Why Businesses Exist

In business, there are a lot of nice-to-haves. As entrepreneurs it’s important that we don’t switch these (admittedly very good) things with what is actually required for a business to exist. When we get confused on this point we can waste a lot of time, energy and money.

Let’s start with a few examples. In conversations about business, I’ve noticed two concepts that are generally presented as being key to starting or running a business: innovation and profit.


Also known as the good idea, innovation is by far the most popular explanation of what’s required for a successful business. As a society we’ve done a lot to perpetuate this by idolizing “inventors” and “disruption” as shining examples of business done right.

In reality, almost all of business is based on the same time-tested principles. Boring businesses are often stable and profitable. Attorneys and accountants aren’t usually considered “innovative”. The majority of grocery stores or plumbing service companies don’t get written up in TechCrunch or featured in the latest edition of Inc Magazine, but they exist and thrive. Innovation is commendable, but it’s definitely not a requirement.


The other example I’ve heard is that to have a business you need to make money. I get the impression this is referring to profit, as most of these discussions tend towards estimating growth potential, plotting charts with rising lines, and generally attempting to predict a rosy future before making the first move.

In fact, it’s quite common for businesses to break even or run a loss for extended periods of time. Startups run on borrowed money for years, often with no revenue model at all. The entire airline industry averages a one percent profit margin. Small businesses with seven-figure revenues operate on annual profits in the fractions of a percent. Many service-based businesses don’t account for profit at all, content with (or resigned to) covering expenses or making payroll. Profit is fantastic and helps to ensure longevity, but it also is not required to start or operate a business.


So what is required for a business to exist? It’s actually much simpler than most people seem to think. At it’s simplest, a business exists because of two things: desire and execution.


The existence of a business is contingent on what someone wants. Desire is a core aspect of human existence. When you satisfy someone’s desire you provide value. The measure of value is relative to how strong the desire was, and how well you fulfilled it. It’s easy to equate value with your product or service itself, but a desire can be satisfied many different ways. It’s also easy to confuse value with cost, but desire is an emotion, not a dollar amount. You may have equipment and employees and products and services, but without desire it’s not a business.


In order to have a business you must deliver value. Unlike desire, execution is objective and measurable. Until you do the work, you don’t have a business. Period. You can call it an idea, a business plan, a project, a pitch. You can dream about it, write it down, draft up a formal document, even put together a professional slide show extolling its virtues. You can tell your friends, tell your relatives, or tell investors. You can set up an office, appear on Shark Tank, or win scholarships and awards, but until you deliver the value and take home the check, it’s not a business.

The real good news is that value and execution are just as effective at any scale. You can start by providing something valuable for one person today. One person, one transaction, one desire fulfilled, and you’re in business.