Businesses grow. They generally start out as simple ideas. They are then mixed with energy, optimism, a little funding and a lot of scrambling to make the idea feasible or to conform it to the needs of the market enough to produce a consistent income. As they grow and change, experience about what works and what doesn’t is gained by those involved in shaping the businesses. They also make assumptions as to the reasons for successes and failures but generally, very little of this gets documented for posterity. At best there will be financials (and the paperwork that goes into producing them), a few evolving policy documents and ad campaigns, and some bills for costly mistakes (school-of-hard-knocks fees) to remind business owners what they’ve been through and what they’ve learnt along the way. A lot of the factors that will influence a business’s success or failure might not even be recordable. How would one write up the character traits of key employees or managers or the flow that a team can create?
As businesses grow larger, some of the systems that make them function well become ingrained. They form part of the company culture and the “way things were always done” (though, if this is too rigid it may cause problems down the line). If the business is big enough to have separate managerial functions, it will tend to start documenting results by way of minutes of meetings, managerial reports and management accounts. These form an invaluable source of data and could be analysed to glean some of the institutional information that makes a company tick. Smaller (and family) businesses tend to keep going for years based on the experience and gut-feel of individuals in the management structure. Note that this way of running a business seems to be no less successful than running it based on the hard numbers analysed in minutia and both can mitigate and cause their fair share of stresses (fear of the unknown or fear of the known respectively). It will, however, cause problems when the time comes to pass the business on to someone else.
Unless they worked in the companies structure, when a new person takes over (for whatever reason), they will struggle with the nuances required to keep operations smooth. They are generally motivated to make sweeping changes and improvements anyway (why else take over a business). For this reason a “hand-over” time, where the previous owner shows the new owner the ropes, is often stipulated in a business sales agreement.
In the end, the business owner needs to be comfortable with the level of information that they produce and analyse to run a business. For some, this may be full management accounts and psychometric profiles. For others this may be come down to the firmness of a handshake and a good feeling about their decisions. Both approaches have their advantages and disadvantages and both can lead to success and failure. Most business owners and managers will fall somewhere on the spectrum between those two extremes. As long as they know that, at some stage in the life cycle of the business, someone will want to see the nitty-gritty numbers