How Does a Business Make Money?
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Hello Dreamers!
Many of you reading this today are ready to take on the world! You’re chasing financial freedom, a way to impact your community, or maybe you want to inspire the people you love the most. We all dream about being the next Steve Jobs or Jeff Bezos.
Everyone dreams of making it big, but most have no clue where to begin. That’s exactly why you’re here, reading this right now.
You’re looking for the blueprint, and I’m here to tell you… business isn’t a mystery. It’s a process. Once you understand how money moves, how value is created, and how customers are earned, YOU can start turning that dream into a reality.
I’m going to break it down for you in six simple steps that you can apply to any business idea I’m going to explain this like launching your first clothing line to building a global brand. By the end of this, you won’t just understand how a business makes money, you’ll know exactly how to start making your own.
.-LET’S DO THIS!
Step 1: Create Something People Want (Product-Market Fit)
Did You Know? The number one reason new businesses fail isn't a lack of money, but a lack of awarness. Over 40% of startups fail because they create a product nobody wants to buy.
A business starts with a product or service that effectively solves a problem or fills a need for a specific group of people. This is the foundation of product-market fit.
Deeper Dive into Product-Market Fit
Definition: Product-market fit is the sweet spot where your product's features and value proposition align perfectly with the needs of YOUR BOSS the customers. It's not just about having a good idea; it's about validating that a large enough group of people is willing to pay for that idea to solve THEIR problem.
A business has achieved product-market fit when it meets three key criteria:
Customers are actively using your product. This isn't just about downloading an app or visiting a website; it's about repeat engagement. Your audience is consistently using what you've built because it solves their problem better than any other solution.
They are willing to pay for it. The product is so valuable to them that they are not only willing to spend money, but are also willing to recommend it to others.
Your customer base is large enough to sustain growth. There is a substantial number of potential customers who share this same need, allowing your business to scale beyond its initial user base.
The "Why" Behind It: Without product-market fit, a business is essentially a chicken without a head. You might spend all your time and resources building a great product, but if it doesn't align with what your customers actually needs, it will likely fail. Achieving product-market fit is the primary goal in the early stages of a startup because it proves your business actually works.
Clothing Brand Example: You've developed a fashion brand focused on ethical production. You design trendy, comfortable hoodies made from eco-friendly fabrics with original designs. Your audience is drawn to the style and a commitment to sustainability, making your product highly desirable. There is alignment to product and customer needs.
Practical Application Think of a problem you see every day. It could be a simple inconvenience or a complex issue. Now, brainstorm three unique solutions YOUR product or service idea could solve. Don't worry about the cost yet, just focus on creating a solution people would genuinely want.
Step 2: Set a Price That Covers Costs (and Makes a Profit)
Did You Know? The average gross profit margin for a small business is around 10-15%. Without setting a price that creates a healthy margin, your business will fail to grow, no matter how many products you sell.
A business needs to charge more for its product than it costs to create it. This is how you generate a profit margin.
Deeper Dive into Profit Margin
Definition: Profit margin is the money you get to keep after you've paid for everything it took to make a product. It's not just about covering materials; it also includes your time, labor, shipping, and marketing expenses. This margin is the life of your business, allowing you to pay yourself, pay your team, and reinvest in growth. A business has a healthy profit margin when it can cover both fixed costs (These are expenses that don't change no matter how many products you make or sell like rent, software) and variable costs (These are expenses that change depending on how much you produce or sell like materials, shipping) with money left over.
The "Why" Behind It: Without a strong profit margin, your business is like a car with an empty gas tank. You can get in and turn the key, but you won't get anywhere. Charging too little is a mistake that many new entrepreneurs make, and it quickly leads to burnout and a business that's unsustainable. A profitable price proves that your business model actually can thrive and survive.
Clothing Brand Example: If it costs you $20 to make a hoodie (materials, labor, and shipping), you might sell it for $50. That $30 difference is your gross profit. It's the money you need to keep to build a stronger brand.
Practical Application Choose one of your product ideas. Crunch the numbers, and list every single cost involved in its creation. Materials, shipping, your own time. Then, research what similar products sell for and set a baseline price, and ask “does this price give me a healthy profit margin?”
Step 3: Get the Word Out (Marketing)
Did You Know? A great product is worthless if no one knows it exists. Today, digital marketing is the most effective way for small businesses to reach their target audience without a massive budget.
If no one knows your product exists, no one will buy it. Marketing spreads awareness.
Deeper Dive into Marketing
Definition: Marketing is the strategic process of creating and communicating with your customers. It’s how you tell your brand’s story, connect with your target audience, and build a relationship that eventually leads to a sale. Your marketing should do more than just show a product; it should create an emotional connection and solve a problem for your customer. The most powerful marketing happens when you can make your audience feel like they are part of a community.
The "Why" Behind It: A business without marketing is like the famous analogy of a tree falling in a forest, if no one is there to see it, does it make a sound? To succeed, you have to be LOUD and Proud. Be in the right place and use different platforms. Whether it is Facebook Market Place, Instagram, or TikTok. where your customers are looking. Marketing is the bridge between your product and the humans you serve who need it.
Clothing Brand Example: You post photos of your hoodies on Instagram, run a TikTok video of someone unboxing one, and maybe even partner with a local influencer. This gets your hoodies in front of the right audience and builds a community around your brand's unique style and values.
Practical Application Choose one of the social media platforms your target audience uses most. Post three pieces of content promoting your product idea. These could be photos, a short video, or a simple text post asking for feedback. Start engaging with your potential customers today.
Step 4: Make the Sale
Did You Know? Nearly 70% of online shopping carts are abandoned before a purchase is completed, and almost 80% of in person sales interaction gets missed from not asking a closing question? (do you want to buy?). A smooth, easy-to-use sales process is critical to your business's success
This is where a potential customer becomes an actual paying customer.
Deeper Dive into Making the Sale
Definition: The sale is the moment of truth. It's the point where a customer exchanges money for your product or service, generating Revenue (money for your business) . The key to success is to create a seamless, trustworthy experience. This can happen in-person or, more commonly for new businesses, on an e-commerce website with a secure checkout. The goal is to simplify the buying process and remove any objections (doubts) between the customer's decision and their purchase.
The "Why" Behind It: Sales make a business a BUSINESS, not a charity. All the work you do in Steps 1-3. Creating a product, setting a price, and marketing, leads to this one moment. Without sales, your business is just a hobby. A successful sale validates your entire business model.
Clothing Brand Example: A customer sees your hoodie on social media, visits your website, adds the item to their cart, and checks out in under a minute. You've just generated a sale!
Practical Application Create a free landing page using a tool like Squarespace, Wix, or Shopify. Describe your product idea and add a CTA (Call To Action) button that says "Buy Now." You don't need to link it to a payment system yet; the goal is to practice building the path to a sale.
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Step 5: Deliver, Stay Consistent, Love YOUR Customer
Did You Know? It costs a business five times more to acquire a new customer than it does to retain an existing one. Customer experience is EVERYTHING and the reason you are in and do business. This is crucial because no customers, no business.
A happy customer is more likely to buy again and tell others. This is how you scale.
Deeper Dive into Customer Satisfaction
Definition: The delivery of your product or service is your final opportunity to make a great impression and build loyalty, 1st impressions matter and last. This step includes everything from effective communication, fast delivery, to a memorable unboxing experience, what we call a WOW moment. Depending on the impact you created with your customer. The more likely it is that they will make another purchase, and more importantly, become a brand ambassador.
The "Why" Behind It: This is the difference between what we call transactional and transformational. You have to be LOVE your customers. They are the ones that support YOU. A great post-purchase experience turns a one-time buyer into a lifetime customer who will provide powerful word-of-mouth marketing (humans recommending other humans) for free. This builds your brand reputation and lays the foundation for long-term success.
Clothing Brand Example: You ship the hoodie on time, package it nicely, and include a personal, handwritten thank-you note. The customer loves your hoodie and the experience so much that they wear it to school, and three friends ask where they got it. You've just gained three new potential customers.
Practical Application What's one small, memorable thing you could do for your first customer? Write out a personalized thank-you note for your product. Brainstorm a unique way to package your item that will make the unboxing experience special.
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Step 6: Reinvest and Grow (The Business Cycle)
Did You Know? The most successful businesses in the world, from Amazon to Apple, didn't get there by spending all their profits. They used their earnings to strategically reinvest in growth.
Use some of your profit to improve your product, expand your marketing, or reach new markets.
Deeper Dive into Reinvestment
Definition: Reinvestment, is the process of using the money your business earns to make it grow larger than life. This is the difference between a side hustle that stays small and a business that scales. Reinvestment can take many forms: purchasing better equipment to improve production, spending more on marketing to reach a wider audience, opening up new departments, or developing new products to increase your average sales (average purchase ticket sales). Creating higher revenue for your business to grow, and the cycle from step one happens all over again.
The "Why" Behind It: A business that doesn't reinvest its profits eventually becomes stagnate or declines over time. It's like a plant that never gets watered or repotted. Reinvestment is the key to adapt, innovate, and thrive over the long term.
Clothing Brand Example: You use the profits from your hoodie sales to design a matching sweatpant line. Now you can sell sets and increase your revenue. You also use some of the profit to upgrade your e-commerce website, which improves the customer experience and leads to more sales.
CTA: Practical Application Imagine your business is a success. What’s the next logical step for growth? Would you create a new product, launch a new marketing campaign, or hire help? Write down one goal for your business's expansion.
Now Go Build It.
Business is a lot more simple than we put it on a textbook. It isn’t a lottery ticket. It’s not about waiting for the “perfect idea” or the “right time.” It’s about starting with what you have, where you are, and making shIT happen one step at a time.
You don’t have to know everything on day one. You just have to start. Create something people want. Price it so you have the means eat and keep building. Tell the world about it. Deliver like you promised. And then, do it again. BETTER, LOUDER, STRONGER.
When I started 787 Coffee, I didn’t have the connections, the fancy budget, or the playbook. I had a vision, incredible work ethic, and the courage to keep showing up. That’s what wins.
So if you’re dreaming about launching your clothing brand, content creation, or any business. Understand this: your product isn’t the real business… YOU are. You’re the brand, the story, and the energy people will buy into.
Stop waiting for perfect. Perfect never comes. Take your idea, and start moving it through these six steps. You’ll figure the rest out on the way.
Because business isn’t about luck, It’s about ACTION.
Let's get to work. 💯
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3 Easy Steps to Making Money in Business
These three steps are the core of how any business, from a side hustle to a major corporation, actually makes money. They're the difference between hoping you'll be profitable and knowing exactly how to build a sustainable business. So, what do you do with this information?
Step 1: Create, Price, and Market Your Product
First, you need a product or service that people actually want. This product must solve a problem or fill a need. Once you have it, you need to set a price that's high enough to cover your costs and generate a profit. Finally, you have to get the word out. Using a digital marketing strategy—like posting on social media or partnering with influencers—is how you spread awareness and find your customers. If no one knows you exist, you can't make a sale.
Clothing Brand Example: You design eco-friendly hoodies that people want. You price them at $50, which covers your $20 production cost and leaves a profit. You then post photos on Instagram to get your brand in front of the right audience.
Step 2: Make the Sale and Deliver
This is the most critical step: turning a potential customer into a paying one. You need a seamless way for them to buy your product, like an e-commerce website. The money your business earns from these transactions is its revenue. The process doesn’t end there, though. A positive customer experience is key to building a strong brand. By delivering the product on time and delighting your customer—maybe with a personalized note—you create a happy customer who is likely to buy from you again.
Clothing Brand Example: A customer visits your website and purchases a hoodie. You then ship it on time with a thoughtful thank-you note. The positive experience not only generates revenue but also encourages the customer to tell their friends about your brand.
Step 3: Reinvest and Grow
Making a profit is just the beginning. The final step is to use that profit to grow your business. Instead of spending all your earnings, you reinvest a portion of it back into your company. This could mean improving your existing products, expanding your marketing efforts, or creating new product lines. This continuous cycle of reinvestment is how a business scales and becomes more valuable over time.
Clothing Brand Example: You use the profits from your hoodie sales to design a new line of matching sweatpants. This expands your product catalog and increases your average order value, leading to more revenue and continued growth.
Mastering these three moves means you won't just run a business—you’ll understand it inside and out. It's the difference between hoping you're profitable and knowing exactly where you stand.
Want more straight talk and case studies on building a lasting business? Follow along and learn how to build a brand that doesn’t just make money, but makes history.
Let’s simplify the concepts:
Alex started his business from his college dorm room, creating custom, embroidered hats. He started with just one design, which he validated with his friends (Step 1). He priced each hat to make a $15 profit (Step 2) and used Instagram to post photos of people wearing them, which generated his first few sales (Step 3 & 4). After shipping each hat in a hand-stamped, recycled box (Step 5), he used his profits to create a second design and offer a new product line: branded tote bags (Step 6). Today, "Eco Thread Co." is a full-time business that employs several people and ships worldwide. Alex is living proof that following these six steps works.