The Definition of Business – by Josh Kaufman

Josh Kaufman’s definition of a business (excerpted from his book, The Personal MBA: Master the Art of Business) is something to behold. Here it is:

Roughly defined, a business is a repeatable process that:

1. Creates and delivers something of value…
2. That other people want or need…
3. At a price they’re willing to pay…
4. In a way that satisfies the customer’s needs and expectations…
5. So that the business brings in enough profit to make it worthwhile for the owners to continue operation.

It doesn’t matter if you’re running a solo venture or a billion-dollar brand. Take any one of these five factors away, and you don’t have a business—you have something else. A venture that doesn’t create value for others is a hobby. A venture that doesn’t attract attention is a flop. A venture that doesn’t sell the value it creates is a nonprofit. A venture that doesn’t deliver what it promises is a scam. A venture that doesn’t bring in enough money to keep operating will inevitably close.

At the core, every business is fundamentally a collection of five interdependent processes, each of which flows into the next:

1. Value Creation. Discovering what people need or want, then creating it.
2. Marketing. Attracting attention and building demand for what you’ve created.
3. Sales. Turning prospective customers into paying customers.
4. Value Delivery. Giving your customers what you’ve promised and ensuring that they’re satisfied.
5. Finance. Bringing in enough money to keep going and make your effort worthwhile.

If these five things sound simple, it’s because they are. Business is not (and has never been) rocket science—it’s simply a process of identifying a problem and finding a way to solve it that benefits both parties.

Beautiful, isn’t it? Simple, elegant, and comprehensible. And you get all of this goodness at the beginning of chapter two.

Some people have claimed Josh’s book is overly simplified—and it may be if you’re running a hedge fund—but frankly it’s all a small business owner needs to know about the fundamentals of business. And make no mistake: If you plan to run a business, you need to understand these fundamentals, above and beyond what you know about your specialty whether it’s photography, coaching, massage therapy, or something else. It’s part and parcel of being a responsible business owner. So, there you go, I got you started. If you’re curious to know more, pick up a copy of Josh’s book. I read it and enjoyed it. You can too.

Anything surprise you about the definition? Let me know in the comments.

Cheers,

Note: Yep, that’s an affiliate link up top, which means I make a penny or two if you order the book from Amazon. But, I’d never recommend something I haven’t actually read and found valuable.