NATURE AND AIM OF BUSINESS 1. Definition of business.—In everyday speech the word "business" does not possess a clear-cut mean ing. It is applied rather vaguely to trading and manufacturing occupations as distinguished from the arts and professions.
It is the aim of the Modern Business Texts to ex plain the laws or principles which determine and con trol the events of the business world. For the pur pose of our study business may be defined as follows : Any occupation in which men, at the risk of loss, seek to make money by producing commodities for sale, or by buying and selling commodities, or by hiring the services of others for utilization at a profit.
Or more briefly: Business is any gainful occupation of which profit is the goal and in which there-is risk of loss.
This definition, it will be noted, excludes many so called gainful occupations. The farmer, for example, would be said to be in business only in so far as he hires labor and markets his products. As he enlarges his operations and hires more men to work. for him, he becomes more and more a business man because Ile is more and more concerned in such problems of busi ness as are involved in accounting, management, sales manship and credits. But the ordinary small farmer is quite properly regarded as not being in business.
Evidently a country storekeeper is in business, for he buys goods in the hope of selling them at a profit and takes the risk of not being able to do so. A young clerk in his employ on a salary takes no business risk and is not thinking about profits; hence, strictly speak ing, he is not a business man. But he is part of a business machine and is learning how to do business, and so is commonly thought of as being in business.
The ovvner of a factory who buys raw materials and hires labor is taking risks and is in business. Some of his employes are artisans or workers with tools and machines ; they are learning nothing about business and are not thought of as being in business. Other employes may be connected with the purchase or sales department, and may have to assume distinctly busi ness responsibilities ; so we think of them as being in business. The bookkeeper who keeps the records of' the purchases and sales, the output, the costs, 'etc., stands on the border line between business and man ual labor. As mere bookkeeper be is little more than a machine, but as a potential accountant, able to im prove his employer's system of bookkeeping and to warn him against the danger of increasing costs, he steps into the ranks of business men.
In general, the great mass of laborers in manufac turing establishments and on, our railroads, whose work is mainly with their hands, are not thought of as business men altho they are connected with business enterprises. They have no part in the solution of problems involving risk and profit and are not being trained for such effort. They have "jobs" in business concerns, but they assume no business responsibilities. On the other hand, every business enterprise employs men upon whom the employer unloads some of his re sponsibilities. Such men, whether they be bookkeep ers, cashiers, salesmen or department managers, are in direct contact with business problems and are re garded as business men even tho their own money is not at risk.
2. Profit and risk essential elements.—It is not im portant to decide whether this or that man is in busi ness or not, but it is important to understand that the word business necessarily implies a balance sheet upon which the two most important words are profit and loss. If profit is not the goal, then the enterprise is not a liu–siiW-ss one.
By the profit of a business enterprise is meant the surplus left over after all the costs or expenses have been paid. A small storekeeper doing a cash business must sell his goods at such prices and in such volume as will enable him to pa-y the wages of his employes, a fair wage to himself, rent to his landlord, interest on capital invested, and all other expenses. If, at the end of a. year, his inventory shows that his stock of goods has not shrunk in value, and his outstanding debts are no greater, the increase or decrease of his bank balance during the year will disclose his profit or loss.1 Profits are the goal of business. If the socialists had their way and legislated capital and profits out of existence, what we now know as modern business would completely disappear. In Chapter II we shall make a closer study of profits and endeavor to show bow profit is earned and the obstacles that must be overcome. Later on it will be shown that the strug gle for profit which we call business has been a tre mendous force in the development of human capacity and for the advancement of civilization.