When you’re launching and growing a startup, it isn’t always easy to tell if your business is moving in the right direction. But in many cases, this confusion is rooted in the fact that business owners don’t know how to evaluate success in a tangible manner.
Is Your Business Going to Make It?
Can you define success? Seriously…think about it for a minute. What is success – and is it possible to objectively measure it in a dynamic business world?
Legendary basketball coach John Wooden once said, “Success is peace of mind, which is a direct result of self-satisfaction in knowing you did your best to become the best you are capable of becoming.”
The famous leader Winston Churchill viewed it as relentlessness in the face of conflict. As he once said, “Success is not final, failure is not fatal: it is the courage to continue that counts.”
In terms of business, success could be described as the satisfaction that comes from creating a product or service that adds value to customers, creates positive returns for investors, and establishes a sustainable and tangible sense of meaning and purpose for all stakeholders.
In the moment, it isn’t always clear how you’re doing on the continuum of success. Thankfully, there are ways to evaluate what’s happening in the present and understand whether your business is headed in the right direction. You simply have to know what you’re looking for.
Regardless of what industry or niche your startup is in, you can use the following filters to understand where your business stands and how you’re doing in the pursuit of success.
- The EBITDA Formula
There are a variety of ratios and equations you can use to gain a better, more objective understanding of how your business is performing financially.
As Revenued points out, “The EBITDA formula is one of the most comprehensive — and therefore precise — ways to evaluate your business and identify the next steps to keep your company on the road to success.”
The EBITDA formula takes Net Income + Interest + Taxes (Operating Profit) and adds on Depreciation and Amortization. In essence, it tells you how you’re doing now and whether you’re moving in a positive direction for the future.
- Customer Response
“Do you know in advance that you have customers who are willing to pay the price you are asking for the product or service you have? Too many good startups fail to sufficiently validate their customer assumptions—or, in the case of internet firms, scale too quickly before validating the initial marketplace and streamlining their costs,” entrepreneur Cheryl Conner writes.
If customers are responsive to your business and express sentiments of loyalty and excitement about your products, this is a sign that you’re positioned well for the future.
- Interest From Investors
Do you have interest from investors? This may include interest from investors that you seek out and actively pitch, as well as investors who come to you unsolicited.
Interest from investors tells you a lot about your business from a financial and strategic perspective. When combined with an overwhelmingly positive customer response, it indicates a sustainable footing upon which you can foster future growth.
- Growing Network
Finally, it’s smart to take a look at your professional network and the connections you’re making for your business. It’s nearly impossible for a company to be successful in isolation. Thus, if you have a solid network, this is a sign that you’re moving in the right direction. If your network is lacking – or you’re burning bridges with previous connections – this could spell imminent disaster.
Never Settle for Average
Very rarely do people or businesses stumble into success. In almost every situation, it takes hard work, time, and sweat equity to create. As a result of this commitment, many entrepreneurs and business owners eventually give up on their dreams of achieving success and instead settle for being average.
Whatever you do, don’t settle. It could be argued that it’s better to close up shop and do something else, than it is to be okay with being average. As you analyze your startup and determine the direction it’s taking, make sure you set clear objectives and create actionable strategies for how you’ll achieve these goals. In doing so, you’ll create a plan for being successful.