Critical success factors - 8 key elements for a successful venture

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How does a start-up social/environmental enterprise or its investors determine whether the enterprise has the potential for success? Eight critical success factors and fourteen key performance indicators have been identified through IISD's work with the SEED Initiative.


SEED and IISD have developed an interactive self assessment tool based on these 8 factors. This tool will help users to determine whether these factors are present in their enterprise, and what actions they might take to improve the likelihood of their success. Go to The Entrepreneur's Self-Assessment Tool.


These success factors can be also used by development assistance agencies, foundations and venture capitalists to help determine the likelihood that an enterprise will succeed, and so guide decisions about levels of investment and support.

If these eight success factors are in place, an enterprise is more likely to attract the necessary investment and financing to get the enterprise up and running. Using key performance indicators to monitor and report achievements will also help to gain the confidence of prospective investors. The full report can be found at

Critical success factors and performance measures for start-up social and environmental enterprises

The success factors are:


Contents

1. Leadership

The commitment and continuity of one or two individuals to lead and coordinate the enterprise.

Within all start-up enterprises there is a dominant leader who helps coordinate the enterprise and enables those involved to develop and function through the many stages of development required for success.

Leaders or coordinators need to be able to work among all sectors (or types of partners) from understanding the business aspects to building support at the community level, to negotiating with government actors and markets. They also must need to have a keen understanding of cross-sectoral issues and constant attention to securing private and/or public investments.

Being able to deal with governments is an important part of leadership. The ability to weave through bureaucracy, work with different ministries and levels of government and to enable these actors to support the enterprise is a skill that leaders have had to develop or bring to play.

While a good leader is important, spreading these skills and responsibilities among those involved with the enterprise is important for long term sustainability, should there be a change in leadership.


2. Partnership management

The ability to negotiate and maintain a core set of relationships for the benefit of the enterprise 

Partnerships need attention to keep them going and some type of benefit must be realized by each of the partners directly involved. Those partnerships which are not financially resourced well or do not offer tangible benefits to being in the partnership often suffer from unequal participation of partners, with one partner doing most of the work. On the other side, when they do work well, each partner’s expertise and knowledge contribute to the success of the enterprise. Many skills needed in the business start-up can come from the partners: Legal advice, technical and engineering expertise, training, business planning, marketing and so forth.

3. Proof and clarity of innovative concept

Clear description, testing and external validation to demonstrate that an idea has market potential. 

Start-up enterprises can have their roots in or be in some way linked to an earlier project or process supported through overseas development assistance (ODA) or similar international project funding, enabling a" proof of concept" that has demonstrated the viability of commercializing the product or service. Recognition and Reward Programs can help to endorse a concept -- giving an important signal that the idea has merit and opens opportunities with donors/investors which may otherwise have seen the enterprise as too risky.

The idea for the enterprise should have an inherent logic and clarity. Where a product or service is known and a demand is recognized there seems to be an easier road to success, such as water delivery or the need to properly dispose of waste. On the other side are enterprises where new products or services must be introduced, explained and promoted to the market; these start more slowly and have a greater risks attached.

4. Business planning and marketing

Access to business planning and marketing skills or training programs.

Startup enterprises that have had the support of the SEED Initiative have all identified business planning and marketing support as critical to the success of their enterprises. Business plans should demonstrate that the enterprise is establishing objectives, products and service lines; setting up supply chains; and identifying revenue targets and the investment and financing requirements and marketing strategies to meet those targets. Access to investment is often mentioned as a critical success factor for enterprises; understanding what investors might be looking for, and recognizing where there might be barriers to investment, is part of the larger skill set necessary to grow the business.

These skills do not necessarily need to be vested in the leader of the enterprise. Partners in the enterprise can provide business planning and marketing support; or enterprise leaders can demonstrate that they have access to, and are making use of, training on specific skills needed to make the enterprise function well.

Acquiring new business skills must be recognized as an ongoing endeavour, with the capacity to learn about new business opportunities as they arise.

SEED research revealed that while many necessary business skills were accessible within start-up enterprise, the related marketing skills -- understanding of the marketing process, locating buyers or attracting clients -- were lacking. An enterprise depends on bringing income in through selling a product or service, yet as a whole, the sample group of startup social and environmental enterprises noted that they had never thought about marketing, had no skills in this, as most partners come from NGO or Government sectors, and found it one of the more difficult aspects of initiating their enterprise. Lack of information about buyers was commonly stated, and many did not know where to start. Even the Internet was not a solution, as many did not have good internet access, or it was not the first place they would consider as a source of information, or their partners did not have or know how to use a computer.


5. Triple bottom line planning

The conscious and deliberate alignment of economic benefits with social and environmental benefits 

Having important management skills in place at start-up may not prepare an entrepreneur to understand social enterprises, or to develop businesses to have environmental and social benefits. When an enterprise identifies the desire to achieve economic, social and environmental benefits from the outset, then the entrepreneurs needs to plan consciously, proactively and in detail to achieve all three types of benefits. Without the deliberate setting of social and environmental plans, comparable to business plans, it is more difficult to ascertain whether such benefits can be realized.

6. Short and long term benefits management

Short term benefits to keep stakeholders committed until longer term benefits are achieved

An important factor for success is that all stakeholders -- not only the leaders of the enterprise, but their key partners and the local community -- feel they are receiving benefits from the effort they are putting in to the enterprise. Those that seem to have more success plan ahead and define potential benefits to the beneficiaries in the development of the project. It is much more difficult when benefits are not clear or will take time to be realized. This is particularly true when natural resources that need a long time to grow or regenerate are involved. If the enterprise requires a significant lead time before a tangible benefit can be secured, the leaders should plan for either a shorter term benefit to be offered or have a concrete strategy to keep everyone engaged while waiting for the longer term benefit.

7. Community engagement

Long term success and sustainability lies with the engagement of local stakeholders and beneficiaries.

Successful community engagement was cited as especially crucial to the success of most enterprises interviewed in the SEED research, although enterprise leaders found that training at the community level was necessary for the success and further expansion of the enterprise. In developing nations, this can be a challenge, with education levels and cultural understandings varying widely among different economic classes. Many communities are struggling with basic needs (food, shelter, health, sanitation) and often are not formally organized. One of the benefits cited in nearly all projects was the resulting organization of a community into more formal, legal or political structures, which has helped the community to gain access to non-enterprise related benefits such as health care, education and other basic needs.

8. Risk management

Demonstrated planning for mitigation of risks and externalities 

Those enterprises that anticipate and plan for risk often have an easier time of adapting to unforeseen complications or problems which may arise. Those that plan only for the best are often surprised and unduly slowed by the unexpected which inevitably occurs. Enterprises in the SEED Initiative encountered many unforeseen challenges: for example, the length of time (years) to obtain licenses to sell products; political instability; weather events affecting agricultural production; and so forth.

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