One must understand their business to understand how to profitably implement efficient operations and a solid business strategy. Business principles help your team deal with issues, challenges, and errors seamlessly. In this installment of my Invest In series, we’re discussing five fundamental business principles. Take some time to think through the following business principles and how they may apply to your business strategies:
Business Principle One
Know why you are in business.
You should be in business to make money (a profit), or if you have a non-profit, you should be in business to serve the community. It is then your responsibility to define what making money or serving the community means to you. Having a passion for the business is wonderful, but make sure it is a profitable business.
I once had a client tell me she is in business because she wanted to be financially free. That is what we all want! After we talked a little more, she revealed that she wanted to have kids and be there for her kids, but she also knew that she did not want to be a stay-at-home mom. With this information, we worked on creating the infrastructure that will keep her from getting bored; one that will allow her the time she needed to have a new baby and to be with her family as it grew. Her business will be exactly what she wants rather than another stress that keeps her from what she really wants.
Business Principle Two
Know what industry you are in.
Imagine for a second that you sell equipment. Are you a manufacturer, a distributor, or a retailer? Understand what business you are in so that you can make better business decisions. It all starts with understanding your industry, then understanding your industry on multiple levels. Start by getting your North American Industry Classification code (NAIC). You can use it for research, but the process of finding your code proves for good reading and reveals interesting thoughts and ideas.
The second piece is changing your definition of what you do. Are you in the business of selling door locks or are you in the business of providing security? Changing your definition can open up new opportunities.
Business Principle Three
Clarify if you’re currently operating to pay bills or to create wealth.
In business, focusing your operations solely on paying the bills is underpricing your services because you need a client to make payroll, or promote your business in a way that you are not quite sure of; you think, we’re keeping the lights on so we must be doing things right. Not at all! Basically, you are making money but it doesn’t bring value to your company.
Creating wealth is creating cash value in your business. Creating wealth in business is about setting the right price, picking the right target market, and speaking about the business powerfully. In other words, creating wealth is all those activities a business owner must do to be successful. The challenge is that we do not always understand how to put these activities into a format that works for our unique business situation, one that will put us in a position for creating wealth.
It is time to cut through all the clutter and get to the CORE of what it really takes to get your business up and running and positioned for not only making money but a business that will allow you to create wealth! It is time to get to the CORE to focus, fully engage, and finish!
Business Principle Four
Understand the infrastructure your organization needs to support business activities.
There are a lot of ways to build and grow your business. However, one of the easiest, most proven ways to grow a business that is perpetual (or everlasting) is to build a strong infrastructure that not only prepares your business but also allows your business to create wealth, become profitable, and grow exponentially.
Most small business CEOs do not focus on this critical area; not because it is hard, because it requires an intangible process – which means you cannot immediately feel it, touch it, or smell it; it takes time to build. We all know that it is hard to work on something that does not give instant gratification, but it will give you long-term stability if that is what you want. Infrastructure is your armor against outside forces that can deter, hinder, or even break your business’s success. We call this infrastructure the CORE.
Business Principle Five
Understand the key functions of your business.
When I say ‘functions,’ I am referring to any activity within your business that supports the development of new products or the sale of your products. Some people see these as departments, it can be more effective to think of them as functions until you move into a team of 20 or more.
What are your business principles? Share in the comments below!
© Effició, Inc.