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10 Fundamental Business Principles (That Make Millions)

These 10 business principles will change your business's future.

Many businesses focus too much on tactics, techniques, and the latest tricks they have heard from others.

But. Once people share them on the internet, they become commoditised and depreciate in value over time.

That's why you must focus on business principles instead.

Here are 10 fundamental principles that helped me grow a business from $2.5k/month to $300k/month in 29 months. (that's 120x!)

In a world obsessed with the latest business hacks and quick fixes, the true essence of sustainable growth is often overshadowed.

The key to enduring success lies not in fleeting tactics but in fundamental principles that have stood the test of time.

These fundamental principles, when applied with diligence and foresight, have the power to transform the trajectory of your business. If you master these 10 business principles, you'll have a stable foundation to build your billion-dollar empire.

Principle 1: The Star Principle

The first of the 10 fundamental business principles is The Star Principle.

BCG Founder Bruce Henderson created this and named it the BCG Growth-Share Matrix.

When Bill Bain left BCG to form Bain & Co., this was the one tool he used most.

The Matrix categorises a company's business units or product lines into four quadrants: Stars, Question Marks, Cash Cows, and Dogs, based on market growth and market share.

Principle 1: The Star Principle
The Star Principle

Application in Business

In the dynamic realm of business, being the market leader in a high-growth industry positions you as a 'Star'.

This quadrant is where you want your business to be; it's indicative of both high market share and rapid market growth.

You're the market-leader in an industry or niche (even a sub-niche) you'd be in the left two boxes. If you're not the market-leader, you'll be on the right two boxes.

If the industry or niche is growing 10% of more, you'll be in the upper two boxes. If your industry or niche is growing at less than 10% annually, you'll be in the lower two boxes.

In early 2020 before lockdown, the debt was at $4 trillion-ish. In March 2024, the US government just passed another $1.2 trillion spending bill and the debt is $34 trillion-ish.

Which means we'll need to have an "inflation-adjusted" Star Principle.

If your market is now growing by at least 20% a year, you'll need to settle for the lower two quadrants. Or you'll need to at least be the market leader and have a Cash Cow for a business.

Because fundamentally, most of the profits and valuation accrual to business goes to One Singular Star in that niche.

The huge Cash Cows were once stars. Additionally, here are a few more things you must understand.

Stars eat cash.

Real World Example

When I reinvented Kosme Aesthetics to focus on our membership model and being #1 with traffic on Google SEM and SEO (Yes, you can be a Star in channels too), we grew 1000% two years in a row. That... requires more cash flow.

If you've ever had a Star Business, there's always more opportunity to grow it faster. And it's up to you whether or not you'll do it. As of the time of this writing, look at OpenAI and Anthropic, they're eating cash in a fight for market leadership.

If you read this years later, you can just look at the current stars, they eat cash.

What You Can Do

So it's nice to have Cash Cows who can feed the stars. In fact, in most businesses, there are sections of businesses that are Cash Cows and others that are Stars.

The best strategy is to take the money from the Cash Cow to feed the Star.

As for what to do if you're a Question Mark - One thing you can do is choose a niche within a niche. Instead of competing with OpenAI and ChatGPT, Perplexity came up focusing on being a Search Engine Replacement and they're currently a Star.

With Kosme Aesthetics, I noticed the demand for "non-package beauty" was increasing and I focused on being dominant at Google to become a Star.

If you're a dog, the recommendation is to divest. Whether it's an entire business, a business unit or a product line, you can sell it, close it down or pivot it.

With the world printing this much money and having no signs of slowing down, which boat you're on matters.

If you're an ant sprinting on top of an elephant walking the opposite direction, you'll not get to where you want to go.

Principle 2: Play long-term games with long-term people

Long Term Game, Compound Interest

You may have heard. 1% better everyday for a year is 1.01^365 = 37.78. Or 3778%. What about 1% better everyday for 10 years?

Well, 1.01^3650 = 5,929,448,570,000,000

5.9 quadrillion and many trillions in change.

It's easy to see that math and money compounds. What people don't often talk about is the fact that most other things compound too.

Health, Habits, Knowledge... Reputation, Relationships, Technology...

Application in Business

The compound effect of small, consistent improvements is monumental.

Embracing a long-term perspective in both strategy and relationships can yield exponential growth, far surpassing short-term tactics.

Everything compounds. Evolution gave us linear-minded biases while we live in an exponential and cyclical world. Which is why we have to be "long-term greedy" instead.

Warren Buffett says: "You can't make a good deal with a bad person."

Real World Example

Personally, when I acquired one of my businesses, I clearly ignored this mistake.

Deep into the deal and being an M&A rookie, I really wanted the deal to close. Even though I already knew that the seller wasn't a good person, I ignored it and pushed to close asap.

It was a small deal at $98k, but then the issues started coming. Employee poaching, breaching non-competes, hidden unpaid taxes... You get the picture.

What You Can Do

On the flip side, once you've developed long-term relationships with wonderful long-term people, things go smoothly. It's easy to do business when you reach the stage where you can have simple one-page contracts and trust the other party.

Principle 3: The Pareto Principle

You've probably heard of Pareto's Principle, or the 80/20 rule, which is our third principle.

80/20 rule
Pareto Principle

The principle states that 80% of a person's outcomes come from 20% of their inputs. The book argues that this principle can be applied to many areas of life, including work, relationships, and personal development. This is the first version.

If you look at nature, there is 80/20 everywhere. 20% of rocks (the mountains) contain 80% of the mass.

20% of your actions give you 80% of your results. 20% of people have 80% of the wealth.

20% of countries have 80% of the [insert basically anything and it will be closer to 80/20 than 50/50].

Then there is the second version that 80/20 is fractal.

(80/20)^2. (80/20)^3. (80/20)^x.

Which means that 4% of your actions give you 64% of your results. Or that 0.8% of what you do give you 51.2% of your results.

Furthermore, as the world moves into digits, you'll see that there are many places where the gradient of the power law curve has shifted.

It's now no longer 80/20 but instead 90/10 or 99/1.

Does the top 20% of search engines own 80% of the revenue? Do the top 20% of Social Media networks own 80% of the Social Media eyeballs?

The third version of 80/20 is 99/1.

To thrive in the age of AI, you must understand this deeply. Only a few actions that you take with your business actually matter.

The fourth version of 80/20 is 20/120, a deeper understanding of the bottom 20%.

In most businesses, 20% of your work/clients/services/team members and employees produce 120% of the business profits.

The middle portion breaks even or makes a little, while the bottom 20% actually costs you money.

Which means... We must regularly prune the bottom activities and performers.

Personally, I'm harsh and direct when it comes to pruning people. If they're a bottom 20% performer in my company that is costing us profits, they're destroying value in my business.

It's not good for them in the long-run to be destroying value here. When they go somewhere else that is more aligned to them, they could actually be value creators elsewhere. So go on, we'll all do better in the long-run.

The fifth version of 80/20 is 80/20 teamwork.

Often, the critical first 20% of any task is easy for one person who loves that task to do it. They blaze through it.

For example, writing the first draft of emails like this is easy for me. However, there are parts after this which I dislike.

Editing it to simplify the language while keeping the context... Adding the relevant images... Scheduling it on the email platform...

Application in Business

Identifying the 20% of your products, services, or customers that generate 80% of your profits can transform your business's efficiency and profitability. Focus on these areas to maximise impact.

So instead, what we can do is 80/20 teamwork.

Real World Example

If I do my 20% that gets the email to 80% of the way, I can then hand it over to a team member who does 20% of the remaining part to get it to 96%.

With 3 layers we get to 99.6% and 4 layers 99.84%.

This is good enough for me and my weekly emails. In fact, I'm here with this email at 80% in my notes app. While you get it in your inbox with a done version.

What You Can Do

Leverage the Pareto Principle by identifying and focusing on the most profitable aspects of your business.

Figure out the 20% you need to do to get 80% of the way there and delegate the remaining to the right team member.

Principle 4: Have A Big Audacious Purpose.

Deam big to achieve big
Big Audacious Purpose

Look at any great business, they have (or had) a crazy moonshot purpose.

Elon wants to us to be a multi-planetary species.

Google's purpose was to organise the world's information and make it universally accessible and useful.

Amazon's is a version of being the everything store and deliver goods to your house within 24 hours.

Application in Business

Why is having the purpose important?

Here are three reasons.

  1. Having a big and clear purpose inspires you to take action. You're working on something you can feel proud of. You care about bringing that vision of the world into reality.
  2. Level 10 talent is only attracted to a level 10 purpose. Being able to attract top talent and retain them is the most important thing to being able to hit your goals. Bring the best people into your team and you'll crush any goal.
  3. It's easier to say no to distractions that don't move you towards your purpose. Keep rowing your boat in the correct direction and you'll eventually get there.

Real World Example

I decided to put less attention on Kosme Aesthetics even though it's my first 7-figure business because I just couldn't find a big enough purpose for it.

That's why I hired a CEO who can run it for me. And I'm going to go after my first Big Audacious Purpose: Build a deeply connected community of 10k 7-figure+ entrepreneurs.

This purpose... inspires me.

This gave birth to Verified7, where our mission is to help 7-figure+ entrepreneurs who need each other find each other.

It's a shame that the easiest way for 7-figure+ entrepreneurs to meet each other in a reliable way is to spend $10k to $100k going for masterminds (I enjoy it and have spent $500k+ on masterminds).

I... feel like I could use a simple AI to match people... for a few bucks a month.

What You Can Do

If you share your top goals, challenges, interests and a few other things, it's pretty easy to match people up to be able to add value to each other.

That's how my vision was born. So quick plug - If you're a 7-figure+ entrepreneur, click here to read about it and join the waitlist.

Previously, I had a bit of an icky feeling when I told people I was in beauty... Because it didn't align with my purpose.

Now, with Verified7, it feels like I can build something insanely valuable that helps top entrepreneurs collectively get better.

As of the time of writing, we only just started building it. But it's already clear to me that

  • It's something I'm proud of working on.
  • I can attract level 10 talent with this mission.
  • it's easy to say no to things such as an acquisition I pondered about for 3 weeks.

If you're an entrepreneur that's unclear about your purpose. Please. Go find it. You won't regret it.

Principle 6: The Principle of Iteration

The Principle of Iteration

When you start coming up with specific measurements for your team, remember that most parts of your business can be put into an iterative loop.

Application in Business

Implementing a culture of iteration means encouraging innovation, accepting failures as learning opportunities, and constantly seeking ways to do better.

If you measure the right things, you (or your team) will be able to come up with tests for how you could improve on it.

And on measuring the right things... I have a weekly reminder on my phone that says: Measurements must induce the part to do what's good for the company as a whole.

Let's say you ask your video ad creator to measure their CTR.

The tendency is then for them to optimise towards too much clickbait so they have a high CTR (Local Maxima) instead of optimising towards what for most business is the LTGP:CAC ratio (Global Maxima).

Real World Example

Personally, I choose KPIs for my team that has something they can control fully (eg. CTR for a video ad creator) and something that is aligned with the next steps in the chain (eg. CAC).

Do you spend advertising dollars and not know what LTGP:CAC ratio is?

What You Can Do

Google it. Ask ChatGPT. Talk to a business coach. It'll be worth it.

Principle 7: Everything Follows The Incentives

Align incentives and results will follow
Everything Follows The Incentives

Look at the mountains. The sand and particles that form the mountains are there because over a long enough period, they were incentivised to be that at that spot.

Look at the rivers. They follow a certain path and meander a certain way, also because they were incentivised to take that path.

Look at the sharks. The fish. The planktons. They ended up where they are because of incentives.

Sometimes things follow the short-term incentives, sometimes things follow the long-term incentives.

Application in Business

Carefully design compensation, rewards, and recognition systems to encourage behaviors and outcomes that advance the company's overall goals.

Legendary business partners Buffett and Munger frequently talk about incentives. Munger says: "Show me the incentive and I will show you the outcome." Buffett says: "Never, ever, think about something else when you should be thinking about the power of incentives."

You can choose to align yourself with the way the world works. The way business works. The way people work. Or you can choose the harder and slower path to your goals.

This is why I insist that you must understand that everything follows the incentives.

Real-World Example

At Kosme, sales commissions aligned with not just sales volume but customer satisfaction scores ensure that sales teams focus on both quantity and quality, benefiting the business in the long term.

To win in the business world, create a system of incentives that reward good work both in the short-run and the long-run.

Incentives that are aligned.


What You Can Do

Examine and realign incentives within your company to ensure they support your overarching goals. When the clients win, the staff wins, the management wins, the owners win.

Principle 8: Product > Marketing > Sales

Product > Marketing > Sales

You need marketing when you've failed at product. You need sales when you've failed at marketing.

Okay... Maybe it's a bit extreme... But bear with me for a second.

What happens when you have the absolute best product in the world that solves all of the problems of a target market?

Application in Business

You only need to whisper the best product to one person and it'll spread to your entire target market.

Have a product that 3D prints a Ferrari for $0? Or a product that gets rid of all Acne forever? Or a button that someone can press to be peaceful and happy at will and without downside? How many people do you need to whisper to for this to spread?

Well... If you're thinking that reality isn't like that. And you never have the perfect product.

You're right.

Real-World Example

However, the best marketing is a great product. The best sales is a great product. The best way to increase LTV is a great product. If you can win in product... You win in marketing, sales and LTV.

Apple’s focus on innovative, user-friendly products has created a loyal customer base and made marketing and sales more effective, demonstrating the power of starting with an exceptional product.

What You Can Do

Invest heavily in developing and refining your product to meet and exceed market needs.

Marketing and sales efforts will be more effective when backed by a product that delivers genuine value.

Being a marketer myself, I'd say that both sales and marketing are still necessary. Often, due to resource constraints, we won't have the perfect product. And we still need marketing and sales to bring the revenue in.

But keep the priority in mind. Bring in the revenue you need. And then invest at least a portion of it to improve your product.

Principle 9: The Anticipatory Advantage Principle

Humans are funny creatures who love to try and predict the future.

"I skate to where the puck is going to be, not where it has been."

The above quote is attributed to Wayne Gretzky, a former professional ice hockey player widely regarded as one of the greatest players of all time.

Nvidia's rise to multiple trillion market cap?

Most of the gains happened in a few years but Jensen Huang and his team anticipated the growing demand for graphics processing units (GPUs) beyond the realm of gaming.

It always looks easy on hindsight. But when you're going through it, there's a big gap of despair.

The Gap of Despair
The Anticipatory Advantage Principle

You predict where the world is going to be. But then you're wrong. And you're wrong. And people call you stupid. And you're not where you want to be yet. You're still in the gap of despair.

And then... You're lucky.

Application in Business

Developing a forward-looking mindset and investing in future trends can position your business as a leader in your industry, driving innovation and productivity and attracting early adopters.

Shun the haters. Make your predictions and go for it.

Wayne with a microscope attempting to look into the crystal ball.
Make Your Predictions

Real World Example

Here are 5 of mine and how I'm betting on them.

  1. Moore's Law is not dead.
  2. Elon Musk, Ray Kurzweil and the other smart people in the world are wrong about AGI.
  3. AI will discover novel new nano-materials and find breakthroughs in regenerative medicine. We will hit Kurzweil's Longevity Escape Velocity in my lifetime.
  4. Attention and compute will be two of the most important resources in 2025-2035.
  5. When the world moves towards AI, communities and real life friendships become even more important.

I'm betting with my time, attention and money on AI. I'm investing heavily into building my personal brand (and hence these emails) and making my community Verified7 the largest 7-figure+ entrepreneur community in the world.

What You Can Do

If you're unsure about what to bet on in business, then bet on yourself.

Do not forget the quote:  "A healthy man has a thousand wishes, a sick man has but one."

Whether it's the stem cell therapy, peptides or psychedelics that you can do today.

Or the nano-robots, gene edits or brain-chip-interfaces, your 10-year older self will not regret investing in your health.

Principle 10: Leverage


Liquor, Ladies & Leverage

They can all get you. Bankrupt you. Ruin you.

They can also give you the best time of your life and make you rich.

Leverage has somewhat of a bad rep in many circles... But I think it's a key business principle to understand.

So let's start looking at the word Leverage and then break it down into its common forms. Leverage comes from the word Lever.

Archimedes famously said: "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world."

Application in Business

Smart leveraging involves identifying opportunities to amplify your impact without equally increasing your input.

This can be through financial leverage, leveraging technology, or leveraging partnerships.

Here are four common forms of Leverage:

  1. Capital
  2. Collaborators
  3. Content
  4. Code

Real World Example

If you borrow too much capital and make the wrong bets, you go bust. If you use capital wisely, you go further and faster.

Capital comes with risk and responsibility.

Collaborators can be leveraged in the traditional way of building a team.

It can also involve collaborating with other businesses that you can collectively combine with to produce something unique in the marketplace.

With content, you can produce one piece and distribute it to millions of people. Other people have figured out this game and reaped the rewards. You can too.

With code, it's basically anything that's made up of 1s, 0s and soon what's in between.

From No-Code methods of working with this to AI taking away graphical user interfaces (GUIs), you'll be foolish not to put more attention into this.

What You Can Do

As the world gets faster and more connected, the leverage available increases. If you think it's fast today, it's going to be the slowest the world ever is.

And more wealth will be created in the next 10 years than the last 100.

So... understand how to use the four forms of leverage best to your advantage.

S-curve business growth
Use Leverage To Your Advantage

Hint: Most businesses grow in a series of S-curves which mimics exponentiality until it hits the final ceiling of the S-curve. You run many small experiments to see what goes into the "exponential" part of the S-curve.

Then you apply leverage on the middle portion and bet big. Before you going back to running some more experiments to find your next S-curve.

Frequently Asked Questions

What are the 5 business principles?

What are the 3 core principles of business?

What are the 7 fundamentals of business success?

How do you apply 80-20 rule in business?

What is an example of Pareto analysis in business?

What is the 80-20 business principle?

What do you mean by business principles?

What are the basic principles to start a business?

What are the 8 fundamentals of business?

What is the 80-20 rule in leadership?

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