What is the definition of a successful business?

Naturally, if we are going to start a business, we want the business to be successful!

It’s a fact of life that most new businesses ultimately fail, and a failed business is obviously costly and embarrassing, whereas a successful business could easily make you very rich and happy.

While there are many reasons why businesses fail, the most fundamental factor is simply the choice of the business idea or business concept itself. Some ideas and concepts are just more likely to be successful than others. So when generating and evaluating business ideas, we want to eventually choose the idea that has the highest probablility of becoming a successful operation.

What is a successful business? It’s subjective, but:

  • At the minimum, a successful business is a “going concern”: it has sufficient resources and is earning sufficient revenues to be able to sustain its operations indefinitely without having to declare bankruptcy.
  • A business should earn an operating profit for its shareholders over the long term. The business should generally be collecting more in revenues than it is paying out in expenses. However, new businesses may take several years to achieve this state. Capital investments (such as acquiring manufacturing plants or machinery, expanding into new locations, R&D for a new product line, etc.) can impact profitability in the short term, although such investments are undertaken for the purpose of increasing long-term future profitability.
  • Successful businesses are also be expected to grow over time in one or more ways: increased revenues, profitability, market share, employee headcount, market capitalization, number of stores, etc.
  • And while a business must not necessarily be well-loved to be financially successful, in the eyes of the public, a successful consumer-focused business would be one with strong goodwill: a well-known brand name, enthusiastic customers who love the product or service, and a positive reputation.

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