Learning how to manage a business is something that takes time to master. Although you may have experience leading a team, managing a business will require new knowledge, skills and strategies.

The key to managing a company effectively is having a clear plan for how the business will operate and ultimately become profitable. Then it's about setting up systems for business success and constantly looking for areas to improve both the company and yourself as an entrepreneur.

The best tips for managing a business can vary depending on its life-cycle stage and size. However, whether you want to know how to manage a new business or scale an existing one, in this article we will look at some great tips. By the time you finish reading this article, you will have learned:

1. The biggest reasons businesses fail

2. How Apple came back from business failure

3. The 4 business pillars of a company

4. The 10 best ways to manage a business

The biggest reasons businesses fail

Failure is not usually top of mind for many business owners when they start a company. There are several reasons a business can fail: lack of capital, a poor business environment, weak management, etc. A hidden cause of failure: lack of business planning and execution.

Many businesses fail because they lack short- and long-term plans. Your business plan should cover where your company will be over the next few months to the next few years. Include measurable goals and outcomes, as well as a specific task list with dates and deadlines.

Unfortunately, business failure is common:

About 20% of small businesses fail in their first year, and a staggering 96% fail within 10 years. For the remaining 4%, that doesn't necessarily mean they are successful - it means they survived.

50% of the Fortune 500 companies that existed 20 years ago have disappeared; the lifespan of multinational companies is limited and shrinking.

Here are the Top 10 reasons businesses will fail in the next 10 years, compiled by Forbes magazine:

1. Complacency
2. Not prioritizing sustainability
3. Not putting customers first
4. Not innovating continuously
5. Not thinking of themselves as a technology company
6. Not treating data as a key business asset
7. Failing to attract and retain talent
8. Not developing future skills
9. Failing to build strong partnerships and integrate with others
10. Lack of authenticity and transparency

So why do businesses fail? What makes one entrepreneur succeed while another fails in business? It depends on a combination of preparation, strategy and knowledge.

How Apple came back from business failure

Today everyone has heard of Apple. It is one of the most valuable companies of our time, with a market capitalization of nearly 2 trillion dollars and a share price soaring above its competitors. But it wasn't always that way. Apple is actually a perfect example to look at when examining why businesses fail.


 

Apple's founder, Steve Jobs, was fired from the company in 1985. Before Jobs was rehired in 1997, the failing business was running at a loss and heading toward bankruptcy. In fact, Michael Dell was advising the decision-makers to shut Apple down and give the money back to the shareholders. But Apple persevered, and Steve Jobs asked himself one of the most important questions of his life: "What business are we really in?"

At first, the answer seemed obvious - Apple was in the computer business. But how could they win back customers when 97% of all computers in America ran Microsoft?

That was when they realized that no matter how good their products were, Microsoft was entrenched with the masses. After all, that was one of the main reasons Apple had ended up near bankruptcy.

So Jobs asked, "What business do we need to be in?" And Apple decided that it needed to be in the business of connecting people with their passions - their photos, their music, each other. In doing so, he avoided one of the top reasons businesses fail: inflexibility.

Answering this question brought about one of the biggest changes at Apple. The company shifted to building fundamental, exciting technology that connects people with what they love. After rehiring Jobs, the company arranged a partnership with Microsoft, signaling the company's change. When Apple launched the iMac just a year later, the company was profitable again and making its mark. Not long after came the iPod and iTunes, and then the iPhone. Its net revenue soared. Since then, Apple has never stopped innovating, and its marketing campaigns have taken the company into a whole new league. If Jobs had seen being fired as the death of his career (and of the company), the company would never have been revived.

Is Apple really in the computer business today? Only 10.4% of its business is computers, meaning nearly 90% is not - most of it comes from sales of iPhones, iPads and Apple Watches. Honestly answering the question "Why do businesses fail?" was key to Apple changing direction and becoming profitable.

If success is about innovation and marketing, then you have to decide who your customers are, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business, because the answers will ultimately let you change your offer. As we say: change your offer, change your business - and change your business, change your life.

The four business pillars (4M) of a company

There are many moving parts in an organization - but a business's success usually depends on four key resources. These are best summed up by looking at the 4 pillars of a business:

1. Manpower

Manpower refers to the people involved in a company, including employees, customers, stakeholders, retailers, etc. Manpower covers every human resource involved in running the business.

2. Tài chính (Money)

Finance is essential to keeping a business running, and an effective budget is key to keeping operations running smoothly. Money covers costs and profits, as well as financial management within a company.

3. Materials

Materials refers to any physical products or materials involved in the business. Materials are a key factor in deciding how money is managed, where resources are best allocated and what reaches customers.

4. Máy móc (Machinery)

In this case, machinery refers to the intelligence behind a business plan. Machinery includes business technology, plans, ideas and more. These are the key elements that keep a company innovative and relevant.

Khám phá: The best production management methods today

The 10 best ways to manage a business

1. Back to basics

Develop a thorough business plan: What need are you meeting in a specific market? How do you plan to fill it? How will you attract customers/prospects? What is your compelling reason for starting the business? Include as much detail as possible.

Define your customers: Create an avatar of your ideal customer containing both demographic and psychographic information.

Plan your finances: It is important that you understand the numbers of your new business ventures so you can confidently answer a key question: what can I do to learn how to manage my own business? How will you generate income in your business? By when? How will you fund your start-up costs? How do you plan to grow the business from a financial perspective?

2. Plan effectively

The best way to manage a business effectively is through effective planning. You can easily do this by mapping out a defined strategy for the business. First, you need to lay out a great strategy that focuses on both the positive and negative outcomes of a potential business plan. It is better to prepare for failure than for success, since most first ventures have little chance of success.

Learn more: The 6 best ways to manage a smart, modern warehouse and optimize performance

A planning process can lead to better productivity, higher accuracy and faster turnaround for essential business tasks. The goal of planning as a process is to improve and streamline a company's business methods. This results in:

Lower costs, because fewer staff are needed to complete the same process.
Greater efficiency, by eliminating problematic process steps such as loops and bottlenecks.
Higher accuracy, by including checkpoints and success measures to ensure process steps are completed correctly.
All employees better understand what they need to do to achieve department goals.

3. Set growth goals

There are many ways to measure growth. Defining your goals will direct your efforts toward the types of growth that matter to you. Without clear goals, you may grow in some areas, like your customer base, without growing in the areas that really matter to you.

Common metrics for which leaders set growth goals include:

Monthly recurring revenue
Gross profit margin
Paid accounts or upsells
Customer lifetime value
Total number of accounts

Once you have set one or more goals, set a timeline for reaching them. Pursuing “someday” won't get you results. Use milestones to determine whether you are on track.

Also take into account what it will take to reach your goals. Consider the capital, workforce and hours needed to get where you want to be. In your timeline, factor in the time needed to hire, obtain loans or lay the groundwork for growth.

4. Work smarter

Effective managers develop efficient practices that save time and increase productivity. A key element of working smarter is improving management skills and investing in technology.

A certain degree of flexibility is essential for innovation. “Where focus goes, energy flows” - that is, wherever your focus goes, energy follows. When you focus on innovating your business management strategy, your products or services will never become obsolete and you will protect your company from collapse.

Working smarter means learning to improve continuously. For a company trying to adapt, the right technology can give it better visibility and control. As you can see, ERP systems combined with IoT systems are becoming increasingly popular and a bright spot in businesses' digital transformation today.

Organizations don't grow by themselves. The people in your company are responsible for its growth.

Hiring the right employees is an integral, core part of sustainable growth.

Here, cultural fit is key. Hire the wrong people and you will see a lot of turnover that slows your growth. Look for people who see your vision. Make sure they are willing to roll up their sleeves to build processes and have the maturity to leave past mistakes behind.

6. Communicate effectively

Communication is key to any business. Proper communication is needed to deliver the best results; you must therefore make sure the message that reaches the final recipient is exactly the same as the message sent by the sender, without distortion. Face-to-face communication is the most effective, making messages clear and creating a sense of trust, responsibility and belonging among employees, which in turn helps them achieve better results.

Communication is a two-way process. When discussing plans and assigning responsibilities, everyone should be on the same page, meaning everyone must have an accurate understanding of the plan and its execution, with nothing lost in between.

7. A dynamic environment

Any business that operates statically or is closed off to changes in the world around it cannot expect to grow or keep the same market position it had when it started, because adapting to the latest trends keeps you growing as you respond to the needs of your customers or end consumers.

"Change is the only constant."

Businesses therefore need to adapt to change, whether in technology, product lines, customer demand patterns or anything else that may affect your business. Any business, large or small, needs to be flexible and dynamic to manage its operations effectively. Human resources need to be trained over time in upcoming trends and up-to-date technology.

It is not only about meeting end consumers' needs but also about the up-to-date technology a business needs to keep up with. We live in a tech-savvy world, so keeping yourself up to date with the world is always the best way.

8. Authority and responsibility

Business operations can only be effective with proper delegation and responsibility. There must be a balance between “authority” and “responsibility”, as they go hand in hand. If the person given authority does not delegate responsibility constructively, it can create gaps in the whole working system, because authority comes with great responsibility. The person given authority must also be accountable and answerable for any obligations, mandates, debts or any kind of gap between what is expected and what is delivered.

Giving some authority to the person you are assigning responsibility to is very important, because it gives them the power to make the necessary decisions instead of running around asking seniors for permission. At the same time, it gives them the freedom and confidence to make decisions, developing them into better employees.

9. Teamwork

A business's effectiveness is determined by the results of its employees' and managers' actions. If they prove effective in their roles, that will certainly help produce high-quality results. Customer satisfaction and company reputation are often determined by the team's effectiveness, including how they deliver the company's services or products.

Ideally, team members work together toward the same goal and give their best effort. This is only possible with cooperation, complete understanding, thorough communication and a positive atmosphere among team members. Different ideas may create conflict within a team, but a hallmark of a strong, effective team is building cohesion and resolving differences in a reasonable and beneficial way.

10. Creativity and opportunity

Creativity can lead to ideas. Make sure to schedule purposeful brainstorming sessions where you think freely about ideas and define them. Try to do so without judgment and without limits, as some of your best ideas may seem far-fetched at first. When you are running a company, it is also very valuable to involve your employees in brainstorming. Not only does it help employees feel engaged and appreciated, you may actually gather some great ideas from them. The key is to facilitate a brainstorming space in which your team feels safe expressing their ideas without feeling mocked or shot down.