Business operations is the ''harvesting'' of value from assets owned by a business. Assets can be either ''
physical Physical may refer to: *Physical examination In a physical examination, medical examination, or clinical examination, a medical practitioner examines a patient for any possible medical signs or symptoms of a medical condition. It generally con ...
'' 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 An intangible asset is an asset that lacks physical substance. Examples are patents, copyright, franchises, goodwill, trademarks, and trade name A trade name, trading name, or business name, is a pseudonym used by companies that do not ...
, like an idea, is a royalty. The effort involved in "harvesting" this value is what constitutes business operations cycles.


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"): # Generate recurring
income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...
# Increase the value of the business assets # Secure the income and value of the business The three imperatives are
interdependent Systems theory is the interdisciplinary study of systems, i.e. cohesive groups of interrelated, interdependent components that can be natural or human-made. Every system has causal boundaries, is influenced by its context, defined by its structur ...
. 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 A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, socia ...
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 goods and services to the business's customers at a cost that is less than the funds acquired in exchange for said goods and also self-employee services—in short, making a profit. * The funds directly acquired by the business in exchange for the goods and services it delivers is the business's
revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive revenue ...
. * The cost of developing, producing, and delivering these goods and services is the business's
expenses An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuitio ...
. A business whose revenues are sufficiently greater than its expenses makes profit or income. Such a business is
profitable In economics, profit is the difference between the revenue that an economic entity has received from its outputs and the total cost of its inputs. It is equal to total revenue minus total cost, including both explicit and implicit costs. It i ...
. As such, generating recurring "revenue" 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.

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 A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial ...

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
demographic Demography () is the statistical study of populations, especially human beings. Demographic analysis examines and measures the dimensions and dynamics of populations; it can cover whole societies or groups defined by criteria such as ed ...
, 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.

= 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 Franchise may refer to: Business and law * Franchising, a business method that involves licensing of trademarks and methods of doing business to franchisees * Franchise, a privilege to operate a type of business such as a cable television p ...
or licensed. * Maintain intangible assets: Maintaining intangible assets can protect elements that add value to a business; **Examples:
patenting A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an enabling disclosure of the invention."A ...
, copyrighting or trademarking anything believed to be an intangible asset. * 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.


{{DEFAULTSORT:Business Operations Business terms Business process