The Purpose of a business

[Isetech]

Without money there is not business, the amount of money determines the scale of the company.

How you you mange the money will determine the growth or demise of the company.

There many factors to consider that it is literally impossible to know exactly what works for everyone, hence the massive fail rate of companies.

[Justloadit]

In my opinion, the purpose of a business is to make money.
What is important, is what service you provide, and product do you supply for the money you expect to make.
Running a business at cost is not a business.

The same question can be applied as follows:-
Do you work for your business, or does the business work for you?

[Derlyn]

My little one man business has never been about "making money".

Being my own boss has afforded me the flexibility of being able to follow my passion and do what I want to, not what the boss tells me to.

I've been a fisherman, chicken salesman, car dealer, nurseryman and electrician along the way.

Every venture of mine has been successfull. The fact of the matter is that I have never measured success by my bank balance, but by the number of people I've helped and made happy. I always strive to ensure that the value of my service is more than what I charge the client. I've never been without an income and not once in my 66 years can I remember ever going to bed hungry.

My very simple philosophy has treated me well. I am truly blessed.

I am still referred to by some people as the chicken man even although I stopped selling chicken about 25 years ago.

Blurock is correct about the supplier being able to make or break a business. That's what brought my thriving chicken business to an end. A greedy supplier.

I have a house, a car and a pantry full of groceries, but cannot take any of it with me one day. The only thing I will be taking with me is a number. The number of people I've helped and made happy. The bigger that number, the better. Having my own businesses has certainly made that task a lot easier.

[Justloadit]

@Derlyn, I agree success is not measured by the bank balance, but with out a bank balance you can not follow your passion, as you will not be able to afford to.

So the profit from your ventures funds your passion, and in the end means the business is about money.
The difference is, do you sell your soul for money?
On many travels, I have had to remind myself that these rough stones I am stepping on is part of the path I have to travel to enjoy my passion, and if I don't have some money at the end of the trip then it will not allow me to enjoy my passion.
Your passion can not always provide if it can not make a profit.

[Derlyn]

@Justloadit

Yes, I agree. One must make a profit. The question is how much ? This differs from person to person. We are all different with different needs and passions. Some passions and wants cost plenty, others not. Each one is different.

Another factor is the distance one has already travelled along that road called life. My expectations and goals 40 years ago were a lot different to what they are now.

Then, I was working towards owning a house. No more the case. Then, I had to drive the latest shiniest car. No more the case. I now find myself in the comfort zone of not having to have those "keeping up with the jones" items, that force one to maximise profits, no matter what.

For most people, the further one has travelled along that life road, the more one realises that small acts of kindness, which need not cost loads of money, become the most important part of one's existance. That is where I presently find myself and boy o boy, is it good or what ?

Anyway, that's what makes this forum such a lekker place. To be able to debate these things, hear other peoples points of view and above all, to try and be of assistance to others.

Have a super evening.

[Blurock]

The purpose of my business is NOT just to make money, the purpose of my business is to create customers to generate cash flow so that I can earn an income. Repeat business from existing customers is almost like an annuity. To this I need to add NEW customers to grow my income.
I am not interested in earning a fast buck, that is short term gain with no repeat business. My name and reputation is worth more than that. Maybe my markup is not high enough as some of my re-sellers have indicated, but our growth since inception has been outstanding, even through Covid. I can only thank the Lord for that.
Our FY 2023 growth in revenue was 50.89%. Growth for FY 2024 was 168.53%. EBIT 11.6% & 9.55% respectively. This is because I also pay commission for referrals and to resellers, some of whom earn more than I do.

[Blurock]

How do you spend your time as a business owner or manager? What do you do to make your day productive?
You say you are making money, but how?
Is it by managing staff, controlling stock, collecting debts or are you just waiting for the next order to land in your inbox? How do you make money?

If you are not actively seeking new customers, you are wasting your time. "Marketing and innovation produce results; all the rest are costs.
Marketing is the distinguishing, unique function of the business". (Peter Drucker) Because the purpose of a business is to create a customer; the customer is your only source of income.

[SPP]

No

[Blurock]

No

You are correct. But you have to click on the survey to vote.
People who say yes apparently do not have customers and don't have to find customers. They have a trees that grow notes or have a machine to print money.

All businesses are dependant on customers, whether you are a musician playing to an audience, an artist selling paintings, selling fruit and veg, installing solar, repairing plumbing, panel beating or whatever you do, you need someone to buy whatever you have to offer.

Van Gog is a perfect example. He was a brilliant painter but he had no customers. He sold one painting in his lifetime and died a pauper. Are you a Van Gog?

In my experience if the focus is only on the money and not on the customer, things start going wrong. We start cutting costs by diluting the formula, by inserting inferior materials or products. Reducing staff and appointing less qualified staff at a cheaper rate. Not paying overtime etc which eventually leads to greater staff turnover and inferior service.

If the focus is on the customer and not on the money, you will improve your offering in many ways and so gain more customers who will contribute to your profit.

[Blurock]

Without money there is not business, the amount of money determines the scale of the company.

How you you mange the money will determine the growth or demise of the company.

There many factors to consider that it is literally impossible to know exactly what works for everyone, hence the massive fail rate of companies.

Yes, but without customers, there is NO money!
Allow me to illustrate:
No of customers Average Purchase Repurchase rate Total Revenue
1000 ..................R1000 .....................2 ......................R2,000,000
Now lets increase the number of customers by 10% for good honest service and quality products.
1100 ..................R1100 ....................2.2 ....................R2,662,000
Can we perform even better and increase by 20%?
1200 .................R1200 .....................2.4 ....................R3,456,000
What if we increase customers by 50%. Not possible? ???
Everything is possible if you put your mind to it.

My previous business was hijacked by unscrupulous investors who stuffed it up anyway. Staff have been retrenched and it almost does not exist anymore because they chased the money.
I've started my current business with virtually nothing but my good name. It grew trough Covid while some others closed.
Last year my business revenue grew by 168% and more than 50% the previous year.

I am not a genius and have not found a secret formula. I just apply basic business principles and try to keep everything honest.
I've just realised that the customer is king just as much as cash is king.
I don't sell or buy on account. I don't do business with family. I have excellent suppliers and I support them just as they support me.
If there is a problem, I solve it as quick as possible or put pressure on the supplier or responsible installer to fix it.
No business exist without a problem or a difficult customer. Pay attention to those complaints as they become your most loyal customers.
I am jealous about my time and do not waste time on trivial pursuits that does not add value to my business.
Focus on what is important and become a champion in the industry that you are in.

So do you realise what the purpose of a business is? A business has Two basic functions; Marketing (to get more customers) and Innovation (to retain the customers).
Do this right and you won't have to worry about "making money".

[Derlyn]

@Blurock, couldn't agree with you more.

[Blurock]

This article by Pavlo Phitidis supports and illustrates my philosophy that the purpose of a business is to create new customers.

How to Boost Team Engagement by Focusing on Product, Not Just Financial Metrics (edited)
A business owner was struggling to get his team more involved in driving the company's growth. His goal was to increase revenue and his logic was straightforward: as the company grows, so do opportunities for everyone involved.
They removed financial targets from the conversation and shifted the focus to the company's products and how they directly impact the lives of customers. Aligning the team with the purpose behind the product, resolved much of the disengagement.
The business owner had previously focused solely on revenue numbers. But we redefined growth in terms of units sold, shifting the emphasis from money to the product's value. Every product sold represents a unit of revenue. To meet future forecasts, the company would need to sell five times the current number of units.
By approaching the problem this way, the focus shifted from abstract financial goals to concrete actions that positively impact customers. When the team understood that selling more products directly enhances customers' lives and experiences, they became more engaged. It gave them a clear direction and a sense of purpose beyond just increasing revenue.
The Power of Purpose in Team Engagement
This product-focused strategy helped the entire team gain clarity on what to focus on, where to direct their energy, and how to achieve collective success. They no longer viewed their work as simply contributing to the company's financial gain. Instead, they saw how their efforts could make a difference for the people who use their products.
By "productizing" the numbers, the team became more aligned and motivated. This approach created a broader sense of purpose and highlighted how their work contributes to something bigger than just the bottom line.

In reality, a product alone cannot generate an income. Every unit sold, was sold to a customer, because the product was aligned to the customer's needs. Now if you satisfy that need better than your competitors, you get recurring or repeat sales, which works like an annuity, ensuring a constant flow of revenue to the business. So, in the words of the marketing guru Peter Drucker, "the purpose of a business is to create a customer."

[Blurock]

Once we start analysing our business, we realise that we cannot MAKE money. We can only EARN money. We don't have a machine or a tree to grow money, so how do we EARN it?
We earn money by creating a customer to whom we can sell our service or product. If we do it right and if we do it better than the next guy, the customer will come back and voila! you have recurring income!

Don't tell me you're a plumber or electrician that will never see the customer again. He may need you again in the future and will remember the satisfying service. Or better still, he may tell his 10 friends while having a braai. If only two of them use you in future and they tell another 10 people about you.... Get it?

So, the purpose of a business is not to make money. The purpose of a business is to create a customer. Treat them well and you'll have a customers for life.

[Mike C]

He may need you again in the future and will remember the satisfying service. Or better still, he may tell his 10 friends while having a braai. If only two of them use you in future and they tell another 10 people about you.... Get it?

And the same is true of poor service. The customer might not complain directly to you, but will tell his 10 friends around the braai ... and your business will start feeling it!

[Blurock]

This video just confirms what I believe in.
The purpose of a business is to create a customer. The function of the company is to retain that customer.
Losing contact and seeing the customer's needs and preferences is a recipe for failure.