Management
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Boundless Management
Entrepreneurship and Management
Small Business Owners: A Profile
Management Textbooks Boundless Management Entrepreneurship and Management Small Business Owners: A Profile
Management Textbooks Boundless Management Entrepreneurship and Management
Management Textbooks Boundless Management
Management Textbooks
Management
Concept Version 16
Created by Boundless

The Impact of Business Owners on Success and Failure Rates

As the creator, organizer, and manager of a business, a business owner is critical to the success or failure of a given venture.

Learning Objective

  • Recognize the significant impact a business owner has on the success of a small business


Key Points

    • As the creator of a small business, and the primary source of strategic direction, business owners have substantial impact on the success or failure of a venture.
    • Business owners are often tasked with the ability to build a business plan, hire a team, communicate a vision, and carry out a variety of core operations all on their own. 
    • Due to the number of hats a business owner is likely to wear when running their own organization, the capabilities of the owner will be closely related to the capabilities of the organization itself.
    • Due to the high importance of a business owner's tasks, and the inability to distribute risk across a high number of employees and work groups, a business owner shoulders a great deal of accountability for both success and failure.

Terms

  • tactics

    Operational approaches to pursuing goals.

  • strategy

    A plan of action designed specifically to accomplish a given objective or goal. In business, the foundation of how a business accomplishes its objectives.


Full Text

Why Business Owners Matter

An entrepreneur or a small business owner is generally defined as an individual who creates, organizes, and manages an enterprise with considerable initiative (and usually shouldering considerable risk alongside it). Whatever the project, the business owner tends to sit firmly at the heart of the strategy, tactics, and structure that defines the organization.

As a result of this, the business owner is a central source of advantage (or potentially disadvantage) when executing the operations of the organization. Simply put, the success or failure of a small organization is inherently tied to the central figure who starts, organizes, and manages it. 

What Determines Success or Failure

There are countless factors that determine success or failure when starting and running your own business. Each business is different, operating in a different competitive environment with different demands. Without getting too specific or detailed, there are a few central skills commonly required of owners across most small businesses:

Strategy

The first thing a business owner needs is a plan that lays out the strategy of their organization. This critical piece of guidance lays the foundation for how and why decisions are made. As the business owner is most commonly the author of this document, she will also be the person who determines the broader strategic strokes that guide the business in the short and long term. 

Team

Another key consideration of a business owner is who (if anyone) to bring on board alongside them. Talent is an expensive business asset and the financial impact of good (or poor) hires can have an enormous effect on the quality of the organization. Leadership of a team to create synergy and ensure alignment is also of central importance and by default the responsibility of the owner.

Communication

Along similar lines, business owners need the capacity to communicate their vision to stakeholders. This includes customers, investors, potential hires, and partners. The ability to sell the idea itself is therefore another critical success factor for any business owner.

Relevant Skills

Different businesses require different skills. A small business owner involved in building websites will need the core relevant skills to create them from scratch. A small consulting group in a given industry will need extensive experience, contacts, and knowledge uniquely valuable to other incumbents in the industry. In short, most small business owners are the primary source of relevant skills for that particular business model (at least at first).

How This Impacts Success Rates

Combining the core importance of the business owner in the creation of the business and the variety of skills business owners can leverage to achieve success, business owners are often enough the primary influence on a small business' potential success (and potential failure).

Business owners with a strong strategic ability to plan, highly developed interpersonal skills, key industry skills/knowledge, and the willingness to take risks and be accountable are poised for the highest rates of success in small business ventures. 

Going into business for yourself can be highly rewarding financially and fulfilling personally. However, entrepreneurship is notoriously linked with failure, and in such situations the entrepreneur is usually the one left wondering where they may have gone wrong.

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