Modern economic science has gone far from the principles and rules that were still told by famous scientists from the time of the industrial revolution, when production moved to a new level thanks to rapid scientific and technological progress.
From time to time, new ideas of contemporaries appear on how to better build the economy of states, enterprises, organizations. You can talk about this forever, but we will try to fit into one article, answering the question, what should be the economy of the company.
Capital must grow
The best answer is a well-formed business model that will maximize revenue and minimize costs. Yes, absolutely all owners and managers strive for this rule. This should be the economy of a modern firm.
Any business is capital, which is expressed in the form of tangible and intangible resources that are necessary for doing business. The main task that the owners want to solve is how to make sure that the invested capital constantly brings the greatest income, increasing their condition. That is, money must generate new money, otherwise the investment will be considered unsuccessful.
Regarding how to achieve the ideal proportions of invested and received money, there are a lot of tips, as well as examples, however, they are most often mediocre. The main management activity should be aimed at increasing the profits of the enterprise.
Profit is the difference between the income and expenses of the organization.
How to increase income?
The correct economy of the company is an important element in building a profitable and sustainable business. Usually it calculates the planning department necessary for analyzing the financial and economic situation of the enterprise on the market.
There are two main ways to increase revenue:
- Increased market share.
- Transition to another market.
The first way involves taking more advantageous positions in the sphere in which the enterprise is already conducting its business activities. To increase market share, it is necessary that the number of goods sold or services rendered increase. This can be done by improving the competitive ability of products - either due to internal qualities, or by reducing the price of goods. Both there and there, it is necessary to make preliminary calculations and choose the option where the ratio of the spent resources per 1 unit of income will be most advantageous.
The transition to another market is necessary for those firms that have exhausted all opportunities for increasing the share of the occupied market or who no longer see their development in the “old” place.
Usually this is characterized by a reorientation of production or the beginning of the manufacture of new products. Before choosing such a path, it is necessary to carefully analyze the new market and try to predict the niche that can be occupied.
How to reduce costs?
Depending on what activities the company is involved in, it is necessary to make the correct calculations of all the costs that are necessary, because the economy and finances of the company are closely interconnected, and one cannot be without the other.
This needs to be done in order to correctly draw up cost estimates for the services performed or the cost of the goods produced. If you make a mistake, the product will either be too expensive and no one will buy it, or cheap - in this case, the company will incur losses.
In addition, the economy of the company involves a constant budgeting process, that is, cost accounting.It is best to keep it as detailed as possible, especially if the range of services or goods sold is not as wide as that of large companies.
This will help in time to make the right management decisions and more confidently pursue the development policy of the company.
Future Plans
If you want the economy of the company to be successful, then you definitely need to plan for current and future activities. How to do it?
First of all, it is necessary to analyze the results of budgeting, to allocate cash flows that go to operational and other activities.
Due to this, it is possible to derive the consumption of resources, which is necessary, suppose, for the production of one unit of output. This will be the cost.
Then it is necessary to derive the necessary level of profitability, which is needed to obtain the expected income. Combine all this with the volumes that you plan to produce, given the sales markets in which it will be possible to sell products in the future.
Thus, you will get the simplest plan for one production cycle ahead, which will allow you to conduct your business not blindly, but consciously. Further, this plan can be adjusted and refined in such a way as the economy of the company requires. The problems that entrepreneurs face at this stage are the same, and they are mainly associated either with a lack of resources, or with the problem of marketing products and entering new markets.
Do not bother yourself with various terms and theories.
If you decide to open your own business, then remember that you will have to work and study around the clock.
There are a lot of literature on economics. The firm’s economy and how to conduct it correctly can be described differently in each book. Do not focus on terminology, scientific theories that relate to the global scale of the global economy - this will be superfluous.
Of course, this will come in handy over time, but by that time you will be able to distinguish delusional ideas from real solutions that will help develop your business further.
