By Will Moore
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In this post, I’ll show you that you don’t need to know everything to excel in business. I’ll explain the underlying principles of running a successful business. And that even if you manage to get an MBA, secure outside investor funding, and have a rock-star business plan, that doesn’t guarantee success. What will put the odds in your favor is learning the core principles of what makes a company successful. And to do this, you don’t need to spend $40,000 and 2-4 years of your life going to business school.
Let me begin with the good things about MBA programs. If there is one advantage of going to business school, it’s that you get access to Fortune 500 recruiters, consulting and accounting firms, and investment banks. This all happens with on-campus recruiting. But this advantage only provides you with a possible interview at these corporations, and does NOT guarantee you a job. Not only that, but this advantage disappears within three years of graduating. At that point, employers don’t really care what you learned in school. They want to know what you’ve achieved since graduating.
First I’m going to start by defining what a business is.
A business is a legal entity that:
1. Creates value through products or services that people need or want (value creation)
2. Attracts people to buy those products or services (marketing)
3. Turns those people into customers (sales)
4. Ensures those customers are satisfied with their purchase (customer service)
5. Makes enough money to continue operating (more money coming in than going out)
“As to methods, there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.” –Ralph Waldo Emerson, Essayist and Poet
It’s impossible to learn everything there is to know about business. There are millions of books about business just in the United States alone. An estimated 11,000 new books in the business genre are published every year. Even if you read one book a day you wouldn’t even scratch the surface. That’s not even taking into account whether the book actually had useful content.
You just need to learn the fundamentals. Everything else you would learn in an MBA program is noise. Follow the 80/20 principle made popular by Richard Koch in his book The 80/20 Principle: The Secret to Achieving More with Less. By focusing on the important 20% and ignoring the unneeded 80%, you will learn how to start or improve a business, and handle even the most difficult business problems you come up against. While your peers spend years in school learning about business in the hope of a successful career and spending $40,000 to do it, you will have gained 2-4 years of experience running a business. This gives you a huge advantage in business and in life. Not to mention you can use that money you would have spent on tuition to fund your startup. And this is why I recommend that anyone who wants a career in business start a small company to learn first hand how it works.
Even if you decide to take an MBA program, you can run a small business on the side to out-compete your peers. It doesn’t matter what kind of business you start. It could be a small affiliate website that requires only 4 hours a week. Or a larger business, such as an e-commerce shop with employees and warehouse space. I plan on making a future post about starting an e-commerce shop, which explains the fundamentals of what you need to get started and make a profit.
“Many who are self-taught far excel the doctors, masters, and bachelors of the most renowned universities.” –Ludwig Von Mises, Austrian Economist and Author of Human Action
You can have the best business plan in the world and still fail. No matter what you do in life there is going to be unexpected obstacles that get in your way. This reality gave birth to the expression, “expect the unexpected”. By gaining an understanding of business you soften the blow of obstacles, and allow your business to adapt and grow while other companies file for bankruptcy.
It reminds me of traditional martial arts. Every year thousands of karate students are taught a punching technique known as Tsuki-waza. You’ve probably seen it before, if you’re every watched the popular Karate Kid movies. Daniel punches with one fist while bringing the other down to his hip. Then he does it again, but with the other arm. And if you’ve ever seen a UFC match, or a street fight, you will never see this punch actually used, even by karate practitioners. Why is this? Ramsey Dewey, a martial artist of 20 years who now teaches combat sports in Shanghai China, says “people have forgotten the original meaning behind the punch. Why do we pull one arm down to our hip? Because it’s an armbar.” The armbar is one of the joint locks used in mixed martial arts competition and submission wrestling tournaments which allows you to break your opponent’s arm if you put enough pressure on it.
Most modern karate student’s practice this punch without ever understanding it’s original purpose. If they happen to ever end up in an unfortunate situation where they need to defend themselves, the tsuki-waza karate plan will fail them.
The same can be said about relying on a business plan instead of understanding the underlying meaning behind the strategies.
Russell Brunson, the founder of ClickFunnels, started his business with no outside funding. It was just him, his co-founder Todd Dickerson, and a handful of software engineers. His two competitors at the time had $90 million and $140 million in Venture Capital funds. But because Russell understood the fundamentals of what makes a business successful, he grew his company into a $100 million machine in only three years, making it the fastest growing, non-VC funded tech startup in the world. His competitors went bankrupt. I plan on making future posts about ClickFunnels and how they could double your revenue within a year–and that’s a modest estimate.
The Wright brothers had no funding but they had a gift for understanding systems. Build something basic and cheap that works, and make small improvements. Test it in the field, and then make more tweaks. This is a fundamental principle of business called the Minimum Viable Product. It was this timeless strategy that allowed them to achieve what their heavily funded competitors could not. Like the Greek God Prometheus who gave fire to humanity, the Wright brothers forever changed the world by giving flight to the people.
MailChimp, an email marketing company from Atlanta, Ga, never accepted a penny of outside funding. Now they make $600 million a year, as of 2019. And they plan on hitting $700 million by 2020. MailChimp started as a paid service, but began offering a free plan in 2009. With that change in strategy they went from 85,000 users to 450,000 in less than a year. All while better funded tech companies were losing money and customers.
Now it’s time to explain the principles needed to operate a successful business. Keep in mind that there is no way I can cram all the fine details into one article, but I plan on making a separate post for each one to explain them better:
Create value through products or services that people want or
In this phase you need to do market research. Does your business idea benefit other people in some way? Is there a large group of people who want or need what you’re offering? A simple way to figure this out is to use Clayton Alderfer’s Hierarchy of Needs. This is a concept he created called ERG theory. It explains that people pursue three stages of needs:
Attract people to buy those products or services (marketing):
If no one knows your business exists, then it can’t survive. You need to write down who your primary customer is. And then figure out where they hang out. Once you do that, you need to put valuable information in front of their faces. An important point to keep in mind, is to not be annoying and spamy. Generally you want to provide value through your content 80% of the time, and only market to them for the remaining 20%. Some techniques you could use are:
Turn those people into customers (sales):
To excel as a business you must earn the trust of your customers. Your company cannot survive without people who actually pay you for your product or service. That’s what makes sales different from marketing. When you market to people, you’re getting them to come see your offer. But once they arrive, you must help them understand the importance that your product would have on their lives. It’s an equally beneficial transaction. And that’s how the best business’s operate. The best way to turn visitors into customers is to build trust with them.
Some things you can do to build trust:
Ensure those customers are satisfied with their purchase
This phase involves things like:
Make enough money to continue operating (more money coming in
than going out):
You must make enough money to continue operating, otherwise your company will end. Generating money is the difference between a business and a hobby. In terms of business finances, you don’t need to know more than the basics unless you plan on becoming a professional accountant or CPA. The formula is simple: make more money than your company spends. When your company makes money, it’s called revenue. And when you pay your employees a salary, or order more inventory, those are called expenses.
Your goal is to maximize revenue and minimize expenses. Profit is what you get when you subtract your expenses from your revenue. For example, if your company makes $100,000 for the year. That’s your revenue. And you pay yourself a salary of $50,000. Plus, you spend $20,000 on inventory. The calculation looks like this:
$100,000 - $70,000 = $30,000 Profit
I'm not an attorney, so you would need to check your local tax laws and consult with an actual attorney. But in the United States, you only pay taxes on your profits. In this example, you would pay tax on $30,000. Let’s assume your tax rate is 24%. The calculation would look like this:
$30,000 * 24% = $7,200 paid in taxes
You are left with $22,800 in profit. Some of that profit will need to be reinvested back into your business. What I mean by reinvest is to spend some of your profit on things that improve your company's ability to make more money. For example, hiring an expert to make an intro video for your website's homepage. Or increasing your marketing budget, which would get you more customers than the year before. These are what I call improvement projects. Every year you fund these improvement projects, you increase your revenue. Three years later you could have gone from making $100,000 a year, to $1 million. Keep in mind that not all improvement projects are equal. Some will make you more money than others.
Stop worrying about weather you have fancy credentials, and start learning the underlying core strategies of business. I write about these strategies in this blog. From doing your market research, to setting up a sales funnel, to digital marketing. Despite what MBA programs want you to believe, business is not that complicated. It’s actually one of the simplest fields you can get into once you understand the important stuff.
| Founder of Bargund Consulting
American patriot and software enthusiast with a love for the ancient classical world. I Live in Missouri, USA. I'm passionate about helping small businesses become more successful, and believe they are the backbone of the nation's economy. I also write articles about business, investing, and entrepreneurship.