Why make business more complicated than it is?
The basics of business is simple. When people try to complicate it, they’re either trying to impress you, or sell you something you don’t need.
“Once you understand its basic models and concepts, business is a repeatable process of identifying a problem and finding a way to solve it to benefit the buyers and sellers.”
Don’t be afraid of competition
When you’re starting to build a business, always choose a market with competition.
This helps to eliminate the risk of not having a large enough customer base, because you know people are willing to pay for this.
Once you’ve decided on the market, invest your time to:
- Learn everything from your competition
- Develop your offer to be more valuable
Successful businesses build on emotions
You will have a viable business if you understand what drives people to spend.
Most people buy because of their drive:
- To acquire — materials and immaterial things, fame, power, influence
- To bond — desire to feel valued, loved
- To learn — acquire new knowledge, technical skills
- To defend — to feel safe, protect ourselves, families, loved ones
- To feel — sensory stimulus, intense experiences, pleasure, excitement, entertainment
You’ll have a market if you are able to identify a group of people who have these unmet needs.
The 5 ingredients of a business
A successful business is based on repeating these processes:
- Value creation
- Value delivery
Manage them well and you’ll have a successful business.
1. Value creation
A project that doesn’t create value for others is a hobby. A successful business starts by creating something of value for someone.
Your value may take on different form but the ultimate purpose is about making people’s life better.
Value can come in the form of a:
- Product — iPhone, sneakers, cars
- Service — copywriting, consulting
- Shared resource — gyms, dance studios
- Subscription — Spotify, Netflix
- Resale — Tesco, Amazon
- Agency — marketing/advertising agency
- Content creation — YouTube, Facebook, Twitter
- Loan — mortgage
- Lease — car lease
- Option — concert tickets, stock photos
- Insurance — car insurance
- Capital — investing for equity
Your business can neither exist nor succeed if your product doesn’t have value to someone.
The best businesses in the world are those that create the most value for people. To do that, you need to find out what people crave and create that.
Nobody is going to buy from you if they don’t know you or your offer. Master marketing because your brand must first exist in your prospect’s mind before you sell.
Marketing is the art of finding prospects. Always remember that your prospects’ attention is limited because everything around us is constantly competing for our attention.
Attention doesn’t matter if people don’t care what you’re offering, no matter how amazing your value is. I’ve got thousands of mail-order bride emails, but I still haven’t got one.
Good marketing leads to high-quality attention. Find an audience, build one if you need to, gain their trust and you will have earned their attention.
Now that you have your prospects’ attention, you turn your project into a business when you make your first sale. The sale process starts with a prospect and ends with a paying customer.
A project that doesn’t sell is a nonprofit. No matter what business you’re in, you’re selling what you have to offer.
No one wants to make a bad decision or be taken advantage of. Help your prospects see that your product fulfils their needs or wants. Successful businesses earn the prospects’ trust by convincing them that their offer is worth paying for.
A sale can only take place when there’s a certain amount of trust between both parties. You can build trust by building a trustworthy reputation.
The more reliability you can prove, the greater the chance you can make a sale.
4. Value Delivery
You’re a scam if you can’t keep your promise to your customers.
Once you’ve created your value, made your prospects pay attention and closed the sale, it’s time to deliver value.
Delivering on your value means that you make the best effort to ensure your paying customer is a happy one.
The happier your customers are, the more likely that they will return for more or spread positive word of mouth about your products.
If you become known to deliver on your promise, you build your reputation, which brings in more customers.
A business that doesn’t bring in enough money to maintain operations will close down. Your business will survive if you bring in more money than you spend.
Finance in business isn’t complicated if you focus on what’s important:
• Monitor your cashflow (money in and out)
• Decide how to allocate the money
• Determine if you’re getting the results you want
The best businesses create huge value for their customers, manage expenses accordingly and make more than enough money.
Business is not just about what you make, it’s about what you keep. To do that, you need to have a high profit margin.
Your profit margin is the difference between how much revenue you make and how much you spent to make that. If you spent $1 to get $2, that’s a 100% profit margin. The higher your margin, the more you make.
Maintaining a healthy profit margin will ensure the sustainability of your business.
The steps you take from value creation (Step 1) to delivering value to your customers (Step 4) is your value stream.
A great value stream ensures quick, reliable and consistent value delivery, which leads to a profit-making business (Step 5).
Know how to start a business the right way.
These are my takeaways from the Personal MBA by Josh Kaufman.
If you want to start your own gig, this book will give you a strong foundation on what a business entails.
Get your copy here:The Personal MBA: Master the Art of Business
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