The five parts of every business

A business is a repeatable process that makes money. Everything else is a hobby. – Paul Freet, serial entrepreneur and commercialisation expert.

Roughly defined, a business is a repeatable process that:

  1. Creates and delivers something of value …
  2. That other people want or need …
  3. At a price, they are willing to pay …
  4. In a way that satisfies the customer’s need and expectations …
  5. So that the business brings in enough profit to make it worthwhile for the owners to continue operation.

It does not matter if you are running a solo venture or a billion-dollar brand. Take any of those five factors away, and you do not have a business – you have something else. A venture that does not create for others is a hobby. A venture that does not attract attention is a flop. A venture that does not sell the value it creates is a nonprofit. A venture that does not deliver what it promises is a scam. A venture that does not bring enough money to keep operating will inevitably close.

At the core, every business is fundamentally a collection of five Interdependent (discussed later) processes, each of which flows into the next:

  1. Value creation. Discovering what people need or want, then creating it.
  2. Marketing. Attracting attention and building demand for what you have created.
  3. Sales. Turning prospective customers into paying customers.
  4. Value delivery. Giving your customers what you have promised and ensured that they are satisfied.
  5. Finance. Bringing in enough money to keep going and make your effort worthwhile.

If these five things sound simple it is because they are. Business is not (and has never been) rocket science – it is simply a process of identifying a problem and finding a way to solve it that benefits both parties. Anyone who tries to make a business sound more complicated than this is either trying to impress you or trying to sell you something you do not need.

The Five Parts of Every Business are the basis of every good business idea and business plan. If you can clearly define each of these five processes for any business, you will have a complete understanding of how it works. If you are thinking about starting a new business, defining what these processes might look like is the best place to start. If you cannot describe or diagram your business idea in terms of these core processes, you do not understand it well enough to make it work.

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