How do you measure the success of a business? Is it the fact that it pays its way? And does that mean that if it makes more money it is more successful? These are questions I keep coming back to.
Running a business is not too different from running a household. It is an enterprise, with incomings and outgoings. With the place you live there are bills to pay: electricity, gas, rates and rent or mortgage payments. If you are able to pay the bills, does that mean the household is a success? Sure, if you don’t keep up with the bills there will be problems. Is it even more of a success if I add extra rooms? For me, these are not valid measures. For me, the success of the place I live is that it is my home.
If a tap leaks, why do I want to fix it? If I am a property speculator it may be to protect my investment. However, in my case I do it because I want the settlement of knowing the house is sound. The house looks after me and I look after it.
In the same way, a business has to pay its bills, and it has to make a profit in order to do so. But if that is its primary purpose then it is not very attractive. There was a local plumber who was like that. He had apparently been told that plumbing was a good way to make money. I haven’t seen him around here recently. A good plumber understands water. The plumber we use (when we can book him – he is ever so busy) has a respect for water and the way it flows. In his spare time he goes fishing – he can’t keep away from water. He is a lovely man.
So, how do you measure the success of a business?
Looking at the businesses I deal with, the ones I enjoy mixing with the most are where its people are proud of what they do. They know they are making a contribution. They have a service they can offer, and the business is their way of doing so. It seems to be a human characteristic that we want to feel useful.
All this does not mean that the business doesn’t grow. However, just as there was a reason for launching the business in the first place, there has to a reason for the growth. Has the volume of work increased to the point where we have outgrown our premises? Are there new products that we want to add to our range? Are there new ideas we want to explore? Personally, I hate going into debt, so I try to fund any expansion out of profits. Growth itself is neither good nor bad. Sometimes it’s needed and sometimes it isn’t. It is the pursuit of growth for its own sake that for me is an issue.
The reason I am writing this is because I regularly receive offers of business loans and other incentives to grow and expand our business. The people calling me seem to assume that all businesses want to get bigger, and all that is holding them back is lack of funds. I often feel that the people who call with these offers inhabit a different universe from the one I live in, so I tried to understand their point of view.
This ‘go-for-growth’ way of thinking permeates our world, from individual to national level. Companies will consider making redundancies in departments or sectors that are not profitable. Surely, then, making more money equals success? Otherwise you may lose your job.
The government measures the success of the economy by how much more money it turned over this year compared to last year. When large businesses, or countries, make less money than previously they are deemed to be in trouble.
It is a fact that when China’s growth rate drops by one or two percent, there will be repercussions worldwide. Some people will lose their jobs and have difficulty keeping going. But is the corollary equally true: that when its growth rate increases this is a mark of increasing success?
I know people have questioned this many times before. Bhutan briefly hit the news headlines when their government decided to measure gross national happiness rather than gross national product as their criterion for success. But old habits die hard, it seems.
For me, the fact that a business (or a country) pays its way is necessary, but is a one-dimensional measure of its success. Just as paying the bills does not make a house into a home, the purpose of a business has to lie somewhere other than profitability. That calls for more sophisticated measures of success than whether it made more money this year compared to last year.
I also think that what is valid at the macro level (governments and large companies) may play out differently at the level of a small business like ours. The first dividing line seems to come when you take on employees. As a principle, we prefer to work with people, rather than employ them to work for us.
The next time someone phones or emails to offer me ways to grow our business that is what I will say to them.