I am not really a business person – I don’t derive a great deal of joy from “the business side”. In fact, in the interests of full disclosure I’ve never run more than a one man enterprise, but I have worked at the higher levels of other people’s businesses and been responsible for decisions which had direct consequences for the flow of revenue into or out of them.
Not being a well versed businessman, some of the delicate intricacies can be overwhelming. However, when I get lost in market scans, or cash flow analysis, or wage expectations, or industry trends I like to remind myself of a simple maxim which (perhaps unsurprisingly) seems to hold true for most businesses: create value to create revenue.
I think we can agree that the primary goal of the average business is to create revenue (obviously there are other reasons, but businesses typically can’t exist in the real world without revenue). What is revenue used for? To create more revenue, of course. It also pays for wages, overheads and weekends in Maui top and tailed with rides in the company jet (I wish).
This is the great perpetual motion machine of business. Create revenue to pay expenses to create more revenue to pay expenses to create .. you get the idea.
But how does one create revenue? (I promise this is the last soon-to-be-answered question).
By creating value.
What exactly is value? (oops, I lied)
My definition: Value is anything that other people are willing to pay you money for.
Value could be derived through:
- Building useful and leading edge products or services at the right price point for the right customers (how to determine those factors is another book entirely – suffice to say it might be easy and obvious or it might be very hard depending on what you are trying to achieve and who you are trying to target)
- Offering great customer service/support (throughout the entire account lifetime – from pre-sales through to account management and day to day help desk) – every contact with a customer is another opportunity to create value and therefore revenue
- Providing significant experience and knowledge through consulting or other “body shop” mechanisms
There is a trick, however, to actually turning value into revenue. The trick is getting someone to see the value and (perhaps unfortunately) people most often value money. A mentor who I learnt a great deal from over a number of years once told me “people don’t value something if they don’t have to pay for it”.
So, to create revenue from value you have to put a price on it. Typically this has to be done up front as once you’ve provided said value it’s often too late to put out your hand and hope to receive something in return.
I guess what I’m trying to say is business to me is about doing great things, but ensuring that every step of the way you are being remunerated for the value that you add, and making sure that everyone knows exactly what that value is worth.
Perhaps this (probably) is a gross oversimplification of the many-fold aspects of business and it’s incumbent complexities, but thinking this way has helped me and I hope it helps you too.