Business Potholedummy is defined as the act of earning money or producing something by purchasing or making and selling goods. Simply put, it's "any undertaking or business entered into for gain." This includes all forms of trade, such as manufacturing, selling, and trading. It also covers financial activities, such as making loans and managing assets.
In essence, business is about earning a profit. However, this definition is broad and covers many aspects of an organization. In fact, a business can be run efficiently and effectively for a long time if it is properly structured and managed. One of the keys to a successful business is planning. This includes everything from the initial concept to execution.
The first step to achieving any business objective is planning. For example, when undertaking a new marketing campaign, a business needs to study the product, research the market, and analyze the competition. All of these facets need to be analyzed to determine what the organization's goal is, how to reach that goal, and how much effort will be required. All of this requires a solid plan.
Obviously, there are no miracles workers in business; everyone involved must put in long hours, follow-through, and put their best efforts toward the achievement of a business objective. A manager who discovers a way to cut costs without affecting productivity is likely to find that his efforts do not bear fruit. The same goes for someone who discovers a creative way to sell a product that solves a problem but does not address the needs of the customer. This is why most organizations seek out management consultants and accountants to help them develop and implement business strategies.
Along with carefully managing the business model, managers must make assumptions about the nature of their organization. Managers must assume that all employees are honest, hardworking, and dedicated to the cause. They also must assume that the company's core competencies are understood, and that these core competencies are being leveraged to the benefit of the business. While managers are careful to evaluate management assumptions in a realistic manner, they also need to be willing to make the assumption that something may go wrong and that adjustments will need to be implemented. If a successful strategy or implementation is not possible, then the managers should consider changing their assumptions, or admit that something is not working.
As business strategies and operations become more complex, so does the level of difficulty of maintaining them. In fact, a company that can successfully execute even moderately complex business procedures will quickly run into problems that require years of attention and investment. Complexity in business procedures and functions tends to grow as the number of functions increases. Each function and process now have to be managed in its own right, and this causes unnecessary complexity for the business. As a business continues to grow, so too does its complexity, and it becomes increasingly difficult for managers to maintain organizational efficiency and effectiveness.
The other factor, related to management and operational responsibilities, is that of business debts. As a company grows, so does the size of business debts, which will result in a mounting interest burden on the business. This is especially true if the company makes substantial profits, because it must pay off the interests and use the interest income to finance the operations that keep the business going. Managing business debts will become particularly difficult as the business takes on more debt and will cause the proprietorship to enter a "deflationary" period, in which revenues are declining while expenses are increasing.
Although all these factors are important in determining the viability and longevity of a business, none of them have any influence on the economic value of a business. The only thing that really matters is the profitability of the operation. While the business owner is responsible for maximizing profits, the entrepreneur, the corporation, and creditors are all equally responsible for minimizing losses and ensuring that the business is solvent at all times. Allocating resources between operations, funding, and investing to minimize loss is what determines the ultimate profitability of an enterprise.