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What Are The '5 Parts of Every Business'?

There are 5 Parts of Every Business, each of which flows into the next:

1. Value Creation - Discovering what people need or want, then creating it.
2. Marketing - Attracting attention 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 worthwhile.

Take away any one of these five parts, and it's not a business.

When planning a new business or analyzing an existing venture, always begin with the five parts - they will help you discover any major issues or gaps quickly.

Josh Kaufman Explains the '5 Parts of Every Business'

Roughly defined, a business is a repeatable process that:

1. Creates and delivers something of value...
2. That other people want or need...
3. At a price they’re willing to pay...
4. In a way that satisfies the customer’s needs and expectations...
5. So that the business brings in sufficient profit to make it worthwhile for the owners to continue operation.

It doesn’t matter if you’re running a solo venture or a billion-dollar brand. Take any one of these five factors away, and you don’t have a business — you have something else.

• A venture that doesn’t create value for others is a hobby.
• A venture that doesn’t attract attention is a flop.
• A venture that doesn’t sell the value it creates is a non-profit.
• A venture that doesn’t deliver what it promises is a scam.
• A venture that doesn’t bring in enough money to keep operating will inevitably close.

At the core, every business is fundamentally a collection of five Interdependent processes, each of which flows into the next:

1. Value-Creation. Discovering what people need, want, or could be encouraged to want, then creating it.
2. Marketing. Attracting attention and building demand for what you’ve created.
3. Sales. Turning prospective customers into paying customers by completing a transaction.
4. Value-Delivery. Giving your customers what you’ve promised and ensuring they’re satisfied with the transaction.
5. Finance. Bringing in enough money to keep going and make your effort worthwhile.

If these five things sound simple, it’s because they are. Business is not (and has never been) rocket science — it’s simply a process of identifying a problem and finding a way to solve it in a way that benefits both parties.

Anyone who tries to make business sound more complicated than this is either trying to impress you with their worldliness or sell you something you don’t need.

The 5 Parts of Every Business are the basis of every good business idea and business plan. If you can clearly define each of these five processes for any business, you’ll have a complete understanding of how it works.

If you’re thinking about starting a new business, defining what these processes might look like is the best place to start. If you can’t describe or diagram your business idea in terms of these core processes, you don’t understand it well enough to make it work.

Questions About The '5 Parts of Every Business'

• Think of the business you’re working on: what are the five core processes?
• Can you describe or diagram them in detail?
• How do they fit together?

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"A business is a repeatable process that makes money. Everything else is a hobby."

Paul Freet, serial entrepreneur and commercialization expert

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