Profits may be the most popular metric of measuring the success of a business venture but it is by no means the only (or the best) method for measuring success. Most start-ups are not profitable at the beginning of operation and many are not profitable for years. While monetizing a business is an important goal there are other important metrics that can be used to judge the performance of the company beyond the simple bottom line.
Social Responsibility – The impact a company has on society as a whole may warrant its existence even if it does not make a profit. This is why non-profit organizations exist and why they are able to source funding for their missions. Even businesses that operate for profit may have such a positive environmental or social impact that the level of profits alone cannot fully measure their success. Take for example a utility company that invests heavily in renewable energy and experiences losses in two years following that investment. The short term losses, may be overshadowed by long term impact of the transition to a cleaner source of energy.
Innovation – Ideas are valuable and great ideas even more so. Not all ideas will be the next big thing, but innovation requires brainstorming and trial and error before genuinely useful new products and services are invented. The process of innovation can be expensive and yield little or no monetary profits in the short term. It however, is an essential part of business which is why some companies have whole departments dedicated to research and development. The ideas hatched today may actually be the cash cows of tomorrow and/or may inspire the next wave of technology developments.
Growth Potential – It is possible for a business to develop and polish the products and services that it offers before it is able to monetize these goods and services. During that period the business may garner fans, users, supporters and attract investors, but may not be able to match the enthusiasm with sales. Sometimes the right business model just has to be figured out. In these situations the potential of the business means that profitability is expected eventually so the company should not be written off. It is a risk but the potential rewards are also high.
Customer Service – More and more businesses are being judged not only by what they provide but by how well they treat current and potential customers. It is easier than ever for people who interact with businesses to publicly express and share their experiences – good or bad. Businesses with superior customer service gain a good reputation and stand to gain more business through referrals and repeat customers. On the contrary, if a business neglects to respect and treat customers well, it may face a lot of negative publicity on blogs and social media.
Let's be clear, companies are judged by the bottom line. Profitability will be an unavoidable metric used to measure your success in business. Bear in mind however that profit is not all that is important. There are many other factors to consider in making your business a true success and ignoring these factors may discourage an entrepreneur on the verge of success.
This post was originally published on the Futurpreneur Canada website on January 12, 2015. Ellis is a Futurpreneur Canada Mentor. Click to read original post.
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