The Ultimate Business Blog | All About Business
Business is an economic term which comprises of exchange of goods and services. It is the core of economy. People do business to earn money.
Countries do business to buy goods which are not available in their country. Countries also earn revenue by doing business with other countries and selling their products.
Today, most of the people of a country are part of some business. Either they are running one on their own or they are doing a job in a company which is obviously doing a business.
Let us take a look at the definitions of business by popular people and experts of economics.
Definition of BusinessDefinition of Business by Wikipedia
Wikipedia, which is one of the most popular website on internet and which has an expert opinion on every subject has a definition of business of its own.
According to the Wikipedia, the activity of making one’s livelihood by manufacturing or buying and selling goods and services is called business. In simple words, business is an activity or enterprise entered into for profit. This entity can be anything from a street vendor to a big national or international company.
Business is an organization which is engaged in some kind of commercial, professional or industrial activities. They may have a goal for profit or they might work for social goals.
It can also be an individual’s organizational effort towards producing and/or selling goods or services for making profit.
Business is a method of making money from commercial transactions. It is an organized economic activity in which exchange of good and services takes place.
It can be seen like a systematic effort to produce goods and services and sell them at the market. Profit is the goal of business. All activities are directed towards this goal.
Feedough Business Definition
Business is an economic activity which provides goods or services for profit. The profit may not always be in terms of cash depending on the entrepreneur.
Another definition of business by a popular business website goes like this
A business is an organization or economic system which exchanges goods and services for money. Every business requires some form of investment and enough buyers to make profit and to survive.
The concept of a business is the most fundamental business aspect and
requirement of the business. It is an idea of the business. Without a proper idea there can be no business. It is the core.
It is the concept that becomes the base for planning, taking actions, setting goals and moving in a direction in business.
For example, when Ebay started, it has the concept of providing a platform for people to list their second hand stuff to meet buyers. The concept of Facebook was to bring people under one domain and enable them to communicate with each other in some form.
When someone has a concept then it takes real form of a business when action is taken in a slow and strategic manner to achieve the goals.
Business starts with an idea in the mind of a person or a group of persons. This idea has to have the potential of turning into a reality. In other words, the idea must be feasible.
Extensive research would be required to know whether the idea can work or not, especially if the idea is new.
It should be possible to achieve the goals
Entrepreneurs are capable of arranging the resources necessary for completing the work
The goals can be achieved in the set time frame
Whole process has some value for the clients
The business model is able to make profit for the people involved
Other than that, the business idea must be able to provide value to its potential customers. Today, a business is not possible without having some benefits to the clients.
It is essential that people should get some value from the overall business activities after earning profit for the entrepreneurs.
Naming Your Business
Choosing the right name for the business or the firm is second basic step.
In today’s competitive era where it is very difficult to attract customers, business name can be really helpful in achieving this goal.
The business name must be a stylish and attractive one. It must be a name which sounds like a modern and latest name.
The name for the business should also be relevant to the business idea and the niche.
Name relevance helps people establish a connection between your business and their goals.
It is also a lot easier to help people understand the nature of your business when you have focused on name relevancy.
Studies have suggested that a business with the name similar to its niche is 70 per cent more likely to become popular among the related masses.
Planning for the business is another basic requirement and one of the fundamental business aspect which takes place after naming the business.
This basic step requires a lot of work on the paper. It is crucial to form a proper plan on the paper first.
This step not only gives business a concrete form, it also helps in figuring out the required steps to achieve the goals of the business.
Documentation of a business plan is not only standard but it is a must. It helps in formation of a better plan and saves from any mistakes or hypothetical thinking.
Making a business plan includes goals and objectives and the strategies which will be implemented for achieving these goals and objectives.
There is a basic difference between goal and objective
It is difficult to clarify an objective in a definition. However, we can see it as following.
An objective is like a result where a goal is like a task.
The difference between an objective and a goal is that a goal is a task where an objective is the result obtained from it.
The goal is in our hands but objective is not in our hands.
The goal can be to create an entertaining content and post it to your social media account. This is very clearly in our hands.
But the objective of this task is to reach audiences, get them to like your content, become popular and let people connect with you.
This, one can only hope, it is very clearly not in our hands. In simple words, objective is something we are aspiring for.
Types of Business
Classification of Types of Business
Providing Service – This type of business provides services to its customers and clients. In this kind of business, there is a team of professionals who are expert in a particular niche.
Together with their team work, they tend to accomplish some goals for their clients. Some examples of providing services can be website designing and development, HR firms, CA and accountancy and Saloon.
Manufacturing Products – In this type of business, goods and products are manufactured to sell in the market. This kind of business requires raw material, skilled labor, machines and people to operate these machines.
Manufacturing products takes time, high level skill, technological knowledge and know how etc. It also requires petty big space and a big building to keep machines while protecting them from whether and other problems.
The products and goods are generally sold to the whole seller or dealer. From there, they are sold to the retailer and finally, the retailer sells the product to the end customer. Some products are also directly sell by the manufacturers.
Retail Business – The kind of business involves directly selling the product to the customer is called retail business. It has to deal with the customer.
Hybrid form of Business – This form of business has several other forms involved in one single business. A restaurant is a very good example of a hybrid business.
Restaurant manufactures own dishes and in the same place, they also sell it to the end customer like a retail business. They also provide services to its customers. When they sell a product like cold drink which they bought from whole seller, it is a part of retail business.
This is an example of hybrid business.
Types of Business Ownership
Business is vast and multiple business aspect can have different levels of complexities. A business can be very simple like a magazine shop or it can be very difficult like running a multinational company.
As the complexity increases, the liability of owners also increases which makes it compulsory to include more people to make things easy to handle.
This factor forms several types of ownership in the business. They are as follows
When a business is entirely owned and run by an individual then it is called sole proprietorship. Generally this kind of business is simple. A good example of this business can be a small general items shop.
In this kind of business all profit is owned by the owner. Similarly, any loss occurred is also alone managed by the owner. It is the sole responsibility of the owner to run the business and all its operations properly.
Partnership Firm Partnership is dividing the ownership between two or more people. The profit, loss, liabilities and responsibilities are equally divided among the partners. This kind of ownership is required in business of large sizes where things are difficult to handle alone.
The partners in the business have a legal agreement between them to state their roles and responsibilities in the business. This agreement depends on the laws of the state where the business is being done. Partners share their part of profit or bears losses between them based on their investment and agreement.
There are two types of partnership
General and Limited
General Partnership – General partners share all responsibilities of the business equally. They invest, contribute and share their department of work according to their skills and expertise.
Limited Partnership – Limited partners are partners who only invest in the business. They do not participate or contribute in the business. Limited partners invest the money but are not liable for any debts and they do not participate in the business activities.
Corporation A corporation is business where ownership has a separate legal identity. One person does not owns the business and cannot make all important decisions. Stock owners have the ownership and they play important role in making a business.
Limited Liability Company This is a hybrid form of partnership. It has features of both corporation and partnership. In this kind of partnership a partner cannot be held responsible for the mistakes done on the part of another partner.
Cooperative A private business organization which is run and controlled by a very large number of people for their own benefit. It is like a group formed by a group of people to achieve some common economic goal. Every person in such organization is a partner as well as decision maker.
Types of Business Activities
Classification of Business Activities
There are so many activities going on in a business. Whether the business of a single person is considered or business of people in a network, the activities performed are numerous.
Suppose a person opens a shop. He hires a place, buys furniture, buy and sell goods, hire employees etc. When this shopkeeper hires a place, someone is renting it, somebody is selling the furniture, people are learning skills from somewhere to getting hired.
In above transactions, so many activities are being performed at different levels. All this activities are considered business activities. These business activities can be classified in to two major categories.
Industry Level Business Activity – Any business activity which involves the process of transforming raw materials in to usable goods or products is known as industry level business activity.
Commerce Level Business Activity – Those activities which includes financial transaction of any kind refers to commercial level business activity. This may be buying a good, selling it, giving rent, paying salaries etc.
Business Based on TimeNew Kind of Business
New business is something that is relatively new and was not being done by people a decade ago. Like smartphone or LED TVs are some new businesses.Old Kind of Business
An old business is something that is being done by people for a long period of time. For example a cloth manufacturing or shoe manufacturing or imports and exports business are old businesses. Business aspect of an old kind of business is known to people.
Characteristics of a Business
Like anything, event, product or humans, business also have some characteristics. These characteristics can be divided in to basic three categories. They are organized work, fulfilling a need and making a profit.
Organized Work – The first and basic characteristic of a business is work which is organized. No business can be run alone. There must be a team of individuals which is working together in an organized manner. Otherwise, the work will not get done.
Fulfilling a Social Need - Unseen Business Aspect – Business is done for people and is run from the participation of people. They can be called as a society and they need a reason to participate in the business model. This is a proven fact that it is only possible when people are getting some kind of benefit. Hence the business has to fulfill some social need.
Making a Profit – Money is very important in today’s world. You need money to buy things, pay employees, provide services, run the business and even staying alive. If the business is not making profit, it will seize to function. This is the fundamental business aspect. Hence, making a profit is essential for any business.
The characteristic of a business can be vast if we apply a broader perspective to it. It is a good idea to have a look at these terms after understanding the basics of business characteristics
Exchange of Finance – The first and foremost thing that happens to a business is that it has financial transaction in it. No business activity is done without some exchange of finance.
Risk Factor – There is always some risk involved in business. Market conditions can change, there is a probability of damage to goods or products. There can be an accident, fire or the client may get a better deal.
Any of this can happen to a business which is a regular concern of the business owner or owners. This is something that has to be deal with on a regular basis.
Goods and Services are Arranged – To run any kind of business, either, some product is chosen or a service is given. In some cases, production can be done by the owner him/herself.
But in most of the cases business owners buy goods from other manufacturers and sell them in the market. Similarly, they hire people to provide services.
Goods and Services are Sold – The business owner must be able to sell the goods and services to its clients. If the business person is unable to sell them, then the business will not be complete.
Legally Accepted – Any business should follow all rules and regulations of the country itself and international laws as well. This is a very important characteristic of a business.
If the business violates any laws then it hampers the country. Such activities also harm the people of society in some manner and thus they cannot be termed as business.
Regularity is Important – The fundamentals of business says that A business must be providing services on a regular basis to its clients. If they are selling goods, then they must be selling them on a regular basis otherwise they won’t be able to build trust.
Proper involvement is a necessary element of business characteristic and dedication is required for growth.
Uncertain Return in Business – Uncertainty is a predominant factor in business and probabily a dangerous business aspect. If someone opens a shop, there is possibility of selling low from selling high.
In other words, one cannot be certain about the return they are going make on their investment. Nobody knows whether they are going to earn huge or not.
Structure of Business
Structure of a business is the legal division of profit and losses among all the partners. Structure is how the tax agency and law of the state sees business owners responsible for their investment, contribution in the business and bearing the share of loss.
Types of Structure – Types of business structure is very similar to types of partnership in business with one major difference. Sole proprietorship is not considered as a structure as the sole owner is alone responsible for all investment, operation, contribution, profit and loss.
Major types of structure are Partnership, Limited Liability Company and corporation
Partnership Structure In the partnership structure of business all the partners are equally responsible for paying the taxes and bearing losses if not agreed otherwise. The legal entity binds all the owners to share taxes, profit and loss equally.
Corporation Structure In the corporation structure the business itself is an independent legal entity which is separate from its owners. It is a complex structure which binds the owners with different roles and responsibilities through various rules and laws.
Limited Liability Company Structure LLC or Limited Liability Company structure is a hybrid kind of business structure which combines features of Corporation structure and Partnership structure. LLC allows tax benefits to the business owners.
A limited liability company structure issues shares and each owner is a shareholder. The liability is distributed according to the percentage of share a partner holds.
Understanding Profit in Business
When a business earns more money than the invested amount, expenses and taxes paid then it means that the business has made profit.
Generally, profit is the main goal of any business except started otherwise for different goals.
The profit is divided equally among all partners. In special cases, it may be divided according to the amount invested, involvement and other conditions made by the partners in the business agreement.
Loss in Business
A business is said to be in loss when the business makes less in a financial year then the amount invested and other expenses occurred.
In a business there can be many reasons for loss. Unexpected change in market conditions, low sales, accidental damage to goods are some of the major reason for loss.
A newly started business is expected to bear loss for some times in the start. This period for bearing losses can vary depending on the business and market conditions.
Role of Capital in Business
Capital is the investment required for starting and running a business. Capital is very similar to the term Investment. Read next paragraph to know more about investment.Investment Required in Business
An investment is an important part of the business. Capital is required in a business for almost everything. Whether you have to rent a place, buy important furniture and necessary technology, hire employees or fulfill legal formalities, money is needed at different stages.
Investment is made either by the business owner by himself or herself or they have to find an investor for the capital. Different kinds of partnership are also formed for attracting the investing.
A loan can also be raised for the business by its owner or owners. There are various small and big financing houses in a state which provides loan for doing a business.
Loan can be required either at the start of the business or in the middle of the business. Generally the business has to show the tenure for which the business is running, a profit or loss statement, establishment and activities going in the business.
A share or stock is a way for business with corporate structure to raise capital.
A corporation can issue share which is sold in the stock market to obtain cash. It is a portion of the equity of a corporation with the shareholder.
Basically a corporation can generate money by the means of share by offering people who are willing to buy the share, a share in the profit of company. People with 20 or 25 percent share can also become one of the decision makers of the company.
The idea behind share is to propose a business plan which is real and practical enough to convince people in to buying the share and hold it for some period of time.
Big shareholders makes profit by holding them while small shareholders can make profit by selling the share as the price of the share rises when the company makes a profit and many people are willing to buy it.
Bank Account For Business
Business means transaction of money. When it comes to money people prefer to keep it in a bank. Banks provides security and it also maintains a record of money coming in and going out.
The type of bank account required for a business is called the current account. This account is different from the savings bank account as it allows numerous transactions in a month.
Any person who is willing to take the risk of capital, time and put their efforts into creating something useful for the society are Entrepreneurs. They are very important part of any society as they carry out economic activities and provide job opportunities.
There are three types of business men or Entrepreneurs
Rich – These business person have money as a part of their parental property. They are not in scarcity of money and they generally do not face any lack of resources. Starting a new business is relatively easy task for them.
Inheriting – These class of business person inherits an already running business. They only do not have wealth but they also have lots of knowledge and information about how to run the business.
New – World have seen some people who emerge as successful business men without any money and previous experience of what they are doing. They learn work hard rise and shine like sun. Mark Zuckerburg, Neil Patel, Bill Gates and Steve Jobs are some world class entrepreneurs.
Business that Started Small and Grew Big
It is not necessary that you have to start a big business to be a successful businessman. You can also start with a small business and slowly grow it into a big business. There are many examples of business which started small but later grew into a big business.
Google One of the world’s biggest company Google was started in a small two room office in the state of Stanford. Today they have become world’s most known search engine. Google also owns the number one smartphone operating system which is known as android.
Like this there are many examples worldwide. Not every business is as popular as Google but there are many businesses which started small and reached the top.
The activity done by a company to promote the buying or selling of its goods and services in known as marketing in the business world. Marketing is done by performing activities like research product development, advertising and selling.
In simple words marketing is the process of taking the product or service to potential buyers and clients. Marketing has been proven to be very effective in creating awareness among people and increasing sales.
Advertisement is a part of marketing which uses different popular media sources to tell people about the product and services. Advertising is used to tell features as well as offers and discounts on the goods. Magazines, newspaper, TV channels and other media sources are used for marketing.
Reaching Potential Customer with Internet
Internet has a reach to billions of people in this planet. It is the most popular media channel. People read blogs, watch youtube like video streaming sites play games use social media and do many more things on internet. Businesses can reach their potential customers in these places.
The Difference Between Business and a Company
Business is an area of activities and transaction which is a broader term and accomplishes something useful for society or a part of it. Company is a relatively smaller term which generally works for a particular segment of the business.