February 27, 2021

SB-Accounting

Accounting + Finance Blog

Business: meaning and explanations

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As interactions between humans continue to take place there is the need to exchange knowledge or goods for money. This results in the term business. What exactly should be the definition of a business? Here is what you should know.

Definition of a business

Generally, a business is any legal business activities people engage in to earn a profit.

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Specifically, a business is planned activities to provide value to people for the sole aim of profit.

Key Explanations

From the general definition, the following can be deduced.

A business is a legal activity. Every business must be backed by the law of the country. If the country specified that a particular business is illegal, doing such a business can put a businessman in serious problems.

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For example, recently in Nigeria, there is a ban on the use of motorcycles for transport businesses in the metropolis area of Lagos state. In that instance, such business becomes illegal. Therefore, ride-hailing startup companies like Gokada and the much older Max.ng cannot find a job to do in the mainland and island of Lagos state.

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The aim of doing business is to make a profit. There is a saying that when there is a risk, there should be rewards attached to it. Doing business is a risk. A businessman risk time he will spend with his family to go out there to do business.

Similarly, a businesswoman faces risks on the street from predators men just to do business. As if that is not enough, there is the risk that the business may not earn enough income to scale. In any case, the reward for such risk is profit. Further, profit is the primary reason why people do business in the first instance.

From the second definition, you will notice that aside from the motive of making a profit, people go into business to provide value to people. These business people see a need, capitalize on it and turn it into the business. When you see the business in this way, it might motivate you to value quality service or product first, then profit.

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A good example is Andela. A startup that trains software developers and places them with top jobs with big companies. The owners saw a need. That is, training Africans to become software developers. Next, use the knowledge they acquire to provide jobs that have been trained.

The business should be seen first as providing value and then profit-making. In the next article, the objectives of going into business will be discussed.

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