1. Business Fundamentals

The Core Concepts Every Entrepreneur Must Understand

Every business—no matter the size, industry, or complexity—relies on a small set of timeless principles.
These fundamentals explain what a business is, how it creates value, and why customers choose it.

This is the foundation of understanding any company.

1. Mission, Vision, and Value Proposition

Why the business exists, where it’s going, and why customers choose it.

Mission — What the Business Does Today

The mission defines the company’s purpose in the present tense.

It answers:
“What do we exist to do?”

Examples:

• “We repair cars quickly and honestly.”

• “We help homeowners protect their property.”

• “We manufacture reliable parts for manufacturers.”

A good mission is:

• clear

• practical

• customer-focused

• actionable

Vision — Where the Business Is Headed

The vision describes the future the business is building.

It answers:
“What do we want this business to become?”

Examples:

• “To be the most trusted auto shop in the region.”

• “To become the leading home-services company in the Midwest.”

• “To operate the most efficient powder-coating line in the industry.”

A good vision is:

• ambitious

• believable

• direction-setting

Value Proposition — Why Customers Choose You

This explains the primary reason customers buy from the business instead of anyone else.

It answers:
“Why should someone buy from us?”

Strong value propositions rely on:

• Higher quality

• Faster service

• Lower cost

• Convenience

• Specialized expertise

• Reliability

• Customization

• Brand trust

Your value proposition is your promise.
Your operations are how you keep it.

2. Revenue Models

How the business makes money.

Most companies earn revenue in just a few fundamental ways.
Each model has different strengths, weaknesses, and scaling dynamics.

1. Products

You sell a physical or digital item for a set price.

How it works

• Customer pays once

• You deliver the product

• Profit depends on cost control and volume

Examples

• Clothing, tools, electronics

• Digital products

• Manufactured parts

What matters most

• Cost structure

• Reliability of production

• Customer acquisition

2. Services

You get paid for time, expertise, or labor.

How it works

• Customer pays for work performed

• Pricing may be hourly, project-based, or retainer-based

• Revenue scales with skill and efficiency

Examples

• Consulting

• Repairs, installation

• Legal or medical services

What matters most

• Skill and reputation

• Consistency

• Quality of execution

3. Pricing Models

Where pricing comes from — and how to choose the right approach.

All pricing ultimately comes from one of three places.

1. Cost-Based Pricing

Price = cost + markup.

Strengths

• Simple and predictable

• Ensures cost coverage

• Easy internally

Weaknesses

• Ignores customer value

• Easy for competitors to copy

• Works best for commodities

Where it works

• Manufacturing

• Retail

• Construction and trades

2. Value-Based Pricing

Price is based on the value delivered to the customer, not the cost.

Strengths

• Often leads to higher margins

• Rewards expertise and differentiation

• Aligns pricing with outcomes

Weaknesses

• Requires deep understanding of customer needs

• Harder to implement

• Requires strong trust and reputation

Where it works

• Professional services

• High-skill, high-value businesses

• Solutions that create measurable impact

3. Market-Based Pricing

Price is based on what competitors charge and what customers expect.

Strengths

• Market-aligned

• Easy to benchmark

• Useful in competitive categories

Weaknesses

• Can limit margins

• Encourages price matching rather than strategy

• May create race-to-the-bottom pricing

Where it works

• Consumer goods

• Retail and restaurants

• Highly competitive services

4. Understanding Moats & Competitive Advantage

Why some businesses stay strong while others get copied.

A moat protects a business from competitors.
A competitive advantage is why customers choose you.

Great companies build both.

Why Moats Matter

Any time a business earns strong profits, competitors try to copy it.
A moat makes copying:

• difficult

• expensive

• risky

• slow

A weak moat = temporary success.
A strong moat = multi-decade advantage.

Five Main Types of Moats

1. Brand & Trust

Customers believe your product will deliver every time.

Examples: Apple, Toyota, Nike
Gives you: pricing power, loyalty

2. Cost Advantage

You can deliver at a lower cost than competitors.

Examples: Walmart, efficient manufacturers
Gives you: durable profitability

3. Switching Costs

It’s painful for a customer to switch to someone else.

Examples: software systems, logistics contracts
Gives you: predictable, recurring revenue

4. Network Effects

Value increases as more people use the product.

Examples: marketplaces, payment networks, social platforms
Gives you: exponential growth and market dominance

5. Unique Assets

You own something others can’t easily get.

Examples: patents, proprietary data, exclusive rights
Gives you: scarcity and protection

The Unified Purpose of All These Fundamentals

A business succeeds long-term when it has:

• a clear purpose today (mission)

• a compelling direction for the future (vision)

• a reason customers choose it (value proposition)

• a sound way to make money (revenue model)

• pricing aligned with value (pricing model)

• protection from competitors (moat)

This combined knowledge gives people the ability to understand, evaluate, and improve any business.