What Is Business And What Activities Are Involved?
Every day, there are people across the globe who think about starting their own business. Some of those people go on to make their dreams a reality. That is why we have so many great businesses today and so many more just now starting out.
Some people who start their own company have an in-depth understanding of what business is and how to run one. That understanding may come from a college education or previous experience in the business world. Yet, others may not really understand the answer to the question, “What is business?”. That doesn’t necessarily mean they can’t succeed with their business. It simply means they need to put more time and energy into researching, learning, and understanding how business works.
In its entirety, business is a massive and complex subject with numerous branches into fields like economy, psychology, marketing, and more. Even those business owners with decades of experience and education don’t fully understand every aspect of the subject. But what they do all have is a firm understanding of the fundamentals.
At the very least, anyone who is considering starting a company should be able to answer a few simple questions. Those questions include, “What is business?” and “What are the activities of a business?”.. Understanding these are important because a company cannot be successful without understanding what it is and what it should be doing.
What Is Business?
The most general definition of a business is an organization that either trades services or products for money or for other services and products. The most common businesses are companies that sell products or services to customers. These could include retail stores, home improvement companies, car lots, or the car manufacturers themselves. Such businesses surround us much of the time and play a significant role in our day-to-day lives.
A business can come in a number of different forms and those forms are often related to their legal liability or their ownership. For example, a company registered as a sole proprietorship is a business that is owned by a single person and that is operated for that one person’s benefit. Many times, when a person starts a business at their home by themselves it is a sole proprietorship. It’s entirely possible for this type of company to eventually evolve into a larger business with partners.
If you were to start your own business as a sole proprietorship, but one day decided to get a friend involved and that friend became an equal partner, then the company would need to be registered as a partnership. This is a type of company where two or more partners run a business and each partner shares all liability for legal matters and debts.
Finally, one step up from a partnership is a corporation. This is your standard business structure when considering big name brands and stores. Corporations are companies that have created their own legal identities, thus leaving the owners of the company with very limited liability. Corporations may be privately owned and operated by a small group or owned by the public with shares that are traded on the stock market.
Most businesses will fall into one of two categories. The first option is a non-profit company. This type of company makes no net profit, but rather puts all surplus towards achieving some sort of objective. The second and most common type is a for-profit company. These are standard businesses that run with the intention of making as much profit as possible each year.
In most cases, if you are starting a business at home, you will be starting a for-profit company. Your goal is to make sales, keep expenses low, and thus increase profits. To do this, you will also need to understand the most important activities that businesses perform.
The Common Activities Of A Business
Every business can be divided into a series of activities. In the case of a for-profit business, the most important of those activities is sales. Sales are all about selling a product or service and earning a revenue. If that revenue remains higher than the expenses of the company, then that company has generated a profit and is thus accomplishing their goal. However, a company needs to do more than just make sales.
Many sales are fueled by another important activity: marketing. Marketing is an activity that focuses on bringing in paying customers. This is accomplished through a variety of techniques and strategies. When those strategies take place online they are known as digital marketing or internet marketing. Some common internet marketing strategies are search engine optimization(SEO), social media marketing(SMM), and pay-per-click advertising (PPC).
Of course, there are offline forms of marketing as well. Advertisements placed in newspapers, magazines, on television, or on the radio fall into that category. As does attending trade shows or hosting public events. Any sort of activity that increases brand awareness and attracts potential customers can be considered a form of marketing.
Marketing and sales are both tied to the income of the business. Some activities are tied specifically to business expenses. One such activity is the manufacturing of products. Manufacturing involves converting raw materials into a product that can be sold. There is often a range of expenses involved with the manufacturing process.
A company that is selling a service does not necessarily have a manufacturing phase, but rather the phase where they are performing the service. The expenses associated with that phase would be the cost of tools or supplies as well as the cost of the man hours put into completing the service.
Just as marketing drives the sales, research and development drives manufacturing. The R&D activity is the first stage of product creation. It requires discovering the potential for a new product or service, improving that product or service, and then either manufacturing the product or performing the service. R&D is a surprisingly difficult activity to perform and, as with many of these activities, is often performed by a dedicated team of paid professionals.
There are a few other activities that may or may not be a part of a business’s operation depending on its size and its market. One such activity is safety management. Safety is important for companies with multiple employees. It also relates to the safety of products sold to the public.
Accounting is also an important business activity for companies of all sizes. Proper accounting can keep a business out of legal trouble as well as ensure that the company’s funds are being used as efficiently as possible.
As most businesses grow they hire teams to handle these activities in-house or outsource the work to separate firms. A company can have a marketing team, a sales team, a manufacturing team, an R&D team, and teams for other activities. But when a person is starting a company at home they often have to handle all of this work themselves. On one hand, it significantly lowers the cost of overhead allowing for a larger profit margin, but it also puts a greater demand on time.
Eventually, as the business grows, they can begin outsourcing the work to separate firms. Marketing is usually one of the first tasks to be outsourced because it is such an important activity for a small at-home business. In time, the business may grow large enough that it hires in-house teams instead of outsourcing the work. In-house teams are generally more efficient, but considerably more expensive.
Starting a business at home can be a great opportunity. Many of the big brands that we use on a daily basis were started in basements, garages, or studio apartments. As long as you take the time to understand what is business and what it entails, then your brand could become a household name as well.