How Does Business Work

The way a business works is basically adding value. They do this by processing inputs into higher-value outputs. Assume, the business produces goods and you are the owner.

Starting a business

At first, you decide what to produce. You then organize and make decisions about resources, including how to pool and organize them. Some you may have to buy such as raw materials. Others you may be able to rent such as machinery and buildings. To do it all, you need capital.

Your initial capital may come from your personal pocket or contributions from your family or friends. Or, you apply for a loan or raise funds from other external sources such as crowdfunding. For external sources, you should create a business plan as a way to convince fund providers to be willing to put their money into your business.

You also design how the business operates. For example, you have to determine what business structure you run, whether it is a sole proprietorship, partnership or limited company. You also organize operational activities into various business functions such as human resources, operations, marketing and finance.

Operating a business

Once operational, your business converts inputs into outputs. We call this transformation …