What is business? People are sometimes not so sure about what business is. Therefore, it becomes pertinent to consider understanding the term. They do not know that businesses are formed by identifying a problem within a niche and solving that problem.
Business can be referred to as an occupation, profession, or trade, as well as a commercial activity that involves providing goods or services in exchange for profits.
Profits in business are not necessarily money. It is also a benefit in any form, like reputation and value, which is acknowledged by a business entity involved in business activity. Read also how to avoid bankruptcy and generate cash for startups.
What is Business?
In answering, what is business? We can define the term business in two forms:
- As an entity
- As an activity
1. Business as an Entity
An organization or any other entity involved in commercial, professional, charitable, or industrial operations is referred to as a business [entity]. It can be a for-profit or non-profit organization, and it may or may not exist independently of the persons that manage it.
2. Business as an Activity
A business is a type of economic activity that entails the provision of goods or services with the primary goal of profit.
Concept of Business
The essential idea underpinning a firm is the business concept. We use this notion to construct the business model, plan, vision, and mission.
For example, Uber was founded on the idea of combining taxi drivers and providing on-demand services under one brand. This principle served as the foundation for all other corporate strategies.
Features of Business
Given below are the vital features of business:
|Features of a Business||Explanations|
|Exchange of Goods & Services||Goods and services are the focus of the business. Consumer products such as candy, bread, cloth, shoes, gadgets, and so on may be included. They could be producer’s goods, such as machinery and equipment, that are used to make another set of consumer goods. Accounting, transportation, warehousing, banking, insurance, and other intangible and invisible items are also part of the firm.|
|Production or Exchange||Only when there is production, transfer, exchange, or sale of goods or services for a monetary value can an economic activity be called a ‘business.’ Such activities shall not be recognized as a business if commodities are created for personal use or presentation as gifts. There must be two parties in a business transaction, namely a buyer and a seller. The transferor exchange of products between a buyer and a seller should be the focus of such activity. The items can be bartered or traded for cash.|
|Perpetuity in Dealings||A single transaction is not to be considered a business. Only when an activity is carried out continuously or at least regularly is it considered a business. It is assumed that a company will continue to operate. Assume you’re selling your house for a profit; this isn’t considered a business transaction. We can only classify this activity as a business once you buy residences and sell them to others regularly.|
|Profit Motive||The basic goal of any firm is to make money. This is not to minimize the importance of social goals or the human element in commercial operations. In fact, a company will only succeed if it can provide excellent service to its clients. Profits are necessary for a company to exist, grow, expand, and get notoriety. The business increases its capital and contributes to the wealth of the owners by reinvesting profits.|
|Usage of Resources||To make a profit, any firm requires one or more of the four productive factors or resources: land, labor, capital, and entrepreneurship. All four resources are always in short supply (scarcity), thus the company must make efficient and effective use of them to produce goods and services. These resources enable the development of a product and/or service that customers will pay a fair price for.|
5 Types of Business
Many businesses are structured around a hierarchy or bureaucracy, with defined roles and responsibilities for each position within the company. The following are the most common structures:
1. Sole Proprietorships
A sole proprietorship, as the name implies, is owned and operated by a single natural person. Because there is no formal distinction between the business and its owner, the owner is responsible for the business’s tax and legal obligations.
A business partnership is formed when two or more people join forces to conduct business. Each partner makes provision for time, money, and resources to the establishment, as well as a portion of the profits and losses. The gains and losses shared by the partners are reported on each partner’s tax return.
A corporation is a firm in which a group of people acts as though they are one. Owners are referred to as shareholders since they exchange money for the company’s common stock. The act of incorporating a company relieves owners of financial responsibility for the company’s commitments. For the business owners, a corporation comes with disadvantageous taxation restrictions.
4. Limited Liability Corporations (LLCs)
This is actually a relatively new corporate structure that debuted in 1977 and spread to other states in the 1990s. A limited liability company combines the benefits of a partnership’s pass-through taxation with the protections of a corporation’s restricted liability.
A cooperative is a profit-owned business operated by individuals for the benefit of all members. The commodities and services provided by the cooperative benefit these people, who are referred to as members. Because the cooperative’s primary goal is to give service to all members rather than a profit, they expect all members to help run the firm.
3 Business Sizes
The three major business sizes we have are:
- Small business
- Mid-sized business
- Large business
1. Small Businesses
Small businesses are small, owner-operated firms. These businesses, which often have less than 100 employees under their management.
They include small manufacturers, family restaurants, home-based businesses, clothing, books and publishing enterprises, and small manufacturers.
2. Mid-Sized Businesses
In Nigeria, there is no clear definition of what constitutes a mid-sized or medium-sized business.
A medium-sized business, however, is one that employs 50 to 249 people.
3. Large Businesses
Large companies frequently employ more than 1000 people and generate gross sales of $50 million or more.
In order to fund operations as a publicly traded corporation, they may issue corporate stock. Large businesses may have their headquarters in one nation but carry out business abroad.
Departments like human resources, finance, marketing, sales, and research and development are frequently used to organise them.
Contrary to small and mid-sized businesses, which are typically held by a single person or group of persons, large organisations frequently segregate their tax burden from their owners, who typically do not manage their businesses but instead delegate that authority to an elected board of directors.
The Element of Risk in Business
This is not to say that every firm makes money from the start; the danger of losing money is inherent in the nature of business. Risk refers to the possibility of suffering a loss. Risk exists as a result of a number of events that are outside the control of the company enterprise.
Any firm must be aware of the risk environment, be able to survive within these risk restrictions, and be willing to bear the risk if it occurs.
There are two types of risks:
|Those whose likelihood can be predicted and insured against||Those whose probability cannot be calculated and cannot be guaranteed against|
|Losses from fire||Changing technology|
|Theft||Stock market change|
How Do You Start a Business?
To start a business, you must go through a series of processes. This process includes:
- Having to conduct market research
- Coming up with a business plan
- Seeking capital or other forms of funding
- Deciding on a location as well as a business structure
- Choosing a name
- Submitting registration paperwork, and
- Getting tax documents (employer and taxpayer IDs), and getting permits and licenses.
- To make day-to-day banking easier, open a bank account with a financial institution.
All corporate activity is self-serving and competitive, and this competition can benefit people and society by directing resources to their most profitable use. Business organizations are primarily economic in nature, but they also contain human and social components.
The following are some of the most important economic factors in any business:
- Securing adequate earnings and a reasonable return on investment for stakeholders
- To maintain expansion, new customers and markets must be created.
- Making upgrades and innovations to goods and services
- Creating job opportunities
- Provision of high-quality goods and services at a reasonable price
- Profiteering and unfair practices must be avoided.
- Employees receive a fair compensation and incentive package.
- Employees will have better working conditions and an improved working atmosphere.
- Ensure employee satisfaction
Examples of Businesses
Here are a few examples of businesses you can find:
1. Dangote Group
Aliko Dangote founded the Dangote Group, a Nigerian multinational industrial corporation. It is the largest company in West Africa and one of the continent’s largest. The company employs over 30,000 employees and Aliko Dangote GCON is a Nigerian business entrepreneur worth billions of dollars.
2. Globacom Limited
Globacom Limited is a telecommunications company based in Nigerian and is a multinational telecommunications business created by Mike Adenuga on August 29, 2003. The company employs about 3,500 individuals worldwide as of June 2018.
Lagos, Nigeria, is the headquarters. Mike Adenuga is the company’s founder.
3. Zenith Bank Plc
In Nigeria and Anglophone West Africa, it is a major financial services company. The Nigerian Central Bank has granted it a commercial bank license.
Zenith Heights is located at Plot 83, Ajose Adeogun Street, Victoria Island, Lagos, Nigeria. The year they found the company was 1990.
Apple is well-known around the world for its innovative goods, which include personal computers and a variety of smart devices, as well as its services, which include music and video streaming, as well as production services.
How Do You Start a Business Online?
With a few exceptions, starting an online business requires many of the same stages as starting a traditional business.
Prior to doing anything else, you must still conduct market research and create a business plan. After that is finished, decide on your company’s name and organisational structure and submit the necessary documents to register your firm.
Instead of looking for a physical location, pick a platform and create your website. Before starting your business, you should find a means to increase your target market, whether it be through traditional marketing channels or more cutting-edge ones like social media.
How Do You Choose a Business Name?
Your business name ought to be catchy and suitable for the type of enterprise you plan to run. Additionally, it should be something that people will associate with you and your intended offerings of goods and services. It’s critical to be original.
The most important thing is that no one else should be using the name. Search online to see if a business name is available or already taken.
A Business Plan: How Do You Write One?
This includes a summary of the company’s operations and its success-oriented tactics. It also includes information on your management, the market, your industry, promotions, and sales projections.
Lean formats are streamlined yet still contain a wealth of useful data, such as partnership details, summaries of the business’s activities and client relationships, cost structures, and sources of revenue.
How Can a Business Loan Be Obtained?
Loans are frequently the source of essential finance for a firm. There are two options: a conventional lender or government-backed loan, like one provided by the Small Business Administration.
Particularly for new start-ups, prospective lenders want to see information about the business. Make sure your credit score is high and that your company plan is polished, with a breakdown of costs and sources of income.
If the loan is approved, you might need to put down some security to safeguard it.
Businesses have a critical role in the economy. They sell items and services to both consumers and businesses. Businesses exist in all shapes and sizes, and they work in a wide range of industries.
From sole proprietorships to huge corporations with stockholder equity, business models vary.