Business is more than just making money. For most people, a business means having their own home, working in an office, getting a college degree, having their own car, and so forth. But business encompasses much more than that. It also includes the practices used to run a business, the knowledge and skills needed to run a business, the tools used to conduct business, and so forth.
A business is defined simply as an organized system or organization in which individuals working individually perform functions that contribute to the organization’s success. A business can be as large or small as desired; it does not need to maintain any kind of office or management system. A business can also be home-based or involve many individuals working remotely from their home. A business can be as public or private as desired; individuals working within such an organization are called associates or partners. In this manner, a business can be both large-scale and very private.
The term “corporation” refers to any company in which people or individuals own shares of stock or assets. Stocks will vary in price between owners. The ownership structure of a corporation can vary greatly depending on the type of business being operated and the laws governing that type of business. Some corporations have limited liability and pass through their earnings directly to the owners; others operate as partnerships and have shares listed with investors on the exchanges.
A business can be run internally for the benefit of all owners, or it can be run for profit by a board of directors. In order to maximize profits, businesses must develop a business strategy. A business strategy can include any number of things. These include how to best use current products to make the profits desired; the types of goods that are desirable to buyers in the market; what customers find desirable when purchasing goods; how to deliver these goods to consumers and how to keep goods in good condition. Also, a business must develop an efficient distribution system in order to reach all locations and to make sure that all goods are supplied to customers.
Developing a business strategy also involves developing a contractual strategy. This is different from the incorporation of the services of a lawyer or attorney in the formation of a limited liability corporation (LLC). The contract theory of value states that the value of the services of an attorney or lawyer are limited to the fee that the attorney charges for his services; however, the value of a service is not confined to fees. The contract theory of value holds that value is determined by the services and the value of the goods provided to the stakeholders. Therefore, a business can increase its profits by contracting with suppliers for the goods it needs to expand its business.
Another way to increase profits is to obtain credit from suppliers. A firm’s ability to obtain credit increases if it sells more goods to more customers, provides services to more clients, and develops stronger partnerships. Credit enables a firm to invest in more capital assets to produce future goods and services. Firms that do not earn enough from sales cannot improve their efficiency. Thus, firms must choose among the four profit maximization strategies: optimizing present value, optimizing earnings, maximizing net income, and minimizing cost.