The 5 Parts of Every Business – An Introduction

As wealth builders and entrepreneurs, we believe firmly in ownership as a vehicle to enable us to create Wealth. One of the vehicles to do so is building a business.  To build a successful business we need to understand how a business works. To understand how a business works, you need to understand that a business is a system. It is complex made up of various elements or parts. These are the 5 parts of every business. These elements and parts come together to achieve the business aim of profitability. 

The 5 parts of every business

In The Personal MBA, Josh Kaufman writes about the 5 parts of every business. The 5 parts of every business are 

• Creating Value 
• Marketing 
• Selling 
• Delivery the value 
• Finance 

The 5 parts of a business are related to every and any company whether it is Apple or the corner store next to you. 

Let’s now look at each of the 5 parts of every business. 

Value Creation

Creating Value is the starting point of any business. Money is an exchange of value and if your business doesn’t have any form of value to provide, money will not flow its way. Value creation can be looked at as a form of solution or pain reliever. You want to eliminate the pain points for people. You don’t necessarily need to create something new. Most of the successful businesses in the world solved a problem better. Nokia phones for a while were the leading phone manufacturers. But the Apple iPhone is the leading phone in the market. Apple just solved the communication problem better. 

You can also view value creations from solving the problems you have personally. For instance, I love having bottled water with me on a constant basis. I never seem to find a suitable Travel Mug that will keep my drinks cold and tea hot while having a stylistic edge to it. I eventually found one. The Contigo Travel Mugs fit the bill perfectly. I tried the Contigo Travel Mugs for myself and I am now selling the product online for people who, just like me, consume a lot of water or drinks during the day. The point is I solved my pain point and provided the solution as a service to other people.

Marketing 

Marketing is crucial in understanding business. Without marketing, most of your products will not be noticed by a customer. People cannot buy what they don’t know. A business with good marketing stands a better chance of improving its cash. For instance, I focus mainly on Facebook advertising for getting the word out on my Contigo Travel Mugs. This has been one of the most important things I have done for my online business.

Selling 

Selling is normally misunderstood as marketing and has a negative stigma attached to it. The truth is that we are selling all the time. We wake up in the morning and have to sell our vision to ourselves. We sell to our spouse every day to stay married to us. We sell good behavior to our kids to enable them to become responsible citizens.

Selling is basically giving a person an excuse and a reason to part with their money. As Ziglar explains, if we can give people a reason for buying and an excuse for buying, the chances that they will buy improve rather dramatically. 

For instance,  assuming you are selling an iPhone, excuses for a person to buy are: 

• Durability of the phone
• Save money in the long run  

The reason for a person to buy would be 

• Prestige 
• Being seen as wealthy 
• Having a sense of style 
• Being placed a certain social bracket 

Reasons are more powerful for people to take action because reasons are emotionally linked. As Jim Camp puts it all decisions are 100% based on emotions. On the other hand,  excuses are based on facts. So selling is applying both facts (excuses) and emotional reasons to enable a person to part away with their money. 

Value delivery 

Without the delivery or what the person pays for we can not consider ourselves as a business. Here the focus is on providing convenience with regards to how the customer receives their products. As Jeff Bezos said, he doesn’t know what will happen in the future but he knows that customers will always want shorter delivery times for their products. The value promised to the customer should be delivered. 

Finance 

Finally, a business cannot run without numbers. No business can stay open when they keep losing money. When a business runs out of cash, it is literally game over. A business should be self-sustaining and resilient. A business should have enough Cash Flow to run operations. It should also have cash flow reserves for the unforeseen future. Apple has a Cash Flow reserve of $200 billion. 

The 5 parts of every business come together to enable a business to achieve its goal of profitability. 

Watch the 5 parts of every business on YouTube

As usual, let me know what your thoughts are, and  Leave a comment below. 

Until next time wealth builders, Let’s build wealth.