Characteristics of Business
With the definition of business clear by now, we move our focus to different features or characteristics of business, to understand more about it. Most of these characteristics describe almost every business we know of. Some of the most salient features of business include -
Business as an Activity to Promote Economic Causes
Almost all businesses which we see around us are driven by an economic purpose and are based solely to earn maximum profits. These businesses focus more on monetary returns and the satisfaction of customers via selling or exchanging products and services.
For example, a milk delivery website or company delivers milk to your doorstep every morning, in lieu of which they demand a delivery fee, which is then shared between the delivery executive and the company. Such companies earn profits via deliveries and also keep track of the goodwill among customers, which will fetch them more orders in the future.
A Business Should have Consistency in Earnings
Let’s say you have used your laptop or your personal computer for many years now and it has gotten slower with time. Now, you have accumulated some money to buy another new one, and so, you sell your older one to a person seeking an old laptop.
This action, though has generated an income, cannot be termed as a business as you won’t go on to sell old laptops regularly or on a daily basis. But the shop from which you buy your new laptop can be called a business, as that shop is probably a retail store and sells many laptops each day and hence, has a regularity in dealings.
Business as a Profit-Generating Organisation
Almost all businesses have one sole purpose - maximising profit. When a business is launched in the market, the individual or a group of individuals, who are its proprietors, initially comes up with an immaculate plan of providing products or services to its customers such that their earnings are high.
Any business which fails to derive revenues over a while is assumed to go bankrupt, and the business is declared null and void. So, earning high dividends while keeping in mind all other co-curricular costs involved is one sphere where all businesses spend most of their time on.
Businesses Always ply on a high-Risk Road
From the time of its inception, all businesses tend to suffer from a trade-off between high risk and higher returns. The more risk, the more the potential to earn more profit.
For example, there are thousands of start-ups right now in our country, all of which are trying to gain from different market demands. While a food delivery start-up depends on a customer base who order food online, an indigenous coffee-selling start-up relies on coffee purists and not on people who enjoy drinking tea more than coffee. Such customer bases can be volatile and subject to numerous conditions, which increases the risk factor many times manifold.
Businesses as Legal Activities
Though most of the profits reaped by a business are shared among its primary shareholders, all businesses should adhere to certain laws set by the central government for it to run properly. Businesses should pay taxes to the government and have a unique business identity, such that they are enrolled to receive other benefits which governments might offer them in times of crises.
Comparison Between Business, Profession and Employment
The best way to compare business with profession and employment is to go back to the basics and understand the definitions of all the three.
Businesses, as discussed earlier, are economic activities which fetch organisations monetary returns against products and services which are provided by them to their customers, like a private bank which earns profit from its customers depositing money to be kept in accounts.
Professions are all those activities which are carried on by people who hold special professional skills. For example, all the accountants and staff who help a bank to run its services smoothly are professionals.
Employment refers to any activity which fetches the workers or employees’ wages or salaries, like the monthly remunerations which the bank workers receive in return of their service.
Here are a Few MCQs Which Will Help You Revise All the Concepts.
1. Almost all businesses work for an _________ cause.
a. Social
b. Charitable
c. Economic
d. None of the above.
2. You are selling an old mobile phone to a friend. Is this a business?
a. Yes.
b. No.
c. Maybe.
d. None of the above.
For a detailed look at the world of economics and business, go through our study material, that includes a wide range of reference notes, question papers and solved papers. For more on business, check out our free live classes, on the Vedantu app today.
FAQs on Key Features of Business Explained
1. What is a business activity according to the CBSE Class 11 syllabus for 2025-26?
A business activity is any economic activity concerned with the production or procurement of goods and services, followed by their sale or exchange with the primary objective of earning a profit. It involves regular dealings and an element of risk, distinguishing it from one-off transactions or hobbies.
2. What are the seven key features of a business explained in NCERT textbooks?
The seven key features or characteristics of a business as per the NCERT framework are:
- An Economic Activity: It is undertaken to earn money, not for love or affection.
- Production or Procurement of Goods and Services: A business either manufactures the goods it sells or procures them from other producers.
- Sale or Exchange of Goods and Services: There must be a transfer or exchange of goods/services for value.
- Dealings in Goods and Services on a Regular Basis: A single transaction does not constitute a business; it requires regularity.
- Profit Earning: The fundamental purpose is to generate profit for survival and growth.
- Uncertainty of Return: The return on investment is not fixed or guaranteed; it can fluctuate.
- Element of Risk: Business activities are subject to risks from various factors like market changes, competition, and natural calamities.
3. How is a business fundamentally different from a profession or employment?
A business differs from a profession and employment primarily in its objective and the nature of risk involved. A business aims to earn profit through production and trade, bearing significant financial risk. In contrast, a profession involves rendering personalised services of an expert nature for a 'fee' after acquiring formal qualifications (e.g., a doctor), while employment involves performing work assigned by an employer in exchange for a fixed 'salary' with minimal personal risk.
4. Why is the 'element of risk' considered an unavoidable feature of business?
The element of risk is unavoidable because business operates in a dynamic environment full of uncertainties. These uncertainties can arise from changing consumer preferences, new competition, shifts in government policy, technological obsolescence, or natural disasters. Since no business can have complete control over these external factors, the possibility of incurring losses or earning inadequate profits (the 'risk') is always present. Profit is often described as the reward for bearing this risk.
5. Can an activity be a business if it doesn't happen regularly? Provide an example.
No, an activity cannot be considered a business if it lacks regularity. For instance, if you sell your old personal car at a profit, it is not a business activity because it is a one-time, isolated transaction. However, if you open a showroom to buy and sell used cars continuously to earn a living, it becomes a business because of the regularity of dealings.
6. Are all economic activities considered business activities? Explain why or why not.
No, not all economic activities are business activities. While a business is an economic activity, so are profession and employment. The key difference lies in the mode of earning a livelihood. An activity qualifies as a business only when it involves production/procurement and sale/exchange of goods and services with a profit motive. Working as a manager in a company for a salary (employment) or practising as a chartered accountant for a fee (profession) are economic activities but do not meet the core characteristics of a business.
7. What is the importance of the 'profit motive' feature in a business?
The profit motive is crucial for several reasons. Firstly, it is the primary incentive for an entrepreneur to undertake the risks involved in starting and running a business. Secondly, profit is essential for the survival and growth of the enterprise; it provides the funds needed for expansion, diversification, and technological upgrades. Lastly, the level of profit earned acts as an indicator of the business's efficiency and success, which helps in attracting investors and building market reputation.
