What is a Business?

by J.Crawford on February 12, 2012

Most of us think we know the answer to this question but have probably never really asked because it’s probably one of the most misunderstood concepts in the world of capitalism today.  To answer the question; “What is a Business”  I think it’s only fair to acknowledge there are thousands of answers, all accurate to a varying degree. Here is where it get’s interesting, I’m not really interested in a definition of the word in a traditional sense (anyone could offer that)  I’m interested in what YOU think is a valid answer to that question right now, without research.  In other words I’m not interested in the “right” answer but rather mining for the truths in perspective. Do You Want to Help?

I’m mostly interested in YOUR answer to the question for a project I’m working on for the next 8 months so what I’ve done is create a simple way to blatantly solicit your assistance.  If you have a minute or two and you are genuinely interested in business, maybe you want to start one or are an entrepreneur already, consider answering that question below in the comments. BUT here is the catch…. Try not to read the other comments that are already posted. Keep it real, I’m after your unique answer, that’s what I need.  Thanks.

What is a Business?

I took the liberty of seeing what the web had to say in response the question “What is a Business” and it turns out most of what I found are actually answers to an aspect of a business.  For instance here is what a top legal website had to say when asked the question:

A business is a legal entity that is set-up or designed to make goods, sell goods, or provide a service. Many businesses are for-profit organizations as opposed to a non-profit organization or hobby job.

Can’t argue with that, which is what makes this such a unique question.  I know dozens of entrepreneurs both online and traditional off line business owners who could all offer a unique perspective on the question and many have, I’ll be sharing some of those at a later date.  I’ve read several great books on business and entrepreneurship and all offer insight into what it means to own a business.  I’ve also heard some pretty cool definitions of what a business is that I can relate to from my own business experience over the years.

What is a Business? Wikepedia’s Answer:

I always like to check out what wikipedia has to say about certain topics and so I went to see what they had to say about business.  There content is more like a dictionary than anything else and I hope your answer is better!  Anyway here is the gist of what wikipedia has to say about what a business is:

A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalisteconomies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning. wikipedia on business

My Understanding of What a Business Is:

One of the books I read when I was young that shaped my view of what it means to own a business and provided my first answer to the question: “What is a Business” was a book by Robert Kiyosaki called the Cash Flow Quadrant.  Have you heard of it?  Maybe you’ve read it.

What is a Business

These are the 4 Quadrants~Notice the "B" Quadrant

In the book “The Cashflow Quadrant” Robert talks about the quadrants and states that essentially people have four ways they can make money each of which is one quadrant of the CashFlow Quadrant (p.s. these are all trademarked terms).  Picture a Tic-Tac-Toe board then in the top left is the first quadrant which is the employee quadrant.  Below that is the self employed quadrant and then back up to the top right quadrant we have the Business quadrant.  Then below in the bottom right quadrant we have the Investor.  Robert talked extensively about the “B” or Business quadrant and explained that is where most millionaires are made, which got my attention.

In fact most millionaires have had experience in each of the quadrants and this is part of what probably makes them effective at mastering business, management and personal finance.  There are no short cuts other than hiring people who know better than you, but then still, it is easier to manage effectively if you have personal experience in each quadrant.

One of things that was shared in the book was a simple definition of what it means to be a “Business Owner”.  Essentially it said that:

 “In order to own a business you need to be able to leave the business for one year and upon your return find it being better than when you left.”

I remember being reminded of this when I was reading some books by Micheal Gerber who founded the company “E-Myth” which is an entrepreneurial consulting company.  The E-Myth works at helping business owners turn their business into a “B” type business that can effectively run without them, which is not how most entrepreneurs start out, the book asserts.

Essentially if you go to work everyday and get a paycheck every week you are an employee and you have a job.  If you own your job and personally provide a service to a customer or client, you own your job and are self employed.  People who own a set of systems that continually improve and innovate to provide a product or service without their own personal day to day input, own a business that makes money for them.  And then finally the investor is someone who uses money to earn money for them in a passive way.  These are just my words, Robert does a much better job of explaining it all. If you are interested in the “Cash Flow Quadrant” or Micheal Gerber’s “E-Myth” I’ve provided a link to learn more or buy them from Amazon.

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It

Rich Dad’s CASHFLOW Quadrant: Rich Dad’s Guide to Financial Freedom

Those are two easy to read books that will fundamentally change and clarify the way you look at business, they should both be required reading for anyone seeking a business degree in my opinion.

In a nut shell…

Before I ever contemplated the question, what is a business, I started one.  Or so I thought.  In my early twenties I start a concrete business where I was basically a concrete contractor which is really a self employment business.  I did over a period of 7 years turn that into a “B” type business of sorts and then decided that wasn’t the business I wanted to be in if I wanted to own a real business that operated without me.  One of the best examples of a true “B” type business is my online business which is a great business idea for 2012 for the right person. I think the Internet has opened up some great possibilities and small business ideas that can be developed into a true business.

So my answer to the question (that I’d like you to answer below in your own way) “What is a Business” is a mix of what I’ve learned in the two books I’ve mentioned and my personal experience.  To me a business is a system of delivering a relevant and ever innovating product or service with a philosophy of systematic problem solving and improvement.  Another key component of a real business is that it needs to be something that can be sold.  Some of my websites are good examples of a business because they are in relevant topic areas and have systems built in that allow for marketing and feedback. I can also outsource writing and even revenue generation in some cases.

OK, now let us know how you answer that question.

What is a Business?

  • Do you own a business now? 
  • Do you want to own one in the future?
  • What are your top reasons for wanting to own a business? 
  • What is your Dream business?
  • What has been the worse business you’ve ever owned and why?

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