What Are The Features Of A Business / Advantages And Disadvantages Of A Family Business?

To a layman, a business is simply the exchange or the buying and selling of goods and services in order to make profit and earn a living. But in an advance sense, every business activity has  some unique features which most be fulfilled in order for it to be consider a business venture.

Any activity the is carry out with the primary objective of making profit and to grow can be consider a business activity.

In article we will looking at features of a business and also the advantages and disadvantages of engaging into a family business.

A family business is a business that is owned and controlled by family members. It occurs when two or more family members come together and agree to do business. It is considered one of the oldest forms of business organization in the world.

What Are The Features of A Business?

For any activity to be considered a business activity, the following features are required:

1. Exchange of Goods and Services

Every business deals with the exchange of goods and services. The goods may be consumer goods like bread, clothes, shoes, and phones, or producer's goods like equipment and machinery used to produce other goods for consumption.

Services such as banking, accounting, transport, insurance, and housing, which are intangible goods, are also considered businesses.

2. Production or Exchange

Another feature of a business is the production or the exchange of goods and services.

An activity can be considered a business if there is production, transfer, exchange, or sale of goods or services for a value. If goods or services are produced for self-consumption or for presentation as gifts, such activities cannot be seen as a business. In the business activity, there will most likely be two parties: a buyer and a seller.

3. Perpetuity (Continuity) in Dealing

Perpetuity in dealing is a feature that describes business activity.

A single transaction cannot be considered or treated as a business. An activity is treated as a business only when it is undertaken continuously or at least recurrently. To understand this, assumed that you solely own your car for profit, it is not considered a business if you start buying and selling cars on a regular basis, for it can be considered a business.

4. Profit Motive

The main feature of a business is to earn profit and grow. A business will flourish only when it is able to serve its customers to their satisfaction. Profits are essential to enable the business to survive, to grow, to expand, and to get recognition.

By reinvesting the profit, the business increases its capital and contributes to the wealth of the owners.

5. Usage of Resources

For a business to function, it needs to make use of four factors of production, which are: land, labor, capital, and enterprise, in order to earn profit from the business. All these resources are always limited in supply in relation to demand (scarcity) and so must be used effectively and efficiently to produce goods and services that are solely for customers for a price/value.

6. The Elements of Risks

Every entrepreneur should be aware of the fact that taking risks is an important feature of a business.

Not all businesses will make a profit at the initial phase of the business, and so they may have the possibility of enquiring a loss. The possibility for a business to inquire about any lost is what is referred to as risk.

There are two types of risks: insurable risks and uninsurable risks. Insurable risks may include risks from fire, theft, float, or accidents, where the probability can be calculated and insured, while uninsurable risks could be a change in technology or a fall in demand and supply.

Also See: Different Stages(Phases) Involved In A Business Lifecycle

Family Business Advantages And Disadvantages:

A family business is a business owned and controlled by family members. It could be any type of family. But how ever, this type of business has advantages as well as disadvantages, which we will be discussing below. 

What are the Advantages of  A Family business?

Although family businesses have more disadvantages, there still exist a few advantages, which are:

• It is easier to build good communication links between workers due to the close relationship.
• It focused on long-term achievements, and also members are committed to their work, ensuring the production of quality products since they work with the initiative that the business is theirs.
• There is almost an equal distribution of the profit made from the business amongst members.

What Are The Disadvantages Of A Family Business?

Like every other business, family businesses have the following disadvantages:

• In a family business, retaining non-family employees may be problematic, as such employees may find it difficult to deal with conflicts amongst family members at the job site. They might also have limited opportunities to progress.
• Many family members are employed not based on employment qualifications but as a result of hereditary with the hope that they will make useful contributions towards the business.
• Salaries and compensations paid to family members and also sharing of profits is challenging. This is due to the fact that some individuals might work less but still expect an equal payment.
• Determining who will take over the leadership or ownership of the business went the current general retires or dies is a serious challenging issue which requires a well defined plan, a family meeting on neutral grounds without any conflicts or distractions which can then be open for discussions of family goals and future plans.

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Final Thoughts

A business is simply the exchange or the buying and selling of goods and services in order to make profit and earn a living. Features of a business as seen above are the exchange of goods and services, perpetuity in dealing, profit motive, usage of both human and non-human resources, and the involvement of risks.

From the above point, we can see that family businesses turn out to be more stressful and disadvantageous as compared to non-family businesses.