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What Is Business Traction?

Many new businesses and start-up companies often find it difficult to get off the ground. Finding enough capital to fund a developing business and keep it running can be difficult for a company that has not had sufficient time to prove itself in the marketplace. By creating business traction, new companies can attract potential investors and gain a competitive edge in their industry.

Business Traction: a Definition

Business traction refers to the progress of a start-up company and the momentum it gains as the business grows. When traction is lacking, sales dry up and the customer base dwindles, regardless of the effort put into the enterprise. It applies to nearly any kind of business, whether service or product-oriented, or whether it sells to the public, other businesses or the government sector. There is no one way to measure traction, however, companies usually rely on customer response and revenue as indicators of their success. Maybe surprisingly, profits do not necessarily make for traction; companies such as Amazon, Tesla and Uber have excellent traction but have only had sporadic profitability, if at all. The reasoning behind developing traction is to grow the business while meeting specific company goals and objectives. While traction may be a seemingly abstract concept, it is important and helps a company understand where it stands in an industry and where it would like to be.

Importance to Investors

While the concept of traction is important for the company founders and employees, it is of equal importance to investors or other stakeholders who have an interest in the organization. The higher the traction, the more investors are attracted to the organization. Consequently, the more investors, the more funds are available to help your business succeed. Keep in mind, however, that the relationship between traction and investors can also be tricky, as investors want to make money. Though a start-up with good traction will attract investors, demands for profitability and returns can compromise a start-ups ability to put funds into building the business. Therefore, you want investors patient enough to ride out short-term losses in favor of a longer-term payoff.

Creating and Measuring Traction

Understanding the future of the organization, developing specific goals and a means to reach those goals, is the first step for successful start-up. Clearly stated goals in both a business plan and mission statement shows investors how the company will progress in relation to marketplace factors and competition. However, simply defining these goals is not enough. To measure traction, the company needs to understand what metrics it will use to define success. Depending on the industry and external marketplace factors, you might measure traction through sales, customer response or market research. Charting these factors with respect to time is of critical importance to measuring traction, as it is all about determining how the numbers are trending: increasing sales and customer response indicate good traction; declining figures show traction problems.

Fighting for Traction

The most well-intentioned organization with a clear business plan may still struggle with traction. While there are many reasons start-ups fail, one of the most common is lack of product or brand awareness. As competition increases in the marketplace, smaller businesses with little-known brands or products are often overwhelmed by larger, more established brands. Therefore, to avoid this pitfall, new companies increase advertising and marketing efforts. In addition, if the product or service is not generating customer demand or is priced too high, a company will lose its foothold in the industry. Only by careful research and reaching out to customers can a company regain its business traction and continue its path to success.

by Casey Anderson; Updated November 08, 2018, https://smallbusiness.chron.com/business-traction-22786.html

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