…And 5 common pitfalls to avoid
Montreal — The Business Development Bank of Canada (BDC) released a new research report that looks at how Canada’s entrepreneurs can stay at the top of their game by mastering five fundamentals of business success and steering clear of five common pitfalls. The research was published in the context of the 35th annual BDC Small Business Week TM.
The report, The Five Do’s and Five Don’ts of Successful Businesses, identifies factors that are key predictors of business success. In fact, they appear to be common to many of Canada’s “most successful” business leaders, defined as the top 20% of businesses based on recent financial performance and employment growth, regardless of the industry in which they operate. The other 80% of Canadian entrepreneurs surveyed were classified as “all others.”
The five “do’s” 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—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.”
“As we celebrate BDC Small Business Week, 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. “Entrepreneurs can and should be thinking about these factors if they want to create winning conditions for their businesses.”
The research also shows that many businesses that have mastered their day-to-day operations can 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 over 20 years. Five common pitfalls emerged from the analysis.
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.
- As with each “do,” each “don’t” includes a case study of a successful firm and recommended strategies for avoiding these pitfalls.
Innovation remains 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 over 20% 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 hasa detailed road map for future growth.
- Over sixty percent 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, download the full BDC study and accompanying infographic.
BDC Small Business Week runs from October 19 to 25 under the theme “Back to Basics. Reenergize Your Business.”
About the Report
The BDC Research and Economic Analysis Group conducted the research presented in the report in two phases. The first phase consisted of a literature review and a series of in-depth interviews that resulted in a list of possible success factors (as well as factors contributing to firm failure), which were explored in a BDC/Nielsen survey of 1,139 small and medium-sized enterprises across Canada. Survey responses were compared to the ranking of firms based on a general success index (based on measures of financial performance and, to a lesser extent, employment growth), and the most statistically significant results were grouped into five overarching success factors. The second phase consisted of a review of the circumstances that led 118 firms in BDC’s portfolio to encounter financial difficulties, in consultation with BDC executives from the special accounts department and business restructuring unit. Based in part on an initial list of factors that were identified during the literature review, the five most frequent sources of problems for formerly successful businesses were identified in this sample.
BDC Small Business Week™ is a trademark of the Business Development Bank of Canada.
About BDC Small Business Week™
For 35 years, the Business Development Bank of Canada has been organizing BDC Small Business Week™ in recognition of the contributions and achievements of Canada’s entrepreneurs. Events held during the week bring entrepreneurs together at conferences, luncheons and trade fairs across the country, where they have the opportunity to learn, network and enjoy themselves in the company of their peers.
Canada’s business development bank, BDC puts entrepreneurs first. With almost 2,000 employees and more than 100 business centres across the country, BDC offers financing, subordinate financing, venture