5 Key Concepts Every Entrepreneur Must Understand to Succeed in Business 

What are the most important business concepts that every entrepreneur should understand? 

You don't need to get an MBA or attend a business school to succeed in business. Virtually all the knowledge and information you need to succeed for the first time in a small business is available for free in the real world. 

This article introduces five basic and very important concepts that you must understand to succeed as an entrepreneur or businessman. 

These concepts help you better understand your business opportunities and initiate informed and actionable business decisions. 

The best part is that these concepts help you think, speak and act like a modern entrepreneur. All of the concepts learned here are important. I think this is a basic and concise course in business and economics. 

Why is it important to learn these concepts? 

Today's world is a fast paced and rapidly changing world. We live in an age where information is everything. 

But if you don't understand, where is the good news? Terms like GDP, ROI, and customer segmentation are so common on corporate news and websites that aspiring entrepreneurs face when trying to understand all the business and business jargon we all know. I can't imagine the difficulty. .. 

To survive in today's business world, you need to understand the basic concepts and speak a language. 

In addition to the personal benefits of understanding these concepts, it also helps in the short and long term as you progress on your business trip. 

Imagine you are facing an investor who is considering investing in your great business idea. He asked me, "What would be the return on investment if I invested in your business?" Do you feel discouraged and stand there as if you just saw a ghost, or do you impress them with your knowledge? 

Whatever you do, it may be the difference between getting the capital you need to start your business or losing potential investors and regretting your ignorance. Hmm. 

No one expects every entrepreneur to have an MBA or business education. But everyone expects you to know the basics of business. 

In my opinion, these concepts are very helpful for entrepreneurs in making business plans and giving them meaning. The 

Business Plan is not an essay or document in English. You need to write in a language that excites and convinces investors, banks, potential customers and more. Whether you use business planning software, hire a business plan consultant, or use a business plan template, you need to understand the language of planning. 

Now that we know why these concepts are important, let's take a closer look... 

1- Client 

You might be surprised to start with this "simple" term. 

Today, the term "customer" (or "consumer") is so commonly used that very few people understand what it really means. 

Like it or not, customers are and will continue to be the most important part of any business. It doesn't matter if you rent an impressively decorated glass office, hire an MBA staff, or make a beautiful product. If you don't have customers buying the product or service you sell, you don't have to do anything. Limit! 

Now you know why they say "customer is king". 

If customers are the most important factor in your business, what do you think is the first step every entrepreneur should take before starting a business? 

That's right. First you need to define your customers! 

Who are the customers of the product or service business you are about to start? What he wants? How, where and when do you want it? What do you dislike about the products and services you are currently using? Where do you live and work? How much can you buy for this product you are about to sell? Will it be more sensitive to the price and quality of your products? 

The more specific your answers to these questions, the greater the success and profitability of your business. Understanding customers means that you should always see your business from the perspective of your target customers. Regardless of your preferences, tastes, or personal preferences, if customers don't want or like what you sell, they won't buy. And if they don't buy it, your business will die!

 A good example is very useful here. 

Hassan is an up-and-coming entrepreneur who wants to start an ice cream business. Fortunately for him, he found that (through this article) he needed to identify and understand his target audience in order to succeed in his business. 

He said to himself, "Who are my customers? He did some basic market research and found: 

Who are Hassan's customers? 

He Customers are students attending local kindergartens and elementary schools (until Friday). They end the day at noon and are always looking for something cold, tasty and refreshing to quench their thirst and heat. Their current choices are cold water and cola. 

Cold water is cheap and comfortable, but kids want to enjoy something delicious. On the other hand, Coca-Cola is delicious, but it's expensive and some kids can afford it. The flavors of chocolate, vanilla,

and strawberry are the three best ice cream options for kids and often prefer to put them in a small bowl to keep them from melting. These kids also enjoy buying ice cream from friendly vendors and will most likely remain loyal customers. 

Bingo! Hassan touched something! By identifying customers, Hassan is poised for success because he knows exactly what to do to satisfy them. Satisfied customers always lead their businesses to success. 

The next day, when the school gate opened, Hassan was there with a big smile in front of the children waving from the ice cream truck. 

You don't have to be a prophet to predict that Hassan's business will prosper and be successful. As long as Hassan continues to give his clients what they want, how they want it, where they want it and when they want it. 

Lesson : Entrepreneurs, get to know your customers!

2- Supply and Demand 

Every market has two main groups: buyer (demand) and seller (supply). Supplier alone cannot create a market. Buyers too. 

All entrepreneurs and businessmen are essentially suppliers. 

If you are in business, you have to offer (sell) something. Products (fruits, vegetables, electronics, etc.) or services (consulting, taxi business, etc.). In order for suppliers to make money and continue to do business, customers must be willing to buy the products and services they sell. 

Let's talk a little more about the question. 

The concept of "need" represents the consumer's desire and willingness to pay the price of the product they sell. The question is clearly different from "wish" and "wish". Some want and some want, but if you're not willing to open your wallet and pay, that's not a requirement. 

Suppose you have a store on a college campus and you work in the soap business. Each of my soaps sells for $ 1 and students love to buy them in sweet scents and beautiful packaging. Most importantly, the students love to buy my soap because they can afford it. Yes, my soap is in great demand. 

Imagine the price of each soap suddenly rises by $ 50. What do you think will happen? There is always a demand for soap, but there is no doubt that no soap will sell! 

Why? There is no need. 

The pupils still need soap (bathroom, laundry, etc.), but the soap is too expensive to pay. They still remember the smell and color of my soap, but I can't afford it. What they think of my soap is no longer "necessary". My soap has become a wish. 

Quantity, like price, is another factor that influences supply and demand. Imagine there are other soap shops like me on campus at, and we all sell soap for $ 1. The problem is that the school only has 100 students, but it sells over 1000 bars of soap. What do you think will happen in this market, assuming students only buy one type of soap? 

Some sellers are starting to lower their prices to attract more customers. Conversely, if there are more students than soap, the seller is more likely to raise the price and run away. 

This brings us to one of the most basic but very important principles of economics. This is called the principle of supply and demand. The principle says that if supply is greater than demand, prices will generally fall. And if demand is greater than supply, prices can go up. 

Lesson : Understand the nature of market supply and demand. It can help you plan for your business, get better prices, and make a profit. 

 3- Competition 

 What do you think is the only company in your country that sells mobile phones? 

 That's great. This means that you can sell your favorite phone at any price you like. Red is your favorite color, so you can decide to sell only red phones. 

Who cares what the customer wants? If they don't like the quality, color or price of your phone, what other options do they have? You are the only company they can buy. They may hate, blame and complain about your bad customer service, but it won't hurt your business. As long as they need a cell phone to communicate, you will always be in business! 

Economists call this type of activity a "monopoly". 

Unfortunately, most countries of the world now operate in a "free market economy", anyone with sufficient means can start a business, and the prices of goods and services are those of a single entrepreneur, company or individual, not from the market . 

Put simply, the market is competitive and every company tries to outdo the others to get more customers.

Every day you wake up as an entrepreneur, there is another business somewhere competing with you and trying to run ahead of you. And what are the rewards that businesses compete for? Customer! Remember that customers are the most important factor in any business. 

All businesses continue to look for new and effective ways to be more attractive to their customers. If they are more attractive, they can attract customers from competitors. 

 Competitors can "steal" customers by offering higher quality products, more value, more convenience, and services that provide greater satisfaction. If your customers think they can get better deals and enjoy the more friendly service of your competition, you can lose them forever. 

 Competitors are constantly looking for weaknesses that can be exploited in your products and services. That's why every business should have a “competitive advantage”. Quality that makes it difficult for other companies to exploit their weaknesses or imitate their style. 

 Famous brands, patented products, or "attentive" customer service are just a few of the competitive benefits a company can have. 

 In the business world, only the strong exist, and competitive advantage is the force that helps you survive in the market. It is the one and only. And as long as this benefit is what your customers want, you will continue to be successful in your business! 

Lesson : If your business cannot compete, it will surely die. Find your competitive advantage and keep improving it!

4- Return on Investment 

 Now let's dig a little deeper into the term. 

“Return on Investment” or ROI is a popular term among investors, bankers and professionals. ROI is often used when an investor or entrepreneur is considering a variety of trading or investment options. A good example is useful here. 

Rebecca is currently working between the ages of 9 and 17 and dreams of starting her own business. Like many emerging entrepreneurs, he was looking for useful business ideas that could turn into successful ideas. 

Finally, on smallstarter.com, she came across three interesting business opportunities: pig farming, importing small items from China, and a laundry business. The problem with is that she has enough capital (about $6,000) to start a company, so even if he wanted her, she couldn't start all three businesses. As a result, he now has to choose one of three business ideas and turn it into a profitable business. 

To choose the best option, Rebecca needed an objective and objective way to evaluate the three business opportunities without disturbing her personal feelings. 

My father raised pigs when he was young, so if he chooses he will raise pigs. He loves pigs and has a lot of experience in pig farming. 

But is pig farming the best and most profitable for you? What if the import trade made more money than pig farming? How did he get to know him? The 

ROI is one of the most powerful tools to help entrepreneurs and entrepreneurs choose the best and most rewarding of several options. do not be afraid. Calculating ROI is very easy. You can easily calculate the return on investment for many business opportunities by dividing the 

profit (the profit you generate) by the investment cost (the cost of starting and running your business). 

From this simple formula, Rebecca calculates the ROI of three opportunities, as shown in the following table.

Based on these results, the laundry business is likely to offer the highest return on investment (ROI) of all other options. The 

commercial laundry option returns three times (300%) the capital invested by Rebecca. At $ 2,000, it's the cheapest to start with of all the options, but surprisingly, it offers the best returns. 

Based on these findings, Rebecca's best bet is to start a laundry business. 

Lesson : Always choose a trading or investing option that maximizes your return on investment. 

5- Fixed and variable costs 

To earn money, you have to spend it. 

Expenses (or expenses) are anything you spend or pay to start, run, and maintain your business. Rent, equipment, employee salaries, internet bills, shipping, advertising, and bank charges are just a few of the costs most businesses face. 

Unfortunately, most SMEs incur many costs that could have been avoided or significantly reduced. Understanding costs is one of the keys to success in any business. Cost is important because it is one of the two factors that determine whether a business makes a profit or loses (the other is "income" or "sales"). 

No matter how much your business makes, if your expenses are greater than your income, it is absolutely impossible to make a profit. 

Basically, there are two main types of costs that you should know as a contractor and a contractor. These are fixed and variable (or "marginal") costs. 

Fixed costs (also known as "total costs") are costs that do not change regardless of the number of products or services a company offers. Rent and equipment / machinery are two of the most common fixed costs. 

Let's say you paid $ 1,000 for rent for new laundry and dry cleaning. Whether or not you are in the first year of your business, the rent you paid for that year will not change. The same applies to office equipment, salary, insurance, and electricity / water charges. These are all fixed costs. 

Variable or "marginal" (as the name suggests) costs are costs that vary according to the level of activity of the firm. The more products you sell and the more services you offer, the higher the cost of this type and vice versa. 

Again, using the example of the laundry business, in your opinion what kind of costs can be considered variable costs? There are varying costs for items used to wash customers' clothes, such as laundry detergent. The more clothes you wash, the more detergent you use (more expensive) and the less you wash, the less it costs (lower cost). 

Most entrepreneurs make the mistake of spending too much money on fixed costs when starting a business. They buy machinery and equipment when they need to rent (cheaper and more flexible). They hire more staff than necessary and add huge (fixed) salary costs if they are hired less or can be paid on the basis of salary and commission (this can vary more). 

Entrepreneurs should always be aware of the impact of fixed and variable costs on their business. 

The only way to overcome fixed costs (if you cannot avoid or reduce them) is to start a business. The higher the fixed costs (total costs), the more goods and services you have to sell to make a profit and vice versa. 

For more information, check out this very popular article. Five Common Economic Mistakes That Kill Small Businesses in Africa 

These are very important business concepts that every entrepreneur should understand 

This article is the first in a series aimed at increasing knowledge of key business concepts (and how they work). 

Entrepreneurship is an exciting and bitter journey. As you progress, you will need to absorb and apply the knowledge gained. 

My favorite quote is:  “Education is what others do to you. The learning is for yourself. 

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References:

Credited to author John-Paul Iwuoha

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