Making money is simple but not easy

Why making money is simple. Have you ever wondered why some people seem to make money hand over fist while others just seem to spin their wheels? Making money is nothing more than a result of adding value. Anyone can do that. Adding or providing value to someone happens every time you spend a dime. Next time you pull out your wallet ask yourself what it was exactly that you needed and could not facilitate on your own. If you bought a gallon of milk, did you actually need the milk or perhaps you were more concerned about a crying baby. I recently had to go to a close gas station and paid too much for a gallon of milk but was 100% ok with that because I had a baby at home and time was of the essence.

In a free market things are sold on three predominant basis; cost, quality, and lead time. You buy on a cost basis when you are shopping for a value at the lowest price. This is often commoditized items that are available everywhere and don’t differ from one another. You buy on a quality basis when you purchase an item that “must be” a certain way. An example of this could be custom furniture or premium gasoline. You forgo other options when buying on a quality basis because your ultimate need stemming from the product or service is specific and recognized. Finally you buy on a lead time basis when time is more important than any other metric. This was the case when I purchased the milk for my crying baby.

Can you see the value? Value is the thing that meets the need and this can be provided by a product or a service. An interesting thing to note is that the product or the service itself is not the value. The value comes from what the product or service provides. You don’t pay for window washing because you want to watch people wash windows, you pay to have clean windows when the washing is complete. The same holds true for all services. The service itself is of zero value if in the end the customer’s expectation is not met.

This holds true for products as well. Any widget you buy from the hardware store is only of value because of what it will allow you to do. A hammer is worthless unless you have to drive some nails. You don’t need a wrench if you don’t have any bolts to tighten or loosen. A tape measure is a paper weight if you don’t need to know the dimension of something. Your vehicle exists to get you from point A to point B. To some this may seem obvious to others it may provide a new angle to think about the products or services you provide.

Why making money is not always easy. While making money can be simple it is often times not always easy. There are a number of reasons for this but I believe the largest one is the competitive nature of free markets. In free markets everyone has the option to compete in a market space. This means there are a number of other players out to offer the same value that you want to offer. Because of this you won’t have an advantage as you enter a market simply because you are in the market. This can seem frustrating on the surface but it is also one of the things I find most intriguing about business. Those who do well in their business are part of a continuous dance of trying to figure out how they can stand out from the crowd.

People are inherently selfish and as a result the free market is rife with stiff competition. The lively hood of people and their families is pushing many people to figure out how to find a way to the top and additionally how to stay there. What better motivation is there to compete? I believe this is one of the underlining realities that feed into the small business failure rate. People have a novel idea to start a business and think there isn’t much too it only to find that absolutely nothing will be handed to them if they don’t compete. All of the low hanging fruit was snatched up a long time ago by someone else who was already treading down that path.

 Adding value is hard work. Ask anyone who has had many years of success in business and I bet they will tell you it was hard work. Making money can be simple and chalk full of hard work at the same time. This is not a bad thing all it means is that you will need to dig in if you want your company to succeed. In fact, the sooner you realize that simply working harder you have an advantage the sooner you will find yourself as the market leader. Hard work is one of the single biggest differentiators in small business markets.

The market will change.  Another dynamic that makes business challenging is that the market place is constantly changing. Driven in part by the competition stated earlier the marketplace is anything but stagnant. Business is a bunch of people interacting and if there is anything we know about people it is that they are not robots. Companies that get comfortable with their market position won’t enjoy their position for very long. This is one of the biggest reasons small business can have an advantage over large business. Large businesses can’t move at the speed of a smaller organization and as a result is at a fundamental disadvantage in many respects.

Other factors that play into the flux of the market are technology and rising costs. As a market matures and spreads its tentacles out disruptive technologies will sprout up to change the game. Technology is simply a force multiplier and as a market grows it will gain more recognition from others. As this happens more and more people will be looking for ways to do what is being done in a more efficient manner. Many times this can be driven by rising costs. Rising costs are constant over the long run. This means that in 10 years your product or service will cost more than it does today if nothing is done to improve how it is delivered.

What we know. In the end we know the secret to making money is focused persistent hard work. Once you have your niche defined and you are digging in keep this in mind. “Success” won’t happen overnight and it won’t hit you like a ton of bricks. It is a slow process that will require hard work and strategic thinking. It is not rocket science and if made more complicated than it needs to be will be much harder to attaint than simply getting out there and getting something done.

TJ

About TJ

Engineer and Entrepreneur