In simple terms, a business is an entity that sells goods or services to customers in exchange for money. However, I would like to make a case that the definition of a business should be changed to: a business is an entity that sells goods or services to customers in exchange for money and whose existence is not dependent upon any one person or small subset of employees .
If you take a business like Walmart, any person within that organization could leave, and the business would still exist and probably not feel any impact. The CEO could leave, the head of the marketing department could leave, the cashier at any given store could leave; yes, any of the employees could leave and Walmart would still be Walmart. It would still have value, and its shareholders would still have the opportunity to make a return on their investment. There are a lot of entities labeled as businesses when this is really not the case. Take Tommy’s Massage Therapy Inc. Tommy provides a service—massage therapy—in exchange for money. There are no other employees in this business; it’s just Tommy and his clients.
However, if Tommy doesn’t want to do massage therapy anymore, or if he is hit by a bus, then Tommy’s Massage Therapy service has absolutely no value. In fact, it ceases to exist. So, regardless of whether or not there is a corporate “business” entity around it, Tommy doesn’t really have a business, Tommy has a job. This is a job that is unlike any other. At a regular job, Tommy doesn’t have much at risk. He may have to pay for a uniform or put gas in his car to get to his place of work, but basically that is all he is risking.
The worst thing that can happen, the extent of the risk that Tommy bears, is that he gets fired and has to look for another job. But at Tommy’s job-business, he has to pay for the privilege of having a job (plus he has to deal with all of the other issues that come along with running a business, which we will be discussing later). He actually risks his own money to be able to have his own job-business. In addition to spending money, time, and effort to create a job, with a job-business you are not building equity value, which I believe is the really compelling reason to create a business. In a true business, you as the owner have an entity with value that is separate from you. This is the value that you create for the business as a going concern, above and beyond the strict value of your assets minus your liabilities, which makes owning a business worthwhile.
That means you can eventually leave the business (down the road, after many years of hard work) or sell the business (again, after many years of hard work) and get value for it. That is how most successful entrepreneurs make the “big bucks,” by capitalizing upon the value of their business entity.