Lesson 8 Blog: How Do Businesses Make Money? Unpacking the Mystery Behind Profit

Ever wondered how companies like Netflix and Uber make boatloads of money without even selling physical stuff or owning what they sell? Spoiler alert: it all boils down to smart business models. And guess what? You’re about to crack the code too.

Think of a business model like a recipe for your favorite dish. The right ingredients (products, pricing, and strategy) and method (how you sell) make all the difference between a tasty success and a kitchen disaster. In this post, you’ll learn the different ways businesses earn money, what profit really means, and how pricing can make or break a business.

1. Direct Sales: The Classic Cash-In-Hand Strategy

What if you made bracelets and sold each one for R5? That’s direct sales! Simple, straight to the point, and perfect for new entrepreneurs. Businesses earn money by selling a product or service at a set price. Shoes, books, burgers – you name it.

🏆 Make sure your price covers the cost of making your product, or you'll be digging into your own pocket.

"The best way to make a sale is to solve a problem." — Daymond John, entrepreneur and investor

2. Subscription Model: Make It Rain Every Month

Ever wonder why Netflix keeps asking for your monthly payment? It’s called the subscription model. You pay regularly to keep enjoying the service. Gyms, streaming services, and even snack box companies love this model because it brings in steady income.

🏆 Offer a free trial to get people hooked before asking them to subscribe.

Fun Fact: As of 2024, Netflix has over 260 million subscribers worldwide.

3. Freemium Model: Give a Little, Charge for More

Spotify lets you listen for free, but throws in ads. Want premium features? You gotta pay. That’s the freemium model – lure users in with free access, then offer upgrades for those who want more.

🏆 Make sure your free version is useful, but not too good that no one upgrades.

"Freemium is a numbers game. You need lots of users to make it work." — Alex Osterwalder, business theorist

4. Profit: The Golden Goal

Profit is the money left after all expenses are paid. It’s the heartbeat of any business. No profit = no business. If you sell a lemonade for R2 but it cost you R1 to make, your profit is R1.

🏆 Track your spending. Even small expenses add up fast!

"Revenue is vanity, profit is sanity, cash is reality." — Unknown

5. Playing With Prices: The Secret Weapon

Businesses often tweak prices to boost sales. They might lower them to attract new customers or raise them to show their product is high-quality. Discounts and deals? All part of the pricing game.

🏆 Test different prices and see what works best for your audience.

Statistic: 80% of consumers say price affects their buying decision more than brand loyalty (Statista, 2023).

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Wrap-Up: Your First Step to Thinking Like an Entrepreneur

Now that you’ve got the scoop on how businesses make money, you're already thinking like a future mogul. Whether you're selling snacks at school or dreaming up the next big app, understanding these money-making models is your first step toward profit.

Stay curious, stay creative, and remember: even the biggest businesses started with one idea and a smart plan.

Lesson 7 Blog: How Entrepreneurs Market Their Products – The Science of Selling

Ever noticed how Coca-Cola and Nike always show up at big sports events? Or how McDonald's makes sure its ads appear just before lunchtime?

These brands understand where their customers are and how to reach them.

1. The Secret to Smart Marketing: Fishing for Customers

Think of marketing like fishing:
🎣 Bait = Your message (What problem does your product solve?)
🌊 Fishing Spot = The marketing platform (Social media? Billboards? Schools?)
🛶 Fishing Technique = The marketing strategy (Discounts? Free samples? Influencer promotions?)

If you fish in the wrong pond, you won’t catch anything. If you use the wrong bait, customers won’t bite!

2. Choosing the Right Marketing Channels

✅ Social Media – Best for younger customers (Instagram, TikTok, Twitter)
✅ TV & Radio Ads – Great for big-budget campaigns and mass audiences
✅ Events & Fairs – Perfect for face-to-face connections
✅ Referral Programs – Customers bring new customers (word-of-mouth)

3. How Do You Know Your Marketing Works?

Great marketing leads to:
✔ More customers
✔ More sales
✔ More people talking about your brand

Understanding Your Ideal Customer – Why It’s the Key to Business Success

Imagine trying to sell vegan burgers to people who love steak or advertising high-end luxury watches in a flea market. No matter how amazing your product is, if it’s in front of the wrong audience, it won’t sell.

This is why understanding your customer is EVERYTHING in business. The better you know your customer, the easier it is to sell to them—and the more likely they are to buy again and tell their friends.

1. The Three Golden Questions for Identifying Your Customer

Before launching a business, ask yourself:

• Who needs my product the most?
• What problem does my product solve for them?
• Where do they already spend their time (online and offline)?

2. What Is a Customer Persona?

A Customer Persona is a detailed profile of your perfect customer. It includes:

• Name, Age, Location: Gives a clear picture of your target audience.
• Lifestyle & Interests: What do they do? What brands do they already love?
• Pain Points & Needs: What frustrates them? What problem can your business solve for them?

For example, if you are selling eco-friendly school bags, your persona might be:

• "Thabo, a 16-year-old student who cares about the environment and looks for sustainable products."

3. Why Customer Profiling is a Game-Changer

• You won’t waste time & money on ads that reach the wrong people.
• You can design products that truly solve your customers' problems.
• You can use the right words, images, and platforms to market your product.

Think Like a Smart Entrepreneur

Your goal is to attract the right customers and make it easy for them to say, "YES! I NEED THIS!"

For next lesson:

1. Decide upon your product that you want to work on this year, conduct the testing required to check if it is worth making or selling this.

2. Compile a customer profile for each type of customer that you have identified for this product.

How to Find Your First 10 Customers—Even Without a Product

Your business isn’t real until someone pays for it. Finding your first 10 customers is the hardest part—but also the most important.

Step 1: Find Where Your Customers Already Are

• If you sell fitness products, go to the gym.
• If you sell eco-friendly goods, join sustainability Facebook groups.
• If you sell business tools, connect with LinkedIn professionals.

Step 2: Ask, Don’t Sell

Instead of saying, “Would you buy this?” try:

• “What frustrates you most about [problem]?”
• “How do you currently solve [problem]?”
• “What would make your life easier?”

Listening > Selling.

Step 3: Pre-Sell Your Idea

Test demand before launching!

• Set up a waiting list (“Sign up for first access”)
• Offer pre-orders (Even a $1 commitment means real interest)
• Launch a social media poll (“Which feature would you love most?”)

"The Biggest Mistake Entrepreneurs Make—Ignoring Their Customer"

Introduction:

One of the biggest reasons businesses fail isn’t lack of funding or a bad product—it’s not knowing their customer. Entrepreneurs get so caught up in building something they love that they forget to ask: “Who will actually buy this?”

Why You Need to Find Your Perfect Customer Early

Every business solves a problem—but not everyone has that problem. If you don’t identify the right audience, you’ll waste time and money marketing to the wrong people.

How to Spot Your Ideal Customer

Instead of guessing, successful entrepreneurs study their customers like detectives. Here’s how:

1. Observe Behavior: Where do they shop? What brands do they trust? What websites do they visit?
2. Listen to Their Pain Points: What frustrates them? What problem do they wish someone would fix?
3. Ask Directly: Interviews and surveys give real insights, not just assumptions.

Customer Persona: Creating a Clear Picture

A customer persona is a detailed profile of your ideal buyer. Instead of thinking about “everyone,” focus on one specific type of customer.

Example Persona:
👤 Name: Emma, 25
🎓 Background: College student studying sustainability
🌱 Problem: Wants an affordable, eco-friendly water bottle
💳 Buying Behavior: Buys online, follows environmental blogs

How to Validate Your Customer Before Spending a Cent

Before investing in marketing, test your audience:

• Create a poll on social media: “Would you use this product?”
• Run a small ad campaign for as little as R5 to see who clicks.
• Offer a pre-sale or waiting list—people signing up = real demand.

Final Thought:

“Your business isn’t about what YOU want to sell—it’s about what THEY want to buy.”

The faster you figure that out, the faster you can build a business that actually succeeds.

Conclusion:

Instead of guessing, go out and find real customers today. The faster you do this, the faster you build a business people actually need.

Why Your First Idea is Never Your Best Idea

You’ve probably heard of Airbnb, Instagram, and Netflix—but did you know their first business models failed? 

These companies pivoted based on real feedback. The most successful entrepreneurs don’t just launch businesses—they test and improve.

Why Your First Idea Will Likely Fail

• Assumptions vs. Reality: Your idea might sound great to you, but will customers actually pay for it?
• Market Adaptation: Businesses that keep testing and evolving have higher survival rates.
• The MVP Mindset: “Launch small, learn fast, and grow smarter.”

The MVP Success Formula

1. Start Simple: Focus on one core feature.
2. Find Your First Users: Offer trials, ask for feedback.
3. Improve & Repeat: Every mistake is a step closer to success.

Conclusion:

If your first version isn’t embarrassing, you’ve launched too late! Start testing your idea today.

Questions to address for compiling your MVP Planning Worksheet:

1. Your Business Name:
2. What problem does your business solve?
3. What is the simplest version of your product you can build right now?
4. How will you test it?
5. What is one thing you want feedback on?

Ask your test market the following:

1. Would you use this product? 
2. What features do you like or dislike?
3. Note one major takeaway for improvement.

The Biggest Mistake Entrepreneurs Make—Ignoring Their Customer

One of the biggest reasons businesses fail isn’t lack of funding or a bad product—it’s not knowing their customer. 

Entrepreneurs get so caught up in building something they love that they forget to ask: “Who will actually buy this?”

Why You Need to Find Your Perfect Customer Early

Every business solves a problem—but not everyone has that problem. If you don’t identify the right audience, you’ll waste time and money marketing to the wrong people.

How to Spot Your Ideal Customer

Instead of guessing, successful entrepreneurs study their customers like detectives. Here’s how:

1. Observe Behavior: Where do they shop? What brands do they trust? What websites do they visit?
2. Listen to Their Pain Points: What frustrates them? What problem do they wish someone would fix?
3. Ask Directly: Interviews and surveys give real insights, not just assumptions.

Customer Persona: Creating a Clear Picture

A customer persona is a detailed profile of your ideal buyer. Instead of thinking about “everyone,” focus on one specific type of customer.

Example Persona:
👤 Name: Emma, 25
🎓 Background: College student studying sustainability
🌱 Problem: Wants an affordable, eco-friendly water bottle
💳 Buying Behavior: Buys online, follows environmental blogs

How to Validate Your Customer Before Spending a Cent

Before investing in marketing, test your audience:

• Create a poll on social media: “Would you use this product?”
• Run a small ad campaign for as little as $5 to see who clicks.
• Offer a pre-sale or waiting list—people signing up = real demand.

Final Thought:
“Your business isn’t about what YOU want to sell—it’s about what THEY want to buy.”
The faster you figure that out, the faster you can build a business that actually succeeds.

Mastering the Lean Business Model, MVP, and Finding Your Perfect Customer

 Mastering the Lean Business Model, MVP, and Finding Your Perfect Customer

Starting a business can feel like trying to solve a giant puzzle—except the pieces keep changing! That’s where smart planning comes in. Instead of diving headfirst and hoping for the best, entrepreneurs use powerful tools like the Lean Business Model Canvas and Minimum Viable Product (MVP) to test ideas and match them with the right customers. Let’s break it down step by step!

The Lean Business Model Canvas: Your One-Page Startup Plan

Traditional business plans are long and complicated, but the Lean Business Model Canvas (LBMC) simplifies things. Created by Alexander Osterwalder, this one-page blueprint helps entrepreneurs map out their business idea quickly.

The 6 Fundamental Building Blocks of the Lean Business Model Canvas

Why It’s Important

Instead of spending months creating a business plan, you can fill out this canvas in minutes and start testing your idea. It helps you stay flexible and adjust as you learn more about your market.

Pro Tip: Entrepreneurs who regularly update their LBMC have a higher success rate because they stay adaptable!

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The Power of MVP: Testing Before Investing

Imagine spending years developing a product, only to realize nobody wants it—yikes! That’s why smart entrepreneurs build a Minimum Viable Product (MVP) first.

What is an MVP?

An MVP is a basic version of your product with just enough features to test whether customers want it. Think of it as a “rough draft” of your final product.

Why Build an MVP?

• Saves Time & Money – No need to build something fully polished.

• Gathers Real Customer Feedback – Learn what works and what doesn’t.

• Reduces Risk – Helps avoid investing in a product nobody needs.

Examples of MVPs in Action

• Instagram started as an app called Burbn with too many features. After user feedback, they simplified it into the photo-sharing app we know today.

• Dropbox launched with a simple explainer video before even building the product. The response was so strong, they knew it was worth developing!

Pro Tip: Start with a simple MVP, test it with real users, and improve based on feedback.

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Finding the Perfect Customer: Product-Market Fit

Now that you have a solid business model and a tested MVP, how do you find and connect with the right customers?

1. Identify Your Ideal Customer

Ask yourself:

• Who has the problem my product solves?

• What are their habits and interests?

• Where do they spend time online and offline?

2. Create Customer Personas

A customer persona is a detailed description of your ideal customer. It includes details like:

• Age, gender, and location

• What problems they face

• Where they shop and what they read

For example, if you’re selling eco-friendly water bottles, your ideal customer might be:

“Emma, a 25-year-old college student who cares about sustainability and buys reusable products.”

3. Test and Get Feedback

Once you have a customer profile, test your MVP with them. Offer free trials, ask for opinions, and see what features they love (or don’t!).

4. Keep Adjusting

Finding the perfect customer is an ongoing process. Keep improving your product based on feedback to better serve their needs.

Pro Tip: Companies that continuously refine their products based on real customer feedback have higher success rates!

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Final Thoughts: Build, Test, Adapt, Repeat!

Entrepreneurship isn’t about having a perfect idea from day one—it’s about learning, adapting, and growing. By using the Lean Business Model Canvas, creating an MVP, and matching your product to the right customers, you can build a business that truly solves problems.

So, what’s your next big idea? Start small, test it out, and keep improving!

Turning Ideas into Reality: Prototyping & Testing an MVP

From Concept to Creation: The Power of Prototyping

You’ve come up with a great product idea and even defined your Minimum Viable Product (MVP)—but how do you bring that idea to life? The answer is prototyping! Prototyping helps entrepreneurs turn their abstract ideas into tangible models that can be tested and improved before launching a full product.

What is a Prototype?

A prototype is a preliminary version of a product that allows entrepreneurs to visualize and test their idea. Think of it as a draft version of your product before committing to full production. Prototypes help identify potential flaws, refine designs, and gather user feedback early in the development process.

Types of Prototypes

Prototypes come in different forms, depending on their level of detail and functionality. There are two main types:

1. Low-Fidelity Prototypes

These are simple and inexpensive representations of a product. They are mainly used for brainstorming and early testing. Examples include:

• Sketches & Drawings – Quick hand-drawn designs showing key features of the product.

• Paper Prototypes – Cut-out designs used to simulate the product’s layout and function.

• Mock-ups – Basic, non-functional models made of paper, cardboard, or other materials.

2. High-Fidelity Prototypes

These are more detailed and functional versions of a product. They provide a realistic experience and are often used for usability testing. Examples include:

• Digital Wireframes – Interactive app or website mock-ups designed using software.

• 3D Models – Physical prototypes made using 3D printing or other materials.

• Functional Prototypes – Working models that allow users to test some key features.

Why Prototyping Matters

Prototyping is essential because it helps entrepreneurs:

• Visualize Ideas – Bring abstract concepts to life.

• Identify Problems Early – Catch design flaws before mass production.

• Gather User Feedback – Test with real users to improve functionality.

• Save Time & Money – Reduce costly mistakes by testing before investing in full production.

Hands-On Activity: Sketching a Prototype

Now it’s time to put your creativity into action! In our next class, you’ll be sketching a prototype for a product idea. Here’s how to prepare:

1. Think of a Product Idea – What problem does your product solve? How will it work?

2. Sketch the Basic Layout – Draw different views of your product, including buttons, screens, or features.

3. Label Key Features – Describe how each part of your product functions.

4. Be Ready to Share – We’ll discuss your sketches in class and explore ways to improve them.

What’s Next?

After sketching your prototype, we’ll move into testing. This means gathering feedback and making adjustments to refine your MVP. Get ready for an exciting session of creativity and innovation!