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.