Why Do Businesses Exist?
Before we look into exactly why businesses exist, we must first discuss what is a business? How important is it that we see both small businesses and large, public businesses grow and flourish?
Well, by very definition a business is an organisation that exists to provide goods and services on a commercial basis to customers.
Services – Intangible products e.g. Cleaning, transportation, legal representation and more!
Goods – Tangible items that can be used and stored, this would include food, clothing, appliances etc.
So, why do businesses exist?
Businesses exist because business exists, read that again slowly. Demand creates the need for a supply and entrepreneurs are subsequently looking for the next product or service they can take advantage of. Businesses have become and will always be part of society, one of the first and most important parts of basic economics is the concept of supply and demand which we mentioned earlier.
- Individuals supply their knowledge and skills to businesses in exchange for compensation (wages).
- While businesses use this to create goods and services which are then bought by individuals.
This cycle continues to ebb and flow, making the world go around!
We mentioned entrepreneurs earlier within the article and they play a huge role in the success and failure of businesses. Around 80 per cent of UK companies fail within their first year, only 42.4 per cent of businesses that started in 2013 were still trading five years later. (Office for National Statistics)
Without entrepreneurs taking these risks and starting up businesses, we would not be in such a diverse marketplace, huge multi-billion dollar companies such as Amazon would be able to take over even more than they already are as the competition would be less comprehensive.
Businesses must provide value
Customers are created when they find value in the product and/or service of the organisation. They find something of value to them that they are willing to spend money on in exchange for it. The transaction of business should provide both sides of the deal with value.
At this point, when a customer pays for a product or service, a sale or revenue is created. In an ideal world, this can lead to the business getting payment, and the customer can leave feeling happy with the service or product.
Businesses exist to solve problems. Unable to remove that wine stain from the carpet? A carpet cleaner can solve the problem, for a fee of course! Running a business is not supposed to be difficult, there are going to be a range of challenges along the way, but if the idea behind a business is good and the people behind the brand are committed, there is potential to go far.
To sum up, businesses exist to make profits, solve problems and deliver value for consumers. Entrepreneurs take risks in an attempt to become the next billionaire business owner. Many fail, many make it far and millions will also fail!
The journey of starting a business can be difficult but with the correct tools and people on board, it does not have to be that way!
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