For more detailed research results, which includes case studies showing how successful firms manage these factors, and recommended strategies for avoiding these pitfalls, download the full BDC study. Also, check out this detailed infographic.