5 Stages of a Profitable Business
Explore the five essential stages of building a profitable business: Value Creation, Marketing, Sales, Value Delivery, and Finance. Each stage plays a crucial role in ensuring long-term sustainability and profitability.
Curious about what it truly takes to launch a successful business? What are the crucial steps for ensuring long-term success, and how do you ultimately achieve profitability? These are questions that have crossed my mind many times. In today’s article, we’ll explore these topics in depth and reveal the essential elements that can pave the way for a business success.
Stage 1—Value Creation
As humans, we naturally prioritize our comfort, investing time, energy, and resources to make life easier and more enjoyable. For instance, we buy clothes to protect ourselves from the weather or to look stylish, feeling a boost of confidence when someone compliments us. In business, we might purchase accounting software to gain peace of mind about our finances or outsource hiring to attract top talent with minimal effort. People are continually seeking either physical or emotional comfort, willingly trading their time, attention, and resources to achieve it—and this is where value creation comes in.
What challenges do you face in your own life? Are others dealing with the same issue? Or perhaps you’ve noticed people struggling to achieve something important. If you have an idea that could help solve this problem—and it’s worked for you—why not offer that solution to others who need it?
For instance, let’s say you find it challenging to prepare healthy meals with a busy schedule. In conversations with friends or colleagues, you realize many of them face the same issue. So, you take the time to create a meal-prep system that allows you to prepare nutritious meals in under 30 minutes. If this approach works for you, you could start by sharing it for free to see if others are interested in trying your methods. If others find it effective as well, you could then consider selling it and offering your solution to a broader audience.
One person’s spending is another’s income. So, the key question becomes: What can you do to improve that person’s life? Starting a business with the mindset of creating value and making a positive impact is the foundation for long-lasting success.
Stage 2—Marketing
Marketing is the process of spreading the word about your business and creating interest in your product or service. The goal of marketing is to attract potential customers and build a loyal following.
Once you have a great product, it’s like an idle car engine—it won’t go anywhere on its own. You need to turn the key. Once the world knows about your product, if it’s truly good, it can begin to promote itself. As social beings, we naturally want the best for our loved ones, so when we find a product we love, we want to share it. For example, when someone asks for advice on which phone to buy, we often recommend the one we love to use.
In my opinion, marketing is most effective when it bridges the gap between your audience’s awareness of you and their first purchase. After that first experience: if it’s good, they’ll continue using it even if you stop promoting it. But if it’s bad, they’ll likely avoid it, no matter how strong your promotions are. Some may even try again but repeated poor experiences drive them away for good.
There’s a particular phone brand I tried years ago. After a disappointing first experience, I still don’t trust their products, even though they’ve likely improved. They have an impressive marketing team, and their ads make the product look great. But based on my experience, I’m just not interested.
Capture your audience's first attention with great marketing, and make sure your product truly delivers. While marketing can spark initial interest, it’s the quality of your product that builds lasting loyalty. When you succeed in both areas, your customer base will grow steadily—day by day, year after year. And as a result, your revenue will have only one way to go: up.
Otherwise, you’ll find yourself constantly chasing new customers without building a loyal base, ultimately leaving you with a business that’s just barely surviving.
Stage 3—Selling
Sales is the process of turning interest into revenue. It's about converting leads into paying customers through effective communication, relationship-building, and closing techniques.
Remember, people are always seeking comfort and solutions to their needs. A strong sales approach involves helping them find the best value that aligns with what they’re truly looking for. You gain credibility when customers feel you’re guiding them toward the best choice; you lose it if you insist your product is the only solution, pressuring them to buy. Quick sales might come from that approach, but it’s not sustainable.
Instead, start by asking questions to understand what challenges they’re facing. What are their pain points? At the same time, know your product inside and out. By combining thoughtful questions with your product knowledge, you can identify the ideal match for their needs. Once you fully understand their struggles, present the solution that aligns with what they’re looking for—even if it’s not your product. This approach builds a valuable bond of trust, establishing credibility and positioning you as their go-to person for future purchases as well.
In practice, you may find yourself spending an hour asking questions to understand your customers' struggles and just ten minutes explaining your product—then confidently closing the deal. You’re not simply closing a single sale; instead, you’re laying the groundwork for many future deals, as your customers will feel that you genuinely care about their needs.
Stage 4—Value Delivery
Value delivery is how you ensure that your customers receive the product or service as promised and experience the value they expect.
If you run a retail shop where sales are face-to-face, customers often take their purchases home directly. While this doesn’t require a delivery process, it does mean you’ll need to manage your stock smartly—keeping enough to meet demand without overstocking. For larger items, like furniture, arranging delivery is necessary. Similarly, online purchases require a reliable delivery setup, and for digital products like software, a smooth download process is essential. If you don’t meet these requirements, customers may cancel their orders.
Value delivery itself can also become an income stream. You can either include delivery costs within your product price or charge them separately. To reduce workload, you might choose to partner with a logistics service. Regardless of your approach, the primary goal is to deliver to the location your customers specify.
Stage 5—Finance
Finance is the backbone of your business, ensuring that your business remains profitable and sustainable in the long term.
Once you’ve successfully delivered the product or service, the customer will pay you—either the full amount in cash or as a credit over time. Now, while you’ve received payment, it’s not yet profit. This is where finance comes in.
Let’s start with full cash payments. You’ll need to ensure all transactions are recorded. Depending on how often you calculate operational costs—monthly or annually—you’ll only know if there’s profit after expenses are deducted. With installment payments, things become more complex. You’ll need to follow up regularly to ensure timely payments. Once the installments are complete, you can compare the total revenue received with the operational costs during the payment period to determine if you made a profit.
Defining a sufficient profit margin for your product is crucial. You never know when unexpected challenges might arise each month or year. Even if you excel in the previous four stages, a lack of adequate margin can lead to losses that make your efforts feel wasted. If you don’t have a solid grasp of your finances, things can quickly deteriorate. Understanding your financial situation is key to navigating these uncertainties and ensuring your business remains sustainable and profitable.
For necessity-based businesses—like supermarkets or fuel stations—raising prices can be challenging, but they ensure sales because, as the name implies, they provide essential goods. The key is to choose a location that is convenient for customers, which will help ensure that you sell out quickly and generate enough profit overall.
On the other hand, if you're in a niche market, maintaining a healthy profit margin is vital, especially during periods when daily sales may not be consistent. A solid margin will help sustain your business through slower times and keep you moving forward.
Monitoring and repeat
Now that you have a complete process for generating profit, the next step is to ensure long-term sustainability by repeating this process. However, it’s also essential to have a monitoring system in place to verify that everything operates as expected. In a business, these five stages are often organized into teams: an Engineering team for value creation, a Marketing team, a Sales team, a Logistics team for value delivery, and a Finance team. Each team is composed of individuals with similar skills and mindsets, but the nature and behaviors of the two teams can differ significantly.
For instance, you may encounter disagreements between the marketing and finance teams. When closing a deal, the marketing team might want to offer a discount to secure the sale, viewing it as the final incentive for the customer. Meanwhile, the finance team might object, pointing out that, based on their calculations, such a discount would result in a low profit or even a loss. It’s no surprise that these kinds of disagreements can arise frequently, and as an entrepreneur, it’s your responsibility to facilitate smooth communication between teams. Ensuring that everyone is aligned and understands each other’s perspectives is crucial for the overall success of the business.
Thank you for reading! We’d love to hear your thoughts on this article. Did you find the information helpful? Do you have any insights or questions? Please share your feedback in the comment section below. We appreciate your time and engagement!
We also have an interesting blog post that compares blogging and video creation, exploring their advantages, disadvantages, and operating costs. You might find it worthwhile to read!
