According to the Bureau of Labor Statistics, about 20% of small businesses fail during their first year of opening. After five years, half of the companies go bankrupt and only about 30% make it to the tenth year. There are many factors that can influence whether a business stands the test of time or goes out of business after just a few years.
To be successful, entrepreneurs must make the sustainability of their business a top priority. A successful entrepreneurial career requires more than just starting a business. It is to ensure that it stays on for the long term.
What is longevity in business?
While you might assume that longevity simply refers to keeping a business in business for decades, it is not the only possible definition in the business world.
Longevity should always be considered in relation to your business goals. For example, if you are starting a business that you hope to sell at a profit, your longevity priority is to keep it profitable until you can successfully sell the business. Of course, for those who start a business because of their passion and motivation, longevity can mean building a business that will survive even after they are no longer there to guide it.
Longevity depends on various factors, not least of which is the provision of products and services demanded by your target audience. You also need to be able to adapt to changes and disruptions in the market. When setting goals for your business, making sure your business will last long enough to meet those goals should play a fundamental role in all strategy-related decisions.
Why longevity is important
The longer you have been in business, the easier it is to gain new customers. As web designer Lexie Lu writes, “When you’ve been in business for decades, you have a pretty good idea of what your customers need. Explain how long you’ve been around and why other companies trust you to do the job. You can even highlight testimonials from clients who have been with you for years. They can probably explain better than anyone why they choose to stay with your business year after year.
The longer you stay in business, the easier it is to position yourself as a true expert in your niche. Your target audience will subconsciously perceive you as offering higher quality than your competition. Just the fact that you’ve been around for a long time makes it easier to acquire new customers.
Perhaps more importantly, longevity provides you with valuable learning experiences that you can use to continually improve your business. Successes and failures help you determine what works and what doesn’t so you can keep improving.
How to improve the longevity of your business
The way you run your business will have a big influence on its longevity. Of course, it all starts with providing real substance to your products or services.
Camus Lam, Chairman of Chap Mei Group, explained, “Our company has been in the toy brand for 50 years. Continually striving to find a new niche for toy development and to implement new ideas into product design – while paying attention to what children enjoy – has helped us thrive in an ever-changing market. Although the products themselves have changed over the years, the focus on innovation, safety and fun with original designs has remained constant. This allows our brand to remain relevant and profitable.
While a commitment to innovative and quality products and services is a key predictor of longevity, other actions of business leaders can be just as crucial.
As Jill Johnson, President and Founder of Johnson Consulting Services for Foundry Magazine, writes, “Tax discipline is fundamental to the long-term success of a business or enterprise. Yet only a few leaders have the self-discipline to manage their cash flow for the inevitable peaks and valleys. […] They never prepare for the future because they focus on the present moment. Some make ill-advised decisions that create financial crises rather than making prudent commitments that they can realistically manage. Successful leaders of sustainable businesses focus on creating real net worth by mastering financial discipline and tight control over what they spend. “
Business leaders need to think carefully when making decisions related to growth. Scaling up a business can lead to even greater successes, but it can also come with significant risks. Knowing your own abilities can be the key to making the right decision. For the sake of longevity, some entrepreneurs may find it easier to manage overhead and other responsibilities by maintaining a smaller size, rather than growing aggressively.
Finally, business leaders need to be aware of the ever-changing forces at work in their niche. New technologies, the introduction of disruptive competitors, and even supply chain issues can dramatically change the established way of doing business. Companies that eagerly await to identify new opportunities can react quickly to adapt to changing customer expectations.
While you cannot control all of the factors that influence the lifespan of your business, taking concrete steps to improve the longevity of your business will help you achieve your financial goals. No matter what your career plans are, starting a business that is truly designed to last is one of the best ways to be successful.