Measuring Business Success (Edexcel IGCSE Business)

Revision Note

Written by: Lisa Eades

Reviewed by: Steve Vorster

A successful business is considered to be one that achieves its objectives
- Business success can be seen in both financial and non-financial measures

Business success can be something as simple as making a profit and achieving customer satisfaction

Financial measures are often the key performance indicators of the business

Financial Measures of Success

Financial Measure	Explanation
Revenue	Income received from selling goods and services is compared over time and against competitors An increase in revenue suggests that a business is growing and its decision-making is effective
Market share	Sales of the company are measured as the percentage of total sales in an industry Growth in market share over time can help to improve a businesses market position and increase its competitiveness
Profitability	The proportion of sales converted to profit is compared over time and against competitors A high profit margin means that the business can cover its costs, reinvest profits to grow and reward investors
Business growth	The opening of new outlets or production facilities or an increase in the size of the workforce suggests business growth Growing businesses can take advantage of economies of scale and are likely to become better-known
Shareholder satisfaction	Shareholders are most likely to be satisfied when share prices and dividends are increasing A rising share price occurs when a business is increasing profits or is considered to have potential to grow Businesses that generate healthy profits may choose to increase dividends for shareholders

You may need to carry out calculations to compare the success of a business over a given period of time

Percentage change is one way to do this

To calculate percentage change, use the formula

$\frac{New amount - Original amount}{Original amount} \times 100$

Businesses also measure their success on how well they have achieved non-financial objectives
These objectives are often particularly important to public sector organisations, charities and other non-profit organisations

Non-financial Measures of Success

Non-financial Measure	Explanation	Example
Customer satisfaction	Positive reviews and recommendations from customers indicate that a business is meeting this objective The number of returning customers is an indication of customer satisfaction	Last Ottoman Cafe & Restaurant in Istanbul is rated as one of the city's top five restaurants on Tripadvisor
Employee satisfaction	Low levels of staff turnover, high labour productivity and large numbers of applications for job vacancies indicate that a business is meeting this objective	In 2023, financial services business Groupe Hexagone was rated by employees as one of France's best places to work
Owner satisfaction	Business owners often have personal objectives they want the business to achieve If a business is providing a good service, allows an owner to earn a satisfactory income, or achieves recognition, these personal objectives may be met	Save My Exams' founder, Jamie wanted to create a platform filled with reliable, high-quality resources so that students could revise effectively whilst building confidence

Last updated: 10 October 2024

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