When you think of the next billion-dollar business, does your mind naturally go to tech startups? It’s no surprise if so. Industries like tech, fashion, and entertainment are generally considered the most exciting to many people, but this doesn’t necessarily mean this is where the money is!
If you’re embarking on a journey as an entrepreneur, an important note to remember is that some of the world’s most valuable companies would be considered relatively boring by most people.
The companies mentioned throughout this article aren’t the most interesting, nor do they operate in the sexiest of industries. But they do follow three fundamental rules of business.
Rule 1: Fix a Real Problem
When it comes to business, problems equal opportunities. And depending on the size of the problem, being the one to fix a problem is a surefire way to generate wealth. Obviously, the bigger the problem, the bigger the financial opportunity, and some of the world’s most valuable businesses have found success by removing friction from people’s lives. In some ways, every successful business removes friction, but being the first to provide a successful solution tends to be reflected in a company’s valuation.
For examples of companies that successfully fixed a problem, you have to go back to a time when solutions of today didn’t exist. Online payments are taken for granted these days, but there was a time when we could only pay for things in person. It was businesses like PayPal and Stripe that made this possible. While these are unlikely to be anyone’s favourite brand, they are examples of businesses that we would struggle to live without in today’s world.
When thinking of businesses that fixed a real problem though, you don’t have to think of global giants like PayPal. A waste management business that operates locally or a pest control business are examples of a business that identifies a clear problem and provides a clear solution.
While fixing a problem has always been an easy way to guarantee success, it has perhaps become an even more important rule in today’s world where so many brands are trying to fix problems that don’t exist. In these cases, brands will need to drum up artificial demand unlike those fixing a real problem that will have a constant stream of customers.
Rule 2: Have Constant Demand
This leads on to rule number 2 for business success, which is to offer a product or service that naturally has a constant demand. The best way to do this is simply by providing things that people will always need.
Any products or services that are related to food, medicine, sanitation, etc. are likely to have a constant flow of demand purely because they are involved with things that we consume on a daily basis.
A good example is a company like Xylem, who provide solutions around sterile water for injections. There’s a good chance you’ve never heard of them, and providing water solutions doesn’t sound like the most interesting business idea. But without companies like Xylem who help to provide ultrapure water to companies in healthcare, the world wouldn’t be able to operate as it does today.
Rule 3: Be Hard to Replace
The final rule is to be hard to replace. It doesn’t matter how boring your business plan is or how mundane the industry that you operate in is, if you are a successful business and you can’t easily be replaced, you’re on to a winner.
There are many reasons why a business can be difficult to replace. They may have long-term contracts with global corporations that have built up massive levels of trust. In other cases, it may be too costly to replace one provider with another or it may cause too much disruption from a logistics standpoint.
This is certainly the case with Visa, one of the world’s most recognisable brands, despite many people not even realising when they are using the brand. Visa connects banks, merchants and consumers, and around 4 billion people rely on the company—a perfect example of a business that would be a headache to replace.
