Build a Business on Solid Foundations: The 5 Basics Every Entrepreneur Must Master
Hi ,
I hope you are well.
Last week I posted a new Wisepreneurs Podcast where I spoke with Matt Dowling of the Freelancer Club, with 60 000 members. Matt shared his knowledge of freelancing, and it is well worth the listen. The transcript is provided.
Today's article is about business and the foundational concepts you need to know, and I have included my half-price special offer to you at the end.
Solving Problems and Value Creation
Businesses exist to solve customer problems and create value by delivering solutions that meet their needs. For a business to thrive, it must identify valuable solutions and determine how to sell them and provide them effectively to customers. This ability to solve problems and turn those solutions into revenue is fundamental to any successful enterprise.
Running a Business
The core purpose of any business is to fulfil customer needs and create value. One way to better understand the business basics is the 5-line business model, which outlines the essential elements:
- Revenue from product/service sales, which must exceed costs.
- Cost to make or buy the product/service, including materials and contractors.
- Cost of marketing, advertising and selling to reach customers.
- Cost of running the business, like rent, insurance, utilities and administration.
- Profit - what remains after covering the above expenses.
Understanding the five lines is crucial for any business. Revenue must exceed costs and expenses to generate profit, the ultimate goal. Profits then fund further growth and innovation.
Moving from Employee to Entrepreneur
Working in a large organisation shields professionals from many business operational aspects. When these professionals consider self-employment, they must become aware of the tasks they need to handle themselves, such as finding clients, marketing the business, facilitating growth, and managing finances and operations.
Success typically takes longer than anticipated, requiring perseverance and patience as the entrepreneur learns while building the enterprise from the ground up. The shift from employee to business owner necessitates a mindset change and acquiring new skills and technical expertise.
For a small business to succeed, it must do more than identify problems and devise products or services to solve them. It must convert those solutions into revenue by figuring out how to sell and deliver them cost-effectively.
The 5-line business model outlines revenue from product sales, costs of production, marketing and operations, and profit—the difference between revenue and all expenses. Monitoring these financial metrics helps businesses adjust and maximise value creation for customers while staying viable.
The Rewards of Entrepreneurship
For professionals with the drive to build something of their own, small business offers an outlet for applying expertise in a self-directed way by making a difference through the practical act of value creation for customers through problem-solving, innovation, and service.
Cheers
Nigel Rawlins
wisepreneurs.com.au
My special offer is still available for my readers, normally AUD $199; you can save $100 and book a 60-minute consultation with me for $99 to discuss any questions you have about freelancing or self-employment.
Book now using this link: https://wiseprnr.com/IIUFW3
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