The date of establishment and the age of a business are different subjects! – Part 2

In the previous article it was discussed the difference between the age of the business and the youth of a business. Despite the living organisms, a business can stay young as long as some related factors keep the company young. The factors discussed in the former article consisted of:

  • Owner
  • Managers and human resources
  • Products and services

In addition to the above given factors a further 3 factors are discussed in this article.

The clients who are the customers of the business for a quite sometimes are the source of pride for any business. It is the indication of meeting the customer requests in a satisfied manner. Even though it is a positive feature for a business, this feature may have double negative side effects either: The first one is, old and big clients may have dragged off the business to a no profit and inefficient position. Clients of this kind are accustomed to get met for their expectations and it would become a must for the business despite some of these expectations might be harmful for the company. The other side effect is as the clients get old their demand may have become old fashioned and destined to be extinct in the market by time. Client base which is the fundamental contact point to the market is one of the most important properties of a business that keeps the company young and dynamic. If the contact point gets old the business gets old and loose the competitive advantages. Clients act as a juvenescence vaccination for businesses. “Old clients” may have become identical to toxic blood, and they must be eliminated from the body and “fresh blood” must be pumped in which are new clients. As a result, the client base is an important factor, with the others that, keep a business fresh and young. There should be loyal clients which is an indication of satisfaction from the customer point of view but at the same time they must not get old in average.

The effect of technology has two sides for a business on the way to get old: to keep up with the technology and acquiring it to the company and the effective use of the technology. Interiorization of the technology is becoming a critic factor more explicitly as the pace of developments in technology is accelerating each day. The technology base of any business has become a fundamental competition factor in most of the sectors. Just to give an example; it is very possible to manufacture an item with a 5 axis CNC machine for half of time of conventional machinery production time. Therefore, a production company with conventional machinery is not able to compete for large batch, mass production orders. Or if your competitors make use of e-commerce and increase the number of sales via this channel, to keep up with the competition becomes more difficult. There should be technology investments in the company to keep up with the competition at the first hand and then to be a pioneering competitor in the market on the long term. This is another threshold for business struggles. Companies that make investments on technology (occasionally investing on unnecessary technologies) commonly do not use the technology to improve the technology level of the company. Micro, small, and medium enterprises (MSME) nowadays are, capable of investing on Enterprise Resource Planning (ERP) software for production and resource management but do not fully make use of it. Or MSMEs make large number of investments for high technology machines but do not hire high qualified operator staff since the level of salary for the qualified operator is higher than the company is used to. If we get back to the 5 axis CNC machine example, speed is not the only feature of the machine. There is also a capability of the machine on manufacturing complex (value added) and innovative products. If the company does not make use of this technology to produce products that makes the business young, we are referring to technology investment but not a technologic company.

Management structure
Companies need to improve their management structures parallel to growth. This does not mean to hire more staff or more qualified managers. The meaning also covers the talent of improving the market position, competition, planning and performance monitoring ability, etc. It is required to take steps forward to improve the management structure on the above-mentioned areas. These steps are put into use either by improving the skills of the owner or by new talents incorporated by the new managers. Some of the improvements are also incorporated by the use of technologies on business management or use of consulting services. But it is important to notice that there are common inefficient investments on management technologies. Unnecessary software purchases or “cool” but “no use” consulting services are the source of high-tech management company illusions. It is called “illusion” since no real contribution is provided but only “show business”.

The most common factors to stay (or become) young for a business are all given and discussed above. Better in these factors, stronger in real life and we call it: “Long live the business”!

article image