The business in the 21st century is far from what it was 200+ years ago. Centuries ago business was mainly traditional. With people or organizations trading goods with other parties for their goods. Now the business is fast. “Global Village” is becoming smaller and smaller. There is a science to running a business. It involves entrepreneurial skills, and the ability to take risks. A major part in running a business is making sure it is efficient. Whether you run your business traditionally or on the information superhighway (the internet); it is critical that it be run economically.
Economics involves the way you use your resources. It involves knowing your business’s limits and knowing how to push sales or production to its maximum. Many owners fail to realize the importance of knowing your business’s limits and how to push those limits outwards. One of the key ways to run your business economically is to understand the numbers behind the receipts and bills. A strong understanding of how money works and the way it relates to a business is important. To achieve this you must keep up to date and have accurate records. A strong knowledge of accounting is very important. Understanding the numbers involved in the business will show you how one decision affects another and what must be done to achieve a particular result.
It is also important to understand how your resources go to work. Placing all your resources and capital in one product, or selling will affect another. For example, if you sell books and videos on your website, and you place all your effort, skills, and marketing towards selling videos, your book sales will significantly decrease.
Finding a common ground is important. Or placing 100% of your resources into selling one product will make you more efficient and productive when selling that product. For example websites such as www.boxingglobal.com specialize in information about boxing but have a little side focus on other sports. If this website focused on providing information equally the product will not be as rich. Finding a common ground is very important.
A major source of running a business economically is the use of labor. Labor can be defined as any work that is either physical or mental. For you to be economical about your business, you need to make sure your labor (whether it be just you or hundreds of employees) is highly motivated. You need to set goals and reward your labor for work and results.
In economics, it is understood that a business can only achieve so much profit. There will be a point where you just can’t earn any more money. For example, if you own a local barbershop don’t expect to earn millions of dollars.
For you to reach a point that is beyond your economic limit, you must expand. Economists generally have three major categories to choose from in order to expand your earning limit. This is through labor, resources, and capital.
Labor as I explained above can be both physical and mental. Acquiring a larger or more skilled labor force will push your earning boundary further out. Work and the quality of it will defiantly help your business.
Resources include factors such as the people you know, the places you know, and how close and easily attainable something is. For example if you know Bill Gates, that is a huge resource to have.
The final Major factor is Capital. Capital includes money, equipment, buildings, or anything that can be considered an asset. Capital maybe the most important of the three resources because what you put into your business increases the probability that it will be successful.
Every one of the above three categories can then be multiplied into numerous categories. But the above three are very important to expand in order to increase the production possibilities of your business. Keep caution through that expanding too fast in a category will result negatively. The key is to expand slow and steady.
Businesses need to run economically. The decisions you make will directly affect the development of your business. You need to understand how to run a business efficiently and how you will manage your labor, resources, and capital.