The definition of success among small firms depends on whether they are motivated by growth or lifestyle, an academic says, but both have the potential to be profitable.
Martie-Louise Verreynne, a senior lecturer in strategy at UQ Business School at the University of Queensland, compiled a study on why some small firms succeed while others don’t.
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“In a recent survey of 2,100 Australian firms, we asked CEOs how they view success, and how they measure it,” Verreynne said.
“Comparing firms that reported growth intentions with those that did not provides a more nuanced view of what success means to small firms.”
Verreynne said firms that report no growth intentions are typically called “lifestyle” firms.
“These firms, focused on maintaining the status quo or even reducing their operations, viewed success as the ability to satisfy customers, make a profit and repay the initial investment,” she said.
“Besides this, family, lifestyle, happiness and retirement provision were all important to the owners or managers.”
“The close proximity of words and phrases such as ‘clients’, ‘employees’ and ‘happiness’ suggests that success is very personal, and often emotional, to the CEO.”
Verreynne said lifestyle businesses represented 20% of the survey respondents, and are crucial to employment and service delivery in the Australian economy.
“They have few aspirations to grow, innovate or export. Often situated in more sheltered sectors of the economy, they were, however, still profitable,” she said.
Verreynne said for firms with moderate or high-growth intentions, their idea of success paints a very different picture.
“The CEOs of these firms were more focused on a broad range of stakeholders, including customers, employees and shareholders,” she said.
“They also viewed success as the accomplishment of a broader range of goals including profitability, customer satisfaction, employee happiness, shareholder goals, product/service quality and growth.”
“Few comments focused on the personal circumstances of the CEO. Instead, the focus was on the firm and its stakeholders.”
“It was also clear that growth-oriented firms were also more likely to devolve decision-making, have sales from innovation, be larger, train staff, perform and grow better.”
Based on the findings of the survey, Verreynne said it’s important for small firms to determine the type of business they want to be before they can achieve success.
“Success rests in the ability to work out what is important to your business, and then take the necessary steps to attain it,” she said.
“Whether it is by maintaining a lifestyle and providing self-employment, or growing a business for future generations, having a clear vision of the future and linking it with the appropriate actions are key.”