Every failing business is a business FAILING TO DELIVER VALUE!
Let me explain with an analogy:
Scenario A: When I purchase a McDonalds hamburger I give the cashier a few dollars in exchange of the burger. The cheap hamburger I get plus the restaurant experience represents a fair “value” in get exchange of my few dollars. Low value = Low dollars (money).
Scenario B: When I purchase a high quality sushi in a fancy restaurant I’m willing to exchange more dollars expecting amazing quality accompanied with a unique experience and service at the restaurant. Why do I pay more dollars? Big value = Big dollars (money).
How do we exchange value?
First there was barter. Then there was gold. Then there was paper money. Then plastic money. Now there are cryptocurrencies. To better answer your question, let’s forget about cash for a moment and go back to barter times.
Would you exchange your McDonalds hamburger for a high quality sushi? Most people wont, reason we can identify a “value” difference.
Why do businesses fail?
Businesses have expenses: In order for a business to deliver value to their customers they must pay suppliers “value” in exchange of their delivered goods to make hamburgers.
To build a McDonalds hamburger, we need to exchange value (cheap finished burgers) for bread, beef, catchup, pickles, lettuce, potatoes, labor, electricity, etc. Each supplier would need to be paid in burgers.
The problem happens when the burger we give in exchange is so low in “value” that suppliers need “more burgers” in exchange of their products or services!
What is the problem here?
The moment McDonalds stops delivering enough value in their burgers (like a Dollar Menu above) is the moment the business needs more volume or starts to struggle!
Losses start to add up if we fail to give more “finished burgers” to all my suppliers in exchange for bread, beef, catchup, pickles, lettuce, potatoes, labor, electricity, etc.
Debt = Low Delivered Value - High Consumed Value
Can you see it?
We must be asking ourselves daily:
Am I delivering enough value or am I being devalued?
This is happening today not only to businesses but also to people! As the world evolves from the Industrial Age to the Digital Age, value is constantly evolving affecting millions of businesses and jobs worldwide.
Why do successful businesses (and people) eventually fail?
When they consume more value than they deliver!
What do you think? Share your ideas bellow!