Essentials of a Successful Business
Profits: The spark plug of business
In countries of free enterprise, such as the US and Canada, the carrying on of business requires the joint contribution of workers and investors. Workers give their services with the object of earning a return in the form of wages or salaries paid from the earnings of the business. Investors put their money to work in a business in the expectation that it will earn a return in the form of dividends paid from the surplus earnings of the enterprise, or in the expectation that the value of the investment will appreciate so that they will realize a gain upon its sale. In fact, investors may have both objects in view, but in any event, their aim is to earn a profit.
Without such prospect of reward, investors would not risk the possible loss of their savings, and would hoard their money. If the free flow of savings into industry should be seriously retarded, existing businesses could not expand their operation, and no new enterprises would be started. Should such a condition continue for any considerable period of time, the volume of business activity would be drastically curtailed.
To attract capital, therefore, a new business must show prospects of earning. It is estimated that there is an average investment of $10,000 behind every job industry, although the initial investment per job is much greater in some industries than others. Men with savings would not invest such a large amount of money unless they felt they had a reasonable chance of earning a fair return on their funds. After a job is created by the original investment of capital, it takes still more money to maintain that job, and this money must come from the sale of products or services. Consequently, if the job is to be maintained for any considerable period of time, the income of the business must exceed the amount of expenses.
The profits of a going concern determine the volume of its production, the extent of the employment which it affords to workers, and its ability to attract new capital. Profits permit the replacement of worn‐out equipment and plants. They lead to expansion of plant facilities and the creation of more jobs. Profits earned in prosperous years, and retained in the business in the form of surpluses, permit the company to stay in business, and to pay its workers in the lean periods when it operates at a loss.
Object of an enterprise
The launching of an enterprise represents the hopes and ambitions of its organizers, and usually their hard‐earned capital. Yet, in many cases, the launching of an enterprise is an economic waste, because the result is failure. In many other cases, heavy losses are incurred, although such losses may not result in insolvency. A great proportion of these losses could be avoided, since they are caused, to a large extent, by a lack of knowledge of how to organize and conduct an enterprise successfully.
The interest of the proprietors of a new business undertaking, as well as of those conducting a going concern, is usually centered upon its product. The product may be a useful article, excellent in every way, and one that will be in demand. Nevertheless, there is more to a successful business than merely producing a useful or service. While the article or service must be of maximum quality for its price range so as to insure wide customer acceptance, it must also be produced and distributed at a low enough cost to assure a fair profit if the business is to succeed.
Essentials of a successful enterprise
It is easy to enter business. To stay in business and be successful, however, requires a sound knowledge of business principles, and the ability to interpret this knowledge in the light of the conditions and needs of the business in question…
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