The 5 Parts of Every Business

The information from this article was sourced from The Personal MBA: Master the Art of Business. For details read the full book.

A business is often overly complicated by corporate jargon, while in reality, its core values are simple to understand.

In simple terms, a business is:

  1. Something that creates & delivers something of value
  2. Which other people need/want
  3. At a price that people are willing to pay
  4. In a way in which the customer’s needs, as well as expectations, are satisfied
  5. All so that the business earns enough profit for it to be worthwhile for the owners to continue

Whether you run a lemonade stand out of your backyard or own a billion-dollar company, they all follow each of these five factors.

A venture which doesn’t create value for others is a hobby.

A venture which does not sell the value it creates is a non-profit.

And a venture which does not deliver on its promise is a scam.

But also, a venture which does not turn a profit is unsustainable and will inevitably fold.

Every business has 5 independent processes which each flows into the next;

  1. Value creation: Discovering what people want or need and then creating it.
  2. Marketing: Showing people and building demand for your creation.
  3. Sales: Turing prospective customers into actual customers.
  4. Value Delivery: Giving customers what you’ve promised and making sure they are satisfied.
  5. Finance: Generating enough profit to continue and to make your venture worthwhile.

While we could go into immense detail on each of these stages, ultimately business is no more than these 5 processes.

If you can clearly define each of these processes, you’ll have a complete understanding of how a business works.

“A business is a repeatable process that makes money. Everything else is a hobby.” – Paul Freet