The Purpose of a business

[Blurock]

A client asked me how much it cost to do this job....
I answered him: R1500
He said: So expensive for this job?
I asked: How much do you think it will cost you?
He answered me: R800 max... It's a pretty simple job right?"
- For R800, I invite you to do it yourself.
-But.... I don't know how to.
- For R800, I will teach you how to. So besides saving your R700, you'll get the notice for the next time you want
- It seemed right to him and he agreed.
- But to start: you need tools: A welding machine, grinder, chop saw, drillers, welding hood, gloves etc...
- But I don't have all this equipment and I can't buy all this work for one.
- Well, for another R300 more, I'll rent my stuff to you so you can do it.
- Okay, he says.
-Well! Tuesday I am waiting for you to start doing this work
- But I can't on Tuesday I just have time today.
- I'm sorry, but I'm not available until Tuesday to teach you my stuff and lend it to you. Other days are busy with other customers.
-Well! That means I'm going to have to sacrifice my Tuesday, give up my chores.
-I forgot. To do your work yourself, you also have to pay for the nonproductive factors.
-It is? What is this?"
- Bureaucratic, tax, vat, security, insurance, fuel etc.
- Oh no... But to perform these tasks, I'm going to spend more money and waste a lot of time!
- Do you have them? Can you do that to me before?"
-Well!
- I'll make you all the material you need. Truck loading is done Monday night or Tuesday morning. You will need 6 to come load the truck. Do not forget to be on time to avoid traffic jams and be on time
- At 6??? Nope! Too early for me! I usually got up later.
...
- You know, I thought. You better get the job done. I'd rather pay you the R1500. If I had to, it wouldn't be perfect and it would cost me a lot more.
When paying for a work, especially handmade, you pay not only for the materials used, but also:
-Knowledge
-Experience
-Study
-Tools
-Services
- Time to Go
- punctuality
- Accountability
-Professionalism
-Accuracy
- Guaranteed
-Patents
- Sacrifices
- Safety and Security
- Payment of tax obligations
No one can denigrate other people's work by judging prices.
Only knowing all the elements necessary for the manufacture of a certain work, you can estimate the real cost.
NS: I didn't write this dialogue, but share it to support craftsmen and entrepreneurs, that's it.

[Isetech]

Let me share my story of what I thought was the purpose.

I worked hard and earned a low wage. Due to the long hours (more than 100 hours per week) and commitment, I would see a figure higher than the managers on my pay slip. I thought that if I could work that hard for myself, I would get rich very quickly.

Anyone who has started and run a business will tell you that it is not always the case, especially if you have no idea of how to manage money, it makes the journey that much more difficult.

I am F%^&en good at my trade, have the highest qualifications and experience in the industry, do I know everything, certainly not. The more I learn, the more I realise how little I know.


After all these years, I have learnt how to secure projects, complete them in the allocated time frame to the best of my ability, this people is the best sales bid you could ever offer. You dont need a sales pitch or people wasting your money trying to "sell" what you have to offer, it becomes word of mouth, the most powerful sales strategy. Get this right and you win hands down.

My thoughts have evolved and as I get smarter and in a better position, more work than I can handle with money in the bank, so I can now start focusing on improving the business.

[Isetech]

What is the purpose of the business, only you will know, and it will change over time.

The purpose in the beginning was to get rich quick, create a comfortable environment for my family. That didnt work so well the first time, 10 years later I achieved my goal, built a business but lost the most import part of the purpose, the family. I ended up with more work and money than I could handle, by the time I wiped the shyte out my eyes, I was living on my own in a rented cottage.

This year the purpose of the business will change slightly, instead of just focusing on my family, I want to improve the lives of people who work in the business.

What I have learnt is that if you want something done right, it doesn't mean you have to do it yourself. You need to educate and train the people to do it the way you want it done. There are people out there who could probably do it even better than you, given the right training and tools.

IF you are going to run a business, learn to manage the money. Filling the bank account with lots of zeros is the easy part, its what you do with that money that will determine how long you survive in business.

[Blurock]

I rest my case. From the comments below it is clear that chasing money creates other problems.
Running and managing your business well is more important. If you do everything right (not so easy though) the money will look after itself.
When you are chasing after money, some undesirables may manifest, such as greed, ego, etc. which may change your personality.
You may even make a lot of money, but will you be happy?

Always consider the human factor; your staff, your customers and most important, your loved ones.

[Blurock]

So how do you start your own business?

Often you see employees resigning to start their own business with what they have learnt from their employer.
If you are a good mechanic, you do not automatically know how to run a workshop, manage the finances, manage staff and have good customer relations.

To start a business you need a good skillset. Do a SWOT analysis and do an honest strength and weakness assessment.
If you are not good at accounting, get a reliable bookkeeper. Get specialists to assist you with your weak spots and train yourself in those areas.

[Isetech]

The problem, with reference to trades, we tend to see the amount of hard work we put into making the "boss" rich, without understanding the whole big picture.

The company registrations and taxes, how to manage the money and when to spend and not to spend. I started something a couple of months back and it has turned my financial situation around completely. I have moved from always being in an overdraft to almost in the 5 digit plus, hoping by June to have a R100 000.00 available for the rainy days, which by the way comes and go less frequently, but as you learn to manage your finances and stop just spending on stuff that you dont really need, or spending customers deposits. By the way this is one of the biggest downfalls for many small businesses.

Customer relationships, I have it, where people have worked as sub contractors and think because I offer them a small piece of the pie, they get greedy, without understanding that I have 10 years of good standing with the customer. When you get to 30 plus years in business you learn a few things that you will never learn from business school. Customer may not always be right but you need to respect the customer, do what you say you are going to do, finish projects on time and charge what the project is worth. I had a job last year which ran way over budget, like 200 hours over budget, I could have billed the customer for the 200 hours and they would have paid, however when I was reviewing the bill it seemed a little excessive, so I made a few adjustments and submitted the invoice. I might have lost a few bob, but the word of mouth advertising is worth way more. I would rather have 5 good paying customers, who trust me and I can trust, than 50 000 problems.

Like most things in life, people live way above their means and whine all the time about how they cant get through the month, yet they have all the fancy material junk, just like business, when you earn enough to pay cash for that nice 4x4 double cab with all the trims and a range rover for your wife, kids in private schools, then great, if not, dont show off with stuff you cant afford, landing a R10 M contract doesn't make you rich. I see too many contractors, all mouth and bling and too little cash in the bank.

[Isetech]

The one thing that many smart people learn very quickly "CASH IS KING" not just the coins and notes. It takes one bad customer to kill you cash flow.

I had one bad customer last year, I got caught, you would think by now that I would have learnt my lesson. I have learnt to move on as quickly as possible, trying to chase bad debts, not only negatively impacts your operation, but it can negatively impact everything, from your health and well being, to your train of thought and other things.

I have learnt to write off the bad debt and move forward as soon as possible. I could have paid cash for my house with all the bad debts, not just paid off my bond. When you start chasing money, it negatively affects everything, especially if you are are a small operation.

Dump the customer, learn not to waste time on bad payers, chances are they just horrible people in general, who always try screw anyone, claim the loss from your taxes, spread the word, so others dont get caught and move forward.

[Blurock]

The one thing that many smart people learn very quickly "CASH IS KING" not just the coins and notes. It takes one bad customer to kill you cash flow

@Isetec you are right. I have also lost money by chasing business and trusting people.
Nowadays I only do cash business. I have no accounts and no creditors and I sleep well at night. Ek skrik nie wakker nie!

I am hard assed when it comes to business. Why would people pay up front to import a dodgy, untested product, then wait 3 - 6 weeks for it to arrive, but you are not prepared to pay cash for a quality local product? I have turned away a lot of business because I refuse to allow terms, but I have also managed to get up front payments from municipalities and people who value my products and service.

Stick to your principles. There are no shortcuts in business and promises fade away in the mists of time.
Yes, and stay humble. Do you really need that flashy car, boat, house?

[Isetech]

There are way too many get rich quick, like overnight videos and people flashing nice cars and big houses on social media.

If you are smart and browse through the videos, like I have looking for that get rich quick method, you will notice one thing in common with most of them, they all seem to be linked in some way. Once you start taking note, you will find they are somehow tied together.

You dont get to have Tony Robbins or Gary V on your little podcast, unless you have some sort of connection, backing or links, or maybe links to oil, gold or in some cases governments.

If hard work was the route to riches, Elon wouldn't be the riches man in the word. I am sure there are many people out there who have put in more hours than many of the richest people in the world.

Like everything in life, goggins may not be the toughest in the world, and it didnt happen over night.

[Isetech]

Going back to "the purpose of a business" ... why you want the to start a business and what you are prepared to do to make that business work will determine the purpose and direction of the business.

For example, lets use me as an example and everyone will have a different purpose.

When I started out, I had no intention of become a huge corporate, I just wanted to make enough money to support my family and be my own boss, rather than making everyone rich from my time being exploited.

I tripped and landed on my face within a couple of weeks, I shuffled, adapted and moved forward, with the same vision. I tripped and fell more and more often, to a point that I wanted to give up. I went to the bank to try get finance for a vehicle, but that didn't go so well, they requested silly things like a business plan and financials and all the stuff, really who wastes time with all that unnecessary stuff. Apparently you do need it.

To this day I have never seen a financial statement for my business, if you have to ask me what my turnover or profit margin was for last month, I honestly couldn't answer that question. You could phone the guy who deals with my books and ask him, he would be able to answer the question.

IF you want to know what is happening with your project at any point, you phone me I can answer any questions regarding the status of the project, I could also give you a ball park figure on what it will cost and that is about it.

Something nobody will tell you about starting a business, to what extent are you prepared to sell your soul, what are you prepared to do to make it work, I dont mean the time and effort. You see business failing everyday, not because the person didnt have a business plan or a degree in business economics, they just weren't prepared to do what it takes to get to where they wanted to be.

The purpose of the business could be the motivation, just understand that not everyone has good intentions and they will expect more than you are prepared to offer , dont sell your soul for money, you will regret it at some point.

[Blurock]

The purpose of the business could be the motivation, just understand that not everyone has good intentions and they will expect more than you are prepared to offer , don't sell your soul for money, you will regret it at some point.

Agreed, don't sell your soul. If your motivation is just to make money, bear in mind that you can only steal from someone until you get caught!

Motivation may not be enough. You may be motivated to paint starry nights and cornfields like Van Gogh, but if there's no customer to sell it too, you will die a pauper. The purpose of a business is to create a customer. What's the use of having a business if nobody knows about you? You have to advertise, you have to do PR, you have to get word of mouth business. There is no other purpose unless you work for a charity or for the government.

To quote Peter Drucker, guru of marketing, a business enterprise has only two basic functions: marketing and innovation. Innovation is tailoring your product or service to serve a certain market, to improve your product or service. Basically it is finding that one thing that the customer needs or want. Marketing is telling the customer that you can fill that need. Customer satisfaction is what sells a business, not your product or smiley faces.

I have been a "Mystery Shopper" for a number of businesses from service stations to banks. The bottom line is what was the customer's experience? That is what sells a business!

[Blurock]

Just heard yesterday that sadly, the guys who had hijacked our previous business are on the skids and are busy retrenching staff.
It is so sad to see a business that was built with innovation and passion into a sought after supplier with excellent products and customer service go down the drain.
The reason for this is that the guys were not interested in people (customers and staff who are the core of your business) but only in chasing money.

Their greed allowed them to oversell on credit and not being able to generate sufficient cash flow to pay their suppliers and creditors.
Poor quality and service is now accelerating the demise of the business.

[Blurock]

So I think that we can agree that we do not have a tree or a machine to print money. Money has to come from another source, the client or customer.
Do your staff know this? They should also know that the customer is king and should be treated as such.
Staff should also realise that they have internal customers (and suppliers). One department relies on another to deliver so that they can perform. A good example of this is a symphony orchestra where the soloist cannot perform without the backing of the full orchestra and conductor. One false or missing note can ruin the performance.
Actors cannot perform without a wardrobe, makeup, lights and a support team.

In the late 70's consultants at McKinsey & Company developed the 7S model. It is based on the premise that an organization's effectiveness depends on the alignment of seven factors: strategy, structure, systems, skills, staff, style, and shared values. Does your staff have the same vision and focus and do they share your values? If not you may find it difficult to manage and do business.

[Blurock]

So if the customer is king, why do shopkeepers park their cars in front of their own shop so that there is no parking for customers? The customer now has the opportunity to walk past all the other shops and see all the alternatives he can get from competitors.

If the customer is king, why does the staff at the till ignore the customer and continue talking to the teller next door as if the customer is invisible?

I was impressed the other day on how a young lady at Postnet treated customers on a very busy morning. Each new arrival was greeted in a courteous and friendly manner and made to understand that they will be attended to ASAP. People don't want to be ignored and they do want to see a friendly and smiling face. Create a welcoming atmosphere and customers will come back. A value add often leads to the ability to charge a premium price.

[Blurock]

Do you still think that the purpose of a business is to make money? So, do you have a tree to grow money or a machine to print it? NO, the purpose of a business is to create a customer, because the customer is your source of income, not the product or service that you sell. The next step is to retain that customer, which entails careful planning and strategic thinking to build a sustainable business model.
A business is an economic activity that involves the exchange, purchase, sale, or creation of goods and services with the goal of profit and customer satisfaction. So many people think that they can capitalise on an idea or sudden need to make a quick buck. When load shedding starts, they quickly import the commodity or product required which may have nothing to do with their current business or profession.
We’ve seen that with the onset of load shedding. Every Dick Tom & Harry started importing generators and so many burnt their fingers because that was not their core business, and they knew nothing about the industry. The same is now happening with solar power.
These are not business ideas and are not sustainable. These are schemes to make money. You may just as well go and gamble at the casino, that is also a scheme to make a fast buck and most of the time it doesn’t work!
The purpose of a business, in other words, is not to make money. It is to make a profit so that the business can do something more or better. That “something” becomes the real justification for the business.