A business has nine parts that drive it, but they have to be well-oiled

Recently, I had a chance to engage with members and officials of several housing and investment cooperative societies. The subject of discussion was how to enable growth and sustainability through partnerships.

As I was preparing for this workshop facilitation, I called a few contact people in other similar cooperatives that I had interacted with to cross-check whether they were still experiencing the various issues we had looked at, for the sake of those I would be engaging with the following morning. Six quick phone calls yielded exactly the same responses said in different words, all needing one solution.

A cooperative is a business even though it is not entirely for profit. Every business is carried by a model. Look at a business model as the framework supporting the processes by which value is defined, created and delivered to the ultimate client. 

It is the same for profit business as it is for a non-governmental organisation social enterprise. In my case above, the primary objective of membership was to put together funds for acquiring land or housing for members, or property that a member could earn some passive income.

Three common problems

I asked all my six contacts the same question. My desire was to know the kind of problems they were experiencing without limitation. All the respondents described three common problems - getting buyers (read market) for plots of land they had bought in large swaths and were now offloading to members and non-members. 

They also mentioned the shortage of finance for acquiring other deals made available for purchase because money was tied up in the current projects, and the fact that the land available suitable for their members (read purchasing power) was located very far away from their current homes or workstations. These three key barriers were mentioned by all six respondents besides a few other issues unique to the respective Housing Cooperatives membership profiles.

A business has nine important parts that make it work well when all the nine parts are well-oiled. The first part in any business, for profit or not for profit, is the customer segment. 

I did not say the customer, rather, the customer segment. A business exists to solve a specific problem for each customer segment. 

Toyota and Mercedes are global businesses producing and selling cars to completely different customer segments with a common primary need for what a car offers at its most basic nature - mobility. 

While both cars have very much the same basic components for mobility, a Mercedes, by the design, provides extra comfort from stronger suspensions, seats designed for more comfort, stronger body and higher-level engineering of the steering and transmission system among other features. It is therefore naturally priced higher for people who need mobility with a higher level of comfort and distinction. 

Lowering cost 

In particular, they do not have the time to spend servicing the car after a few kilometers of use and don’t mind paying more for parts that serve them longer. A Toyota is designed for regular mobility needs with greater focus on lowering cost of acquiring and maintaining it, regular affordable comfortable rides and fits a broader market segment purchasing powers. 

These two different market segments of car buyers are defined by difference in income as a primary barrier, which then defines the ability to purchase the extra design benefits of these two otherwise very similar products to the naked eye. 

While the two businesses have responded to the primary problem of their respective market segments - mobility, they have added other features to their respective products that distinctively define their eventual segments. This is the second component of a business – a suite of products and services that meet the unique needs of the customer segment targeted.

When the differences between the products are narrow, for example as is the case between brands of bread or brands of tissue paper, competition is intense. We will discuss the other parts of a business in the next series. 

Meanwhile, develop a simple questionnaire that you may share with friends via WhatsApp, whom you think fit the profile of the customer for the business idea that you have been itching to start.

Patrick Wameyo, is a financial literacy coach at Financial Academy and Technologies, and an entrepreneurship coach at The Entrepreneurship Center EA. Email [email protected].