The Purpose of a business

[Blurock]

What is the purpose of a business?

Nine times out of ten I get the answer, "to make money."
Is this why some entrepreneurs try to take shortcuts, supply sub-standard materials and inflate prices?

The question is; where does the money come from?
Obviously from customers.

So should the purpose of a business not be to create a customer? Once you have created the customer, the next step is to retain the customer for repeat business.
So how do you retain a customer and keep them happy and coming back for more? (and also tell their friends).

[Justloadit]

Unfortunately the type of business you own will dictate if it will be a repeat customer. If it is a consumable, then yes you are looking at repeat business.

If I supply a product once every 10 to 15 years, then the rules of the business change with respect to repeat customer.

This does not mean that you become a maverick and supply rubbish to get your money, you will soon get shot down in flames by litigation, especially high end products.

What I see is presenting professionalism, quality and a good service, in order to get a referral to a new customer based on your performance as the business.

[Isetech]

I am sure if you asked any of my customers why they support our business, why they keep using our services, some for as long as 15 - 20 years. I have had one customer, who I had be doing work for over 15 years, turn around one day and said they didnt believe they could trust that I had their best interest at heart, I walked away and have never gone back.

They answer would be trust first and quality second.

If I was in the business of making money, I would be doing things completely different to the way I do things now. I would be a lot less concerned about my reputation, as an honest person, there would be no ethics in the manner in which I conducted my business and my main focus would be to get rich as fast as possible.

I am in for the long game, not the quick buck. This should be the question you are asking. It is easy to make quick money.

What is the purpose of a business?

So should the purpose of a business not be to create a customer? Once you have created the customer, the next step is to retain the customer for repeat business.
So how do you retain a customer and keep them happy and coming back for more? (and also tell their friends).

[Krono9]

I say the primary purposes of most businesses is to generate a return to its shareholders/owners. How you create a sustainable profit generating business is influenced and determined by how you maintain your relationships with your various stakeholders (be it customers, suppliers, employees) through the manner in which you do business.

[Andrew_van_Zyl]

I had a builder do some work on a boundary wall that had collapsed. A week into the job he wanted more money. I had already paid him 75% deposit. 3 Weeks on, after paying him in full he hasn't got the cashflow to finish the job.

This man goes from project to project, swallowing deposits and thinking it will never catch up with him. He wonders why I don't want to partner with him on projects.

In my business I am proud to say my customers give me their house keys to do work while they are away skiing in Europe. I have fired one customer (yes you can do that) but I have never had my integrity called into question.

So for me certain things have to be a given, such as trust and integrity. After that comes making a reasonable living, and deriving pleasure from what you do.

[Blurock]

It is important to understand the dynamics and principles of business if you want a sustainable business.
Research has shown that family run organisations in general are more successful. There family-owned businesses in Europe that have been running for ages and the baton passed on from generation to generation. Maybe its the passion or maybe its old family values. Big corporations tend to be cold and clinical and mired in controversy.

My take on this is as follows:
Principle no 1: Carefully choose the Right Supplier. A supplier can make or break a business. (Ethics and trust)
The supplier has to be able to support your business by delivering a quality product/material on time and at a reasonable price.
You may lose business if the supplier runs out of stock or supplies you with sub-standard products leading to complaints from your customers.

Once selected, support your supplier by paying on time (you may need to lean on him someday when you have cash flow problems).
Build a strong relationship so that you may get preference service and attention when needed.
Be loyal to your supplier and do not force him to compete with the guy selling illegally imported cheap stuff.
There may be a long list to add to this, but a supportive and reliable supplier is the foundation of any business.

[Blurock]

The importance of choosing the right supplier. This is the cornerstone of my business.

A bad supplier can sink your reputation and your business.
Imagine buying components to be assembled into a product and the components fail on the assembly line.
The assembler is stopping the line to take out failed product and charge you for the stoppage and re-assembly.
That is not only profits down the drain, but also your reputation and the quality perception of your product.

A bad supplier may also not have stock when you need it, resulting in missed sales and opportunities.

A good supplier on the other hand, will see that only quality products are supplied on time and when required.
I know of a supplier that actually have staff on the floor of their customer to see that they have ample stock when needed and to attend to problems and demands immediately. Very much like quality merchandisers in chain stores who keep their displays fully stocked.

Choose wisely and nurture your good supplier. Pay them on time so that you can also lean on them in hard times.
Principle: Never abuse a supplier!

[Justloadit]

Also be wary of changing supplier for a better price. Invariably the components are not the same quality. I know of one instance, not me, but to save a few cents on a resistor, they had to recall 20,000 units, a nightmare both in the recall and the modification.

Another one is to occasionally check the prices that are charged, there is a thing called price creepage, induced both by the supplier or the buyer making a return for himself.
I have a spreadsheet which gets updated every time the stock arrives, and I compare prices from the previous purchase. Fortunately I can remember the costs and pick up the price creepage easier than most.
What you can do is create the spreadsheet for every month, and then draw a graph. Excell is very easy to do this. The graph lines immediately indicate the creepage.

[Blurock]

My second building block is staff.
Building a good TEAM is essential. There is no I in TEAM and therefore we choose people with the right attitude who are willing to learn and achieve. Don't employ "yes" people who will always agree with you. Also employ people who may challenge you on different aspects. Diversity in culture, language, sex and age may bring a fresh thinking to your business.

Managers should be non-existent as a title puts a chip on their shoulder. A team leader is similar to a captain of a sports team who participates in the game, but is willing to take the risks and responsibilities required of a leader. Encourage continuous learning and improvement and a strive for excellence. Talk to staff and get feedback on what works and what not. Be a leader, not a dictator!

[Isetech]

You get the real managers, who start work before everyone else, make a point of greeting every single person in the morning, listen to people, who have challenges in their life and handle situations in a manner which encourage the staff to want to come to work and get shyte done.

I have watched a person triple a companies turnover in a matter of months. not because he has a piece of paper that tells everyone he can mange people, because the manner in which he treats people.

I have also worked with a person who gets shyte done, not by shouting his mouth off, but rahter getting stuck in and making it happen. When people are expected to work late into the night to get a project completed, that person organsies food for everyone, works with the team to get it done, at 2 am when the last person is preparing to leave that person is still making sure eveything is done right, staff are still functioning, making sure people have transport to get home or a place to stay.