Business operations

This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Business operations" – news · newspapers · books · scholar · JSTOR (March 2013) (Learn how and when to remove this template message)

This article is written like a personal reflection, personal essay, or argumentative essay that states a Wikipedia editor's personal feelings or presents an original argument about a topic. Please help improve it by rewriting it in an encyclopedic style. (August 2018) (Learn how and when to remove this template message)

Business administration
Management of a business
Accounting Management accounting Financial accounting Audit
Business entities Corporate group Conglomerate (company) Holding company Cooperative Corporation Joint-stock company Limited liability company Partnership Privately held company Sole proprietorship State-owned enterprise
Corporate governance Annual general meeting Board of directors Supervisory board Advisory board Audit committee
Corporate law Commercial law Constitutional documents Contract Corporate crime Corporate liability Insolvency law International trade law Mergers and acquisitions
Corporate title Chairman Chief brand officer Chief executive officer/Chief operating officer Chief financial officer Chief human resources officer Chief information officer/Chief marketing officer Chief product officer/Chief technology officer
Economics Commodity Public economics Labour economics Development economics International economics Mixed economy Planned economy Econometrics Environmental economics Open economy Market economy Knowledge economy Microeconomics Macroeconomics Economic development Economic statistics
Finance Financial statement Insurance Factoring Cash conversion cycle Insider dealing Capital budgeting Commercial bank Derivative Financial statement analysis Financial risk Public finance Corporate finance Managerial finance International finance Liquidation Stock market Financial market Tax Financial institution Capital management Venture capital
Types of management Asset Brand Business intelligence Business development Capacity Capability Change innovation Commercial Marketing Communications Configuration Conflict Content Customer relationship Distributed Earned value Electronic business Enterprise resource planning  management information system Financial Human resource  development Incident Knowledge Legal Materials Network administrator Office Operations  services Performance Power Problem Process Product life-cycle Product Project Property Quality Records Resource Risk  crisis Sales Security Service Strategic Supply chain Systems administrator Talent Technology
Organization Architecture Behavior Communication Culture Conflict Development Engineering Hierarchy Patterns Space Structure
Trade Business analysis Business ethics Business plan Business judgment rule Consumer behaviour Business operations International business Business model International trade Trade route Business process Business statistics
Business and economics portal
v t e

Business operations is the harvesting of value from assets owned by a business. Assets can be either physical or intangible. An example of value derived from a physical asset, like a building, is rent. An example of value derived from an intangible asset, like an idea, is a royalty. The effort involved in "harvesting" this value is what constitutes business operations cycles.

Overview

Business operations encompass three fundamental management imperatives that collectively aim to maximize value harvested from business assets (this has often been referred to as "sweating the assets"):

1. Generate recurring income
2. Increase the value of the business assets
3. Secure the income and value of the business

The three imperatives are

. The following basic tenets illustrate this interdependency:

• The more recurring income an asset generates, the more valuable it becomes.
  • For example, the products that sell at the highest volumes and prices are usually considered to be the most valuable products in a business's product portfolio.
• The more valuable a product becomes the more recurring income it generates.
  • For example, a luxury car can be leased out at a higher rate than a normal car.
• The intrinsic value and income-generating potential of an asset cannot be realized without a way to secure it.
  • For example, petroleum deposits are worthless unless processes and equipment are developed and employed to extract, refine, and distribute it profitably.

The business model of a business describes the means by which the three management imperatives are achieved. In this sense, business operations is the execution of the business model.

Business operations topics

Generating recurring income

This is the most straightforward and well-understood management imperative of business operations. The primary goal of this imperative is to implement a sustained delivery of

.

• The funds directly acquired by the business in exchange for the goods and services it delivers is the business's revenue.

• The cost of developing, producing, and delivering these goods and services is the business's
  expenses
  .

A business whose revenues are sufficiently greater than its expenses makes profit or income. Such a business is

is not the focus of operations management; what counts is management of the relationship between the cost of goods sold and the revenue derived from their sale. Efficient processes that reduce costs even while prices remain the same expand the gap between revenue and expenses and derive higher profitability.

Types of recurring income:

• Long-term
  sales contracts
  : monthly to yearly based contracts for service or product;
  • Examples: mobile phone contracts/plans.
• Multiple revenue streams: different sources of business income that support each other;
  • Examples: sell printers and toners.^[1]

Increasing the Value of the Business

The more profitable a business is, the more valuable it is. A business's profitability is measured on the basis of how much income it generates for the:

• Amount of assets its business operations employ—its business return.
• amount of revenue it realizes — its
  business margin
  .

Methods of increasing value

Growth strategies

• Expand market: offer a product or service to a wider section of an existing market or to a new
  psychographic
  or geographic market.
• Develop brand: a recognized, respected and developed brand is highly valuable. Develop through research, design and marketing of companies name, logo and tagline.^[2]

Management systems

• Show growth potential: create a business that has potential to be efficiently expanded;
  • Example: developing an efficient business system and operating manuals allows the business to potentially be franchised or licensed.
• Maintain intangible assets: Maintaining intangible assets can protect elements that add value to a business;
  • Examples:
    trademarking anything believed to be an intangible asset.^[3]
• Protect and maintain physical assets: protecting physical assets will also help protect the overall value;
  • Examples: regular maintenance and insuring viable physical assets.

Securing the income and value of the business

• Desirability or demand for its goods and services
• Ability of its customers to pay for its goods and services
• Uniqueness and competitiveness of its business model
• Control exerted over the quality and efficiency of production activities
• Public regard for the business as a member of the community

A business that can harvest a significant amount of value from its assets but cannot demonstrate an ability to sustain this effort cannot be considered a viable business.

See also

• Chief operations officer
  (COO)

References