When running any business you should always take into consideration the different stakeholders and their needs. A stakeholder is in this respect a person, group or other entity that will make a difference when it comes to the potential success of your business. These stakeholders are also dependant on one another meaning that they are all better off if they work together rather than only for themselves. In some sense they are all part of a very sensitive business eco system which needs to be sustained in order for all the stakeholders to benefit long term.
Given that the stakeholders have different needs and requirements you have to make sure that the eco system is well balanced. If one stakeholder demands too much from the eco system then there is an obvious risk that the system will ultimately break down. Once the needs of the different stakeholders are balanced in the correct way then you are running your business in accordance with “The Good Guy Concept”. This will also mean that you are more likely to maximize the long term profitability and sustainability of your business.
There are usually five main stakeholders when running a business; 1) the business, 2) the business owner, 3) the employee, 4) the society and 5) the customer. Of course also businesses competing with your business are stakeholders seeing how these will also have an impact on your business success. But, since the competing businesses are stakeholders whose needs it is not necessary to take into consideration when running a business they are not included in “The Good Guy Concept”.
The Business
This is of course the business you are conducting and the entity in which you are running it. Very often the business is run in a company, or another legal entity. Regardless if it is a legal entity or not the business has the need of sustainability i.e. to exist as long as possible.
Although it might be slightly strange you might even look at the business as an individual who wants to live forever. Given that the needs of the business are fulfilled the business actually could live on forever.
In order for a business to be able to live forever it needs to be profitable. Yes, running a business on a break even level is not enough. This is because the business has to have a buffer of funds to survive if things temporarily go bad e.g. if there is a downturn in the market, or if investments that are made are not successful.
This is of course pretty obvious! But, to be honest sometimes people seem to forget. As an example people seemed to have forgotten everything about the need for profitability during the IT boom in the late 1990. This was when almost any online venture happily was funded by investors regardless if it had a sustainable (profitable) business idea or not. A more recent example is the venture capitalists demand on businesses to “optimize” their balance sheets by paying out “excess” capital to the owners as dividends. In the current financial crisis this has in many cases lead to bankruptcy showing that short term thinking always is bad!
As stated earlier the business will not be able to fulfil its own needs unless it also fulfils the other stakeholders’ needs. One obvious example is that the customer will not buy the products or services provided by the business unless these fulfil the customer’s needs.
The Business Owner
This is you! Even though your needs might differ from other business owners needs you will most likely share the need of getting a return on your investment. The return on investment should also be high enough to motivate you putting in the time and/or capital needed in order to run the business.
The higher the return on investment the happier the business owner will be. But, in order to create a long term sustainable business the business owner cannot demand a too high return on investment. If an owner would demand more dividend than the business can afford to pay then there is an obvious risk that the needs of the business will not be able to be fulfilled. Again, we can clearly see the co-dependency in the eco system.
The Employee
When starting a business the employee is also very often the business owner. At this point the needs of the employee and the business owner are pretty much the same. But, once things have taken off the business usually employs also other people. The employee that is not also a business owner has slightly different needs.
Of course the employee also needs return on investment on the time given to the business. This is normally covered by salary, bonuses and other incentive programs. But, the employee very often also needs the possibility to grow and develop along with the business. All these needs of the employee can however only be fulfilled if the business is profitable.
Very often there seems to be a contradiction in the needs of the business and the need of the employee. Either the employee demands to high “return on investment”, or the business gives to low “return on investment”. In the first case the business might not be able to be profitable and eventually risk bankruptcy, in the second case the employee might leave the business and take his/her knowledge to a competing business.
The problem usually is that greed and other egotistical factors blur the view of both the business and the employee. But, looking at things from the outside you quickly realize that the business and the employee actually live in the same eco system as all other stakeholders. What is good for the business is also always good for the employee and vice versa. One cannot exist without the other!
The Society
This is normally the state in which the business taxed. The society consists of the government and all the people and businesses existing in the society and which are therefore benefiting from the services provided by the state. The need of the society is to be able to fund all the services the society provides. For this purpose the business is charged different types of taxes.
If the taxes imposed on the businesses run within a state are too high then the businesses will not be able to exist long term. At least not within said state. In this global age businesses can quite easily move from one state to another. This is especially true when it comes to online businesses. That is also why the question on where an online business should be taxed very often is discussed.
Since also the business is enjoying the services that the society provides it is easy to see that the society also fulfils the needs of the business. Such things as labour laws, civil law and criminal law are examples where the business often benefits.
The Customer
The customer is the consumer of the products or services provided by the business. Sometimes the customer is another business other times the customers is an individual. Regardless of which the customer provides the cash flow in the specific business eco system and is therefore the key stakeholder in the system.
If the customer’s needs are fulfilled the customer will pay for the services or products provided by the business. This will in turn make it possible for the business to be profitable, the business owner to get return on investment, the employee to get his salary and the state to get its taxes.
Therefore focusing on the customer is never wrong! But, only thinking about the customers will lead to the other stakeholders suffering and a potential break down of the system.
The Eco System
The above reasoning is based on each business being the centre of a unique eco system. Hence there are almost an infinite number of eco systems within a society. One could argue that narrowing the discussion down to one eco system is to simplify things, but this is in fact the purpose. The point being that one does not have to take into account all separate eco systems in order to create “The Good Guy Concept”. But, if all eco systems are run in accordance with “The Good Guy Concept” things will work better.
Of course a business owner is also a customer and part of the society. A customer can in turn also be a business owner and the society sometimes also is a business owner and a customer. The idea is that each of the stakeholders should always take into consideration that there are other stakeholders which needs has to be fulfilled in order for the eco system to be sustainable.