Value Creation

Every Business is fundamentally a collection of five interdependent processes:

1. Value Creation: Discovering what people need or want, then creating it.
2. Marketing: Attracting attentiona 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 worthwile

Understanding of your business idea with respect to these fundamentals is a necessary condiction to getting a good start.

If you want to improve your value as a businessperson, focus on improving skills directly related to the Five Interdependents mentioned above.

The Iron Law of the Market is cold, hard, and unforgiving: if you don't have a large group of people who really want what you have to offer, your chances of building a viable business are very slim.

back of the napkin calculation for the following parameters, rate each from 0 to 10, 10 being the most attractive.

• when any two markets are equally attractive in other respects, you're better off choosing to enter the one with competition
  • this means you know from the start there's a market of paying customers for this idea, eliminating your biggest risk.
• The existence of a market implies you're on the right side of The Iron Law of the Market
• The existence of several succesful businesses implies you're not investing in a dead end.

• Becoming a mercenary doesn't pay: don't start a business for the money alone.
  • cause : starting and running a business always takes more effort than you first expect.
• Even though a self-sustainable business can be identified,
  • setting up the systems necessary requires persistence and dedication
  • if Money was the only incentive, you'll probably quit before you hit the Gold lode.
• pay close attention to the things that you find yourself coming back to over and over again
• building or finishing anything is mostly a matter of starting over again and again : don't ignore what pulls you
• The trick is to find an attractive market that interests you enough to keep you improving your offering every single day.
• Finding such a market is mostly a matter of patience and active exploration.

• thinking objectively is important : there's a huge difference between an interesting idea and a solid business.
• learn to differentiate between hobbies, side projects and business.
• you can casually diversify your pursuits once the financial bases are covered
• before proceeding with your idea, evaluate it with the Ten Parameters to Evaluate a Market
• Then test it as quickly and inexpensively as you can before fully commiting.

In order to successfully provide value to another person, it must take on a form they're willing to pay for. Economic Value usually takes on one of the following 12 forms:

1. Product : create tangible entity, sell and deliver for more than what it cost.
2. Service : provide aid or assistance, then charge a fee for the benefits rendered.
3. Shared Resource : create a durable asset that can be used by many people, then charge for access.
4. Subscription : Offer a benefit on an ongoing basis, and charge a recurring fee.
5. Resale : Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.
6. Lease : Acquire an asset, then allow another person to use that asset for a predefined amount of time in exchange for a fee.
7. Agency : Market and sell an asset of service you don't own on behalf of a third party, then collect a percentage of the transaction price for a fee.
8. Audience Aggregation : Get the attention of a group of people with certain characteristics, then sell access in the form of advertising to another business looking to reach that audience.
9. Loan : Lend a certain amount of money, then collect payments over a predefined period of time equal to the original loan plus a predefined interest rate.
10. Option : Offer the ability to take a predefined action for a fixed period of time in exchange for a fee.
11. Insurance : Take on the risk of some specific bad thing happening to the policy holder in exchange for a predefined series of payments, then pay out claims only when the bad thing actually happens.
12. Capital : Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.