Characteristics of a Perfect Business
Written by James Garvin for Gaebler Ventures
How do you build the perfect business? What strategies do you need? This article explains the critical factors and strategies you need to have in order to build your successful business.
Trying to predict a start-ups success is like trying to predict numbers on a roulette wheel.
However, this doesn't mean that we can't try to put together a list of characteristics that would help us create the perfect business. Not all companies share every one of these traits, but many have one, two, or maybe even a handful of these traits that have allowed them to have built successful companies. Below is a list of characteristics that you should strive to achieve through with your own business and determine which ones you think should apply to you.
The Perfect Business should have:
1. Loyal Customers - Customer loyalty is the best way to achieving profitability with your firm as the cost of customer acquisition can be in the hundreds of dollars, ensuring that you protect your ROI from customer acquisition is key. Examples of businesses and firms with the most loyal customers are:
a. Dry Cleaning/Laundry
b. Grocery Stores
e. Household Consumer Goods
2. Faster, Cheaper, Better, or helps your customers make more money. Deliver products/services that help your customers achieve something in a faster, cheaper, or better manner or helps your customers make more money. Mint.com, the free personal finance manager helped customers manage their budgets faster and easier than the long-established Quicken personal finance product. As a result, Intuit, the maker of Quicken, acquired Mint.com for $170 million
3. Scalable - Your marginal cost should be zero or next to zero for each additional unit you sell. Firms like Microsoft, Google, PayPal, and EBay have extremely scalable businesses that allow them to generate profits with out any marginal costs. Each time a consumer searches on Google, Google gets paid for the ads that show up on the search paid, but the search itself does not cost Google anything.
4. Low Start-Up Costs - Raising capital can be a challenge and for businesses that require heavy up-front investments can be the difference between launching your business or not. Start-up costs for businesses have been reduced drastically due to the advent of free software that allows many entrepreneurs to build long-term successful organizations with minimal up-front capital.
5. Sustainable Competitive Advantage - Your business or its processes cannot easily be replicated by competitors. The systems that you build in your business should ensure that you are earning the highest profits in your industry, with the least amount of capital spent. Your competitive advantage should be established even in businesses with low barriers to entry and low start-up costs.
6. High Profitability - The pharmaceutical industry has for a long time had the largest return on equity, however other industries such as the newspaper industry have seen their profits erode due to a dynamic shift in digital media. Ensure you build a business that can protect your profitability in good times and bad.
7. Low Customer Acquisition Costs - In line with having strong customer loyalty, being able to acquire your customers at a fraction of your competitors means more profits for you and your firm. Free tools such as online social networking are one of many ways to acquire new customers for free.
James Garvin began his education studying biotechnology. In recent years he has turned his interest in technology to helping two internet startup companies. The first business was an online personal financial network and the second was an e-marketing platform created to help entrepreneurs demo their web sites. Currently a student at University of California Davis, James is spending his summer incubating two new online businesses and writing about his entrepreneur experiences.
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