Seven Drivers of Market Success
Throughout my years in electronics M&A, I have seen some companies succeed and others fail. A variety of factors determine the success of a company, from great leadership to a strong corporate culture and luck. I define a successful company as one that is profitable and receives attractive offers in the market, whereas a failing company is not profitable and will close its doors without receiving attractive offers. What does a company need to succeed? Here are seven drivers to consider.
1. Great Leadership
Great leadership is one of the most important factors in the success of a company. A strong leader can guide the organization toward its goals, inspire employees to work with common purpose, and make critical decisions when needed. They may be deep into the business, but they also know when to delegate and to whom. Great leaders also know when to invest in more education for themselves or bring in outside help. True leaders know that they must nourish the talent and drive of not only the person in the mirror, but also the people they hire.
2. A Positive Culture
Successful companies develop a strong, positive corporate culture, which is the set of shared values, beliefs, and behaviors that define an organization. A positive corporate culture can drive employee engagement, motivation, productivity, and, when done right, help attract and retain great talent. A negative culture will have the opposite effect. Although positive culture is hard to define precisely, it is critical for the success of the company. It’s why successful companies teem with energy, while failing ones feel like an insufferable day at the Department of Motor Vehicles.
3. Exceptional Services
To grow and thrive, your company must stand out among the competition. It must do a few things exceptionally well, or appreciably better, than the other 150 PCB fabs or 700 CMs in North America. Pick out one or two products or services that your company excels at, and focus on those while not losing sight of the basics. Of course, they must be relevant to a sufficiently large market; there is no point in being a global leader in a $1 million market.
4. Sound Finances
Successful companies have sound financial management, meaning they make smart investments, manage their expenses wisely, and maintain a healthy cash flow. Companies that are financially stable are better positioned to weather economic downturns and invest in growth opportunities.
Financial management also includes effective budgeting and forecasting—a must for making strategic decisions and monitoring spending—and financial reporting. Having great numbers is fantastic, but if it takes eight weeks to publish those numbers, it can slow down decision-making. Companies with strong financial management are always prepared for a sale.
5. Focus on Technology and Investment
Investment into new technology is also key to driving success. You often can tell from the condition of a company’s parking lot whether it has invested in equipment and new systems. Although companies can get by with 10-, 20-, 30-, or even 40-year-old equipment, both customers and employees are negatively affected by old equipment. Customers will end up giving you only legacy projects, and employees will not bother learning new skills. Successful companies invest in their future when they acquire new technology, and if they don’t, their competitors surely will.
6. Excellent Customer Service
Many companies say that they have excellent customer service, but when you call, you get stuck in voicemail hell. The same goes for sales and marketing: Some companies actively reach out to new and existing companies, while others sit back and wait for the phone to ring. Customers appreciate companies that go the extra mile for them, and they reward them with their business. Ignore your customers and they will go to competitors willing to jump through fiery hoops to get their business.
7. Luck
Good or bad, luck has a lot to do with a company’s success or failure. Some firms may seem to make the right decisions at the right times, but behind the scenes they put a lot of thought into safe and riskier decisions. They also hedge their bets so that they’re correct enough times to make up for occasional bad decisions. The harder companies work, the “luckier” they seem to get.
The success of a company depends on a complex set of factors as I’ve mentioned in this column. Companies that excel in the areas discussed above are more likely to thrive in the long term, while those that fall short are likely to struggle. By prioritizing these key factors, companies can position themselves for sustained success as well as a higher valuation, better terms, and a smoother deal.
Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.
