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What’s A Business

November 26, 2009

Most all of us own, work at, or depend on one. They form the nucleus around which every village, town, and city are built. They dominate the headlines, dictate our life styles, and consume most of our waking hours.

“Business” is such a ubiquitous institution, it might seem too simple a question to ask, but, just what is a business?

The dictionary defines a business as a “location where commercial work is carried on.”

Economists define a business as “an entity, an individual, partnership, or corporation, engaged in commerce, manufacturing, or services in an attempt to make a profit.”

Perhaps the most thought-provoking definition, however, is simply that “a business is people.” People like you and me. A business is not an “it,” it’s an “us.”

It’s not the money that makes a business, it’s the investors who put it there. It’s not the order that gets things started, it’s the customer that placed it. It’s not the supplies that are used, it’s the suppliers that provided them. It’s not the machinery that made the product, it’s the men and women that operate them.

It’s the role of management to bring these various groups of people together in voluntary transactions that produce greater benefits for each than could be accomplished elsewhere. That is, all parties to the transaction must benefit, or, sooner or later, the transactions will cease to occur.

In our economy, most businesses are specialized. One company produces raw materials, another manufacturers products, while still others transport, finance, and distribute products. No business can exist unto itself. The quality of the relationships determines the efficiency of the system.

Understanding, respecting, and balancing the competing needs of the “people” that form a business is the responsibility of the managers, leaders, and representatives of each of the groups.

Investors are entitled to a fair return on their capital. Capital in a business is at risk. There is no certainty of a return on the investment. Investors thus are entitled to an incentive for having placed their capital at risk in a business enterprise.

Investors are also entitled to expect that the capital they invest will be spent wisely. The habits of managers spending other people’s money all too often differs from the habits of those spending their own.

A business doesn’t start to work until a customer writes an order. That order is an expression of a customer’s “need.” If the business is to prosper, it must satisfy those needs in an economically advantageous manner.

The ability of a business to do anything, pay wages, maintain employment, and to invest, is totally dependent on its ability to satisfy customer needs. As the demise of many firms during the past few years attests, even the largest of firms cannot take their customers for granted. Only to the extent that customer needs are met, will there be profits for the business and wages for the employees.

Suppliers are a vital part of every business. Without the goods and services that they supply, a business wouldn’t be able to operate.

While a business must constantly search and negotiate for improved sources of supply, it must also recognize that its suppliers are people too. Treating your suppliers with the respect and candor that you would appreciate receiving from your customers is a good policy that will pay dividends.

When was the last time you called one of your suppliers and told them what a great job they were doing? Most calls to vendors deal with pricing , policy or delivery complaints. When things are going well, it’s usually quiet.

What is your reaction when your customer says that you are doing a great job? Don’t be afraid to send praise down the pipeline. They won’t raise their prices. What will happen is that they will be more aware of you and your needs, the relationship will become closer and they will take better care of you than ever before.

Perhaps no other group of people is as influential in defining a business as the people that work there. A good business has good people. Respect and opportunity provided by the employer, effort and appreciation put forth by the employee.

Because it’s your business, remember “a business is people.” If more people did, there might not be so many unproductive disputes and disagreements.

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