Buying Goods and Services
Businesses buy goods and services both for resale and for their own use. The owners of a men's clothing store, for instance, must buy slacks, jackets, suits, coats, and other items to sell. The store owner also needs sales tickets, a cash register, display cases, and other supplies. He or she needs services offered by other businesses, such as advertising space in a newspaper or a window cleaner to wash the display windows. Why is this important?
Selling Goods and Services
Businesses must sell goods and services if they expect to stay in operation. Some businesses like grocery stores, hardware stores, jewelry stores, and others - sell goods. Still other businesses - telephone companies, airlines, hospitals, law firms, and so on - sell services. Why is selling goods and services important?
Goods must be stored until they are sold or until the customers want them delivered. For example, toys are produced year-round, but most of them are stored until merchants order for Christmas. Manufacturers need storage yards and warehouses to store raw materials, supplies, and finished products. Why is this important?
Handling Money and Keeping Records
All businesses must handle money and keep records. Business owners need to know how much they have sold, how much of what they sold was returned by customers, and how much they owe to others. They need to know the amount they are spending on building repairs, rent salaries, and other expenses. Their records show whether their business is making or losing money and give them the information they need for government reports. Why is this important?
Extending Credit to Customers
Most businesses extend credit to their customers. Many businesses would not be able to operate if manufacturers and other businesses did not allow them to buy on credit. And merchants find that most customers today expect credit at stores where they shop. Why is this important?
Providing Services to Customers
Almost all businesses give certain services to the goods they sell to customers. Often a customer will buy from the business that offers the most service. A store may provide parking space, lounges, a coffee shop, telephones, and delivery service. What good is this?
Packaging and Dividing Goods
Many businesses package and divide goods to meet customer needs. For example, marketers design packages to protect goods and make them more attractive. Marketers also package goods to protect them while they are being delivered or to make them attractive as gifts. Businesses that sell goods may buy them in large quantities and divide them into small quantities for resale to customers. A supermarket might buy tomatoes by the bushel and package them into trays of three tomatoes each, which is a convenient size for the customers. Why is this important?
As a business owner, you are entitled to profits because of the risks they take in investing their money, and because of the extra work and responsibilities that go with ownership and management. Bust most businesses do not make the huge profits that some people suppose. The average profit on sales for manufacturing businesses is about 5 percent a year. As you know, competition with other businesses helps keep prices and profits down to reasonable figures. Why is this important?