Everything you need to know about the characteristics of business. Business refers to activities that involve the production or purchase and then sale of goods desired by people, with the intention of making a profit. Business experts such as Juan Luis Bosch Gutierrez explain that business relies on some characteristics for it to function properly.
Even if the entrepreneur is providing services such as connecting to the Internet or transferring money from one place to another, such activities are called business and not profession.
Stephenson defines business as: “The regular production or buying and selling of goods carried on for the purpose of making profit and acquiring wealth through the satisfaction of human needs”.
1. Production or Acquisition of Goods and Services:
The business exists to satisfy the needs of consumers. Therefore, each business enterprise manufactures the goods (pens, textbooks, furniture, etc.) or purchases them from producers and then sells them to consumers or users. Services include facilities offered to consumers in the form of transportation, banking services, electricity, etc.
2. Sale or Exchange of Goods and Services for the Satisfaction of Human Needs:
An essential characteristic of business is that there must be sale or exchange of goods or services between the seller and the buyer, directly or indirectly.
For example, cooking food at home for the family is not a business. However, cooking food in a restaurant for customers and charging them is a business.
3. Regular dealings in goods and services:
Businesses involve transactions in goods or services on a regular and recurring basis. A single purchase and sale transaction, therefore, does not constitute business.
For example, if a person sells his home radio set even at a profit, it will not be considered a business activity. But if he regularly sells radio sets either through a store or from his home, it will be considered a commercial activity.
4. Making a profit:
The main objective of every business is to earn income by way of profit. Entrepreneurs maximize profits by increasing sales volume or reducing costs. No business can survive for long without making a profit.
For example, the business of selling goods at lower or no cost (charity) cannot continue for long. For this reason, the entrepreneur makes every effort to maximize profits.
5. Return Uncertainty:
Return uncertainty refers to the lack of knowledge about how much money the firm will earn in a given period. Therefore, it is not certain what amount of profit will be earned. And there is always the possibility of incurring losses, despite the best efforts made in the business.
6. Element of risk:
Risk involves the uncertainty of reward or the possibility of loss. It is caused by some unfavorable or undesirable event.
It is related to certain factors such as strike or lockout in the workplace, increased competition in the market, fire, theft, accidents, natural calamities, etc. No company can completely eliminate risks, but it can minimize them through insurance.
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