🧠 STEP 6bad — DO YOU KNOW THE BUSINESS?

Why Understanding the Industry Determines Whether You’ll Succeed or Fail

Knowledge = Risk Reduction. Understanding = Profit Protection. Mastery = Wealth.

⭐ INTRODUCTION — Ignorance Is the #1 Business Killer

It’s not competition.
It’s not pricing.
It’s not marketing.
It’s not taxes.
It’s not the economy.

The #1 killer of new businesses is this:

The founder doesn’t understand the business they’re getting into.

They don’t understand:

The customer
The margins
The operational realities
The market cycles
The hidden costs
The legal rules
The industry-specific risks
The competitive landscape
The marketing requirements
The fulfillment challenges

And worst of all:

They don’t know what they don’t know.

This lesson teaches exactly how to solve that — BEFORE you start the business.

🔍 SECTION 1 — Why Knowing the Business Matters (More Than Passion or Capital)

Knowing the business protects you from:

Bad investment decisions
Starting something unprofitable
Choosing the wrong customer segment
Underestimating costs
Misjudging demand
Burning out
Getting scammed
Pricing too low
Missing compliance rules
Tax mistakes
Scaling too early or too late

Knowledge is risk reduction, and risk reduction is wealth preservation.

🧱 SECTION 2 — The Three Types of Business Knowledge You MUST Have

There are three types of knowledge required to succeed in ANY business.

If one is missing, the business breaks.

1️⃣ Industry Knowledge (How the business model works)

You must know:

How businesses in this industry make money
What margins are normal
What timelines are normal
What customer acquisition looks like
What regulations apply
What tools are required
How fulfillment works
What creates a competitive advantage

Without this → you’re gambling.

2️⃣ Customer Knowledge (Understanding who you serve)

This includes:

Their desires
Their frustrations
Their spending habits
Their urgency levels
Their willingness to pay
Their expectations
Their emotional drivers

If you know your customer better than anyone else, you win.

3️⃣ Operational Knowledge (How to actually deliver the service/product)

This is the “day-to-day reality.”

Examples:

In real estate → vacancy rates, repairs, turnover
In Airbnb → cleaning timing, dynamic pricing
In landscaping → weather impact, seasonality
In e-commerce → supply chain delays, returns
In content creation → consistency, distribution
In service businesses → quality control, communication

If you don’t understand operations, you can’t predict:

Costs
Time
Labor
Systems
Scalability

🧪 SECTION 3 — The “Do You Know the Business?” Test (Score Yourself)

Answer YES or NO.

✔ Do you know how the business makes money?

✔ Do you know what customers pay for?

✔ Do you know your ideal customer?

✔ Do you know your expected margins?

✔ Do you know the competitors and how YOU will win?

✔ Do you know the startup costs?

✔ Do you know the hidden costs?

✔ Do you know the legal requirements?

✔ Do you know the marketing needed?

✔ Do you know how fulfillment works?

✔ Do you know the operational headaches?

✔ Do you know the tax implications?

✔ Do you know what skills are required?

✔ Do you know what the worst-case scenario looks like?

If you cannot answer YES to at least 10 of these → YOU DO NOT KNOW THE BUSINESS.

That does NOT mean you cannot start it.
It means you must learn first.

🧭 SECTION 4 — How to Quickly Learn ANY Business (Before Spending Money)

Use this process:

1️⃣ Study Competitors

Look at:

Pricing
Offers
Reviews
Ads
Websites
Fulfillment times

Competitors are FREE teachers.

2️⃣ Talk to 5–10 People Already Doing It

Ask:

“What do you wish you knew earlier?”
“What is the worst part of this business?”
“How much did you REALLY make your first year?”
“What are your biggest expenses?”
“How do you get customers?”
“What mistakes should I avoid?”

These conversations are priceless.

3️⃣ Shadow or Intern

Even 5–10 hours of observing will reveal:

Operational bottlenecks
Customer behavior
Workflow challenges
Success patterns

4️⃣ Learn the Numbers First

Before branding, naming, or buying equipment, ask:

What is the startup cost?
What are the margins?
What is the realistic profit?
What are the taxes?
What is the time cost?
How soon until break-even?

Numbers > Emotions.

5️⃣ Use “Skill Borrowing” Instead of Skill Building

Example:

You want to start an agency.
You don’t know Facebook ads.

Solution:
Hire a contractor who DOES know until YOU learn.

Your lack of expertise should never stop you.

6️⃣ Start Small (Test First, Scale After)

Low-risk, high-learning.

Do NOT:

Buy inventory
Sign leases
Buy expensive equipment
Invest in ads
Quit your job

…until you KNOW the business.

📊 SECTION 5 — Business Models That Require Very High Industry Knowledge

These businesses are RISKY unless you truly understand them:

Restaurants
Bars / Nightlife
Retail storefronts
E-commerce with inventory
Amazon FBA
Real estate flipping
Construction businesses
Mobile home parks
Healthcare-related businesses
Legal or compliance-heavy businesses

These require:

Operational mastery
Legal understanding
Capital
Insurance
Seasoned employees

If you’re brand new → avoid these until later.

🟩 SECTION 6 — Businesses You Can Learn Fast (Low Risk, High Reward)

These are ideal for beginners:

Cleaning
Pressure washing
Social media management
Web design
Notary services
Airbnb co-hosting
Local services
Content creation
Tutoring
Freelancing

You can learn these:

In days or weeks
With low startup cost
With quick paths to your first client

These business types build confidence AND capital.

🔄 SECTION 7 — How Knowing the Business Affects Scalability

A business you don’t understand cannot scale because you cannot:

Delegate
Automate
Systemize
Document processes
Train others
Improve efficiency
Expand your customer base
Predict your financials

Understanding the business is the FOUNDATION of scaling the business.

This ties directly into Step 6bac.

🧾 SECTION 8 — Tax Implications of Knowing (or NOT Knowing) Your Business

If you understand your business, you can optimize taxes:

S-Corp election
Home office
Mileage vs actual expenses
Depreciation
Employee vs contractor decisions
Retirement account strategy
Cash vs accrual
Inventory accounting
Business meals
Equipment write-offs
Travel deductions

If you DON’T understand the business, tax mistakes are almost guaranteed.

These can include:

Paying too much tax
IRS audits
Misclassifying workers
Missing deductions
Incorrect bookkeeping
Commingling funds

Knowledge reduces tax liability.

Ignorance increases it.

📚 SECTION 9 — Case Studies (4 Levels)

🟢 Case Study 1 — Beginner: Lily (Age 23)

Business: Photography
Doesn’t understand pricing or energy/time cost.
Earns: $400/month.

Learns from mentors → shifts to real estate photography ($150–$300 per shoot).
Learns industry → becomes profitable.

🔵 Case Study 2 — Mid-Career: Mark (Age 37)

Buys a food truck without knowing the industry.
Fails due to:

Food cost spikes
Licensing issues
Equipment breakdowns

Re-enters with a cleaning business he understands → Highly profitable.

🟣 Case Study 3 — Self-Employed: Nora (Age 34)

Starts Amazon FBA
Doesn’t understand:

Ad competition
Refund rates
Shipping delays
Inventory cost

Loses $15,000.

Switches to digital products → 80% margins → Scales to $20k/month.

🟧 Case Study 4 — High-Net-Worth: Samuel (Age 51)

Buys a manufacturing company without knowing operations.
Overwhelmed by:

Labor issues
Equipment maintenance
Inventory cycles

Brings in operational advisor → Turns business profitable → Sells for $6M.

Knowledge = millions.

❌ SECTION 10 — Common Mistakes When Entering a Business You Don’t Know

🚫 Believing YouTube videos instead of studying the industry
🚫 Thinking passion replaces experience
🚫 Starting too fast
🚫 Investing without testing
🚫 Underestimating operational complexity
🚫 Not understanding taxes
🚫 Ignoring seasonality
🚫 Not studying competitors
🚫 Believing “it will work because it’s my dream”