What is Business

What is Business – A Breakdown of Entrepreneurship

The performance of a business – whether a startup or a corporation – is largely dependent on its ability to efficiently carry out the different parts of the business cycle. A business performs efficiently only when there is smooth transition from one stage to another. For startups, it is vital for the entrepreneurs to understand each of the components, and how they all fit together in the bigger picture for the company.

Let’s take a look at the different components…

  1. Funds from Investor to Begin/Expand Business Operations

This is the starting point of the business cycle. When an entrepreneur enters the financial world with an innovative idea, one of the first steps is to decide how to raise capital for the business. Funds can come from banks and other financial institutions (debt) or from investors (equity). Whatever the source, it is necessary to raise the funds in order to transform the idea into a real business.

  1. Acquire Clients to Generate Revenue

After raising the initial funding, the next step for a startup is to draw up a business plan, one that will create a strong customer base and generate revenue for the business. Different strategies can be adopted in order to do this, and it will vary from one startup to another depending on its type and goals. Once this is done, the entrepreneur can then implement the strategy and actively seek out clients for the business.

 

  1. Provide Product/Service to Satisfy Customers/Clients

Selling the product or providing the service – depending on the type of market that the startup is hoping to penetrate – is the following step. The main objective here is to satisfy the clients, with the hope of retaining them for the future. In addition, it will establish a goodwill for the startup, which will help to draw in more customers/clients in the future.

  1. Receive Payments

The next component of the business cycle involves collecting the payments from the customers/clients. By selling the product or providing the service, the startup needs to generate enough revenue to cover its costs. This is also important in order to keep the faith of the investors, who are unlikely to keep pouring money into a business that does not generate any revenues.

  1. Grow & Expand Business

In addition to covering business costs, the revenue earned is also used to re-invest into the business. This is especially important for startups since it is very important for young companies to maintain its growth and expand its operations rapidly over the first few years.

Once the cycle is complete, it is repeated over and over again, each time making the changes necessary to maintain a desirable level of performance.

 

 

 

 

 

 

Sources:

http://www.iese.edu/research/pdfs/DI-0449-E.pdf

https://www.massmutual.com/businesses/educational-articles/types-of-business-valuations

http://www.exits.com/blog/business-valuation-what-will-your-company-sell-for/