A business can be divided into three components: people, products, and profits. You can say people, products, and profits are the legs of a business. Each component must stand on its own and the right combination of each can create synergy to improve the businesses ability to thrive. Synergy means that the combination of the three P's creates value greater than the sum of each part. The right blend of people and products provide a competitive advantage to which a company can out maneuver its competitors and find customers. Customers are paramount to a business. The greater the number of customers and amount they are willing to spend the more potential for profit. Profit is the net dollars left over after expenses are subtracted from revenue. All companies must make a profit or they will die.
People are the most important component of a business. It takes people to run a business and deliver a product or service. People coordinate to create strategy, implement and execute tasks, and measure performance. Employees and owners have a greater likelihood of success if they believe there is purpose behind their work and understand where they fit in the organization. Good leadership understands that success is driven by a company’s people. Leaders help the organization embrace the company culture so they can execute strategy and work towards a common goal. An entire company aligned in one direction can do great things. In addition to experience and education, companies look for people with good communication skills and a strong work ethic. The best companies consistently develop, retain, and attract talent.
A company's product is the good or service or the combination thereof that fulfills a want or need of a buyer. In the open marketplace companies specialize to offer a product that can be delivered efficiently and competitively for a profit. Smart companies or individuals that want to start a business look for competitively advantaged product. A few of these advantages can be knowledge and experience, location, rights to resources, or who you know. A good way to find a niche is to take a look around and ask “Is there a problem where I can provide a solution in exchange for money?” or “Do I have access to something somebody wants or needs? How do I get it to them?” Sometimes it means you do something better than anyone else. Other times you offer a combination of products or services that fit a need that nobody is supplying.
Profit is the lifeblood of a company. Simply stated, generating a profit means that there is more money coming in the door than going out through business operations. A company makes money by offering a good or service that buyers choose to buy at a mark-up that exceeds the cost to deliver such a product. Generally speaking, companies that do well are those that charge a reasonable price and control costs. Costs are improved (lowered) by finding ways to increase efficiencies, measure return on spending, and having clarity of where monies are allocated. Profits are good because they can be reinvested into the company, distributed to owners or shareholders, or held as cash. Profit is essential for the long term survival of a company.