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The outcome of 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'''.

Business operations encompasses 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 .
#Increase the value of the business.
#Secure the income and value of the business.

All three imperatives are mutually dependent. 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 Mercedes Benz can be leased out at a higher rate than a Toyota Corolla.


  • ''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.


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 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 .

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

A business whose revenues are greater than its expenses makes a profit. Such a business is profitable.


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 following bases:

  • How much income it generates for the amount of assets its business operations employ -- its business return.

  • How much income it generates for the amount of revenue it realizes -- its business margin.



An example of a wide contrast in business return and margin can be found in art. The same materials and amount of work can be ''spent'' and the same facilities and equipment ''invested'' in the production of a work of art. However, some works of art can be sold for millions of dollars while others sell for nothing more than a few hundred. Individuals or organizations that can produce works of art that command high prices (and therefore higher returns and '''larger margins''') are the more ''valuable'' '''business entities'''.


SECURING THE INCOME AND VALUE OF THE BUSINESS


Businesses stability rests on how successfully a business ensures its '''on-going ability''' to harvest value from its assets (i.e. '''protect''' its income generating capability and '''retain''' its value as a business). This on-going ability may depend on a number of or all of the following factors:

  • 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.


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