Large percentages of businesses fail in the first year because many of them do not have the understanding of ‘What is a Business?’ fully defined. A lot of businesses should never start on the basis of what they think a business is, which leads into further misunderstandings of why it should exist.
This is the most basics of questions but undefined, only results in disastrous consequences.
A business is an organised operation, fulfilling demand in the market place by providing a product, a service, in exchange for money.
A business establishes it’s operations result in a product, in exchange for money, in sufficient numbers to ensure that income is greater than costs, thus confirming a condition of PROFITABILITY.
PROFITABILITY, over the long term, is it’s VIABILITY.
It’s VIABILITY allows for growth potential, the appeal to investors and the ability to withstand economic changes.
Businesses compared to engines are also systematic, developed with creative thought and require input (Fuel) in order to deliver output (performance).
But where engines produce motion, a business produces profit. Without long term and eventual profitability, it will only exist as a research & development project, charity, hobby, or concept.
The business can be an organisation or individual, it trades with a customer / client base, it exists for the longest possible term, it’s income is above expenses and it’s ultimate objective is to be profitable.
DISCLAIMER: Each country holds the definition of a business, in accordance withit's own accounting, tax and enterprise laws. Please seek appropriate legal, accounting and tax advice in accordance with your own requirements.
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