The text book definition of business goes something likes this – an organization or economic system where goods and services are exchanged for one another or for money. Academic definitions and descriptions certainly ensure that people (especially students) keep a good distance away from it.
Business in reality is definitely not as it seems on paper.
A business is a repeatable process that makes money. Everything else is a hobby. — Paul Freet
There are five factors that make a business happen.
1. Something that creates and delivers value
If the customer does not find value in purchasing your product or service, your business will not survive. It is as simple as that. You need to ensure that whatever you want the customer to shell out money for, there is something of value for him or her. If you cannot realize this value proposition for the customer, your business is nothing but a hobby.
2. Something that Customers Want
If I am a customer, and there is something extremely attractive, colorful and and at a throwaway price, if I don’t need it, I won’t buy it. For example, a guy like me may not buy a thong underwear even if somebody gives it for free. I wouldn’t even think of buying it for people I know. So, the product or service on offer must be something that is required, something that is needed and something that is necessary to make a purchase decision. This is where marketing elements come into play, and understanding customer’s requirements becomes a pre-requisite.
3. At a Price they are Willing to Pay
If the customer is not able to pay, or worse, if the customer does not have the kind of money to pay for your product service, you don’t have business. Pricing is an key aspect that often gets bloated, and drowned in the end. 4 Ps of marketing ensures that you look at all four quadrants, including the price.
4. Satisfies Customer’s Need and Expectation
Analysis shows that most business turnovers are due to repeat customers. If your business does not ensure that it meets product or service requirements, customers are smart enough not to go for it, and the ones who fall for it, will not trip the second time. You need to identify what the customer expects and tend to that need. Serving hot Indian Curry Food in Alabama might not find a lot of takers, customers in this part of the world expect something more Southern like grits.
5. Profitable for the business owner
If you are not making profits, then you are in the business of charity, which is not a hobby but something else that ensures your coffers run dry before you blink. So, whatever business you are in, you should be making profits, and the profits must be big enough to justify the existence of your business.