Personal MBA: The Five Parts of Every Business

Personal MBA: The Five Parts of Every Business

“Roughly defined, a business is a repeatable process that:
Creates and delivers something of value…
That other people want or need…
At a price they’re willing to pay…
In a way that satisfies the customer’s needs and expectations…
So that the business brings in enough profit to make it worthwhile for the owners to continue operation.”

I love a good definition. It’s so important to define terms when your thinking about a topic, and this definition of a business, I think, is really helpful. I imagine it acts as a sort of sure foundation to build upon and make better decisions in the course of owning a business or even through the course of fulfilling your responsibilities as an employee. You can think through different challenges or decisions and ask yourself, “Is this decision or obstacle causing me to stray away from any of these key aspects?”

These aspects, however, are a bit abstract, and so in order to put a bit more meat on these bones, Kaufman offers up the following more coherent and systematized definition of what makes a business.

“At the core, every business is fundamentally a collection of five Interdependent (discussed later) processes, each of which flows into the next:
Value Creation.  Discovering what people need or want, then creating it.
Marketing.  Attracting attention and building demand for what you’ve created.
Sales.  Turning prospective customers into paying customers.
Value Delivery.  Giving your customers what you’ve promised and ensuring that they’re satisfied.
Finance.  Bringing in enough money to keep going and make your effort worthwhile.”

Each of these five processes are obviously big topics in and of themselves, but like I said before it’s great to have a big picture view of what exactly you’re trying to do when you start a business.