In the business field, the concepts of business and enterprise are used as synonymous words on many occasions. Entrepreneurs and SMEs think that these two words refer to the same meaning.
But are business and enterprise the same? What are the differences between a business and an enterprise? To understand the difference between business and enterprise, let’s start by seeing the precise meaning of both terms.
Considering the two terms as synonyms is one of the most frequent mistakes in business. Let’s see what each of these terms means to understand how they differ.
What is a Business?
Before reviewing the differences between an enterprise and a business, it is necessary to know the description of both terms in depth. A business is a system designed to obtain benefits through carrying out an activity, selling products, or providing a service to others.
Creating a business requires less rigorous procedures than those of an enterprise. It refers to how a person or organization obtains money in exchange for products or services.
Business comes from the Latin word “negotium” (where “otium” means leisure and “neg” negation; therefore, it means what is not leisure, that is, what brings us money).
The purpose of a business is to obtain benefits by carrying out activities such as having an online store or e-commerce.
Building a house and then selling it is a business, teaching at home is a business, and buying a cheaper car to sell at a higher price is also a business. When a business is repeated regularly and has a certain volume of commercial operations, it becomes a company.
Instead of buying a car and selling it, we buy cars recurrently every month to sell them or buy a place to sell them, hire employees, or get a commercial register; then, we have transformed our business into an enterprise.
Suppose we are the owners of an online store and can overcome the problems that inexperienced e-commerce usually experience in addition to having an optimal online store design, good marketing, strong sales, distribution, and administration channels. In that case, we have transformed our online business into an enterprise.
What is an Enterprise?
An enterprise is an entity or organization created by one or more people to obtain money by producing and marketing products and services to customers. It refers to the legal aspect and the characteristics of the organization.
An enterprise is an economic-social unit made up of human, technical, and material equipment whose objective is to obtain profits by providing its products or services to its clients.
What Elements Make Up an Enterprise?
Each enterprise has its rules, but they all share standard features such as:
- The physical infrastructure that provides material resources
- Technological infrastructure that allows optimizing processes
- Administration and finance area controls that decide on spending
- Legal and juridical aspect helps us to generate certainty/assurance
- Human capital, communication, and marketing to get clients/customers that generate income
- Relations or production areas that create the product or service
- Innovation and alliances that allow the generation of new products or services
What is the Difference Between a Business and an Enterprise?
Here, we summarize the differences between enterprise and business:
- Not all businesses are enterprises, but all enterprises are forms of business.
- An enterprise is generally an enhanced business that reflects an entrepreneur’s initiative or ability to take significant risks.
- Enterprise connotes something more extensive and more far-reaching than just a business.
- The definition of business is closer to being a type of occupation, such as self-employment, that reflects that the owner is the boss.
For businesses, the objective is specified and deals little with how a product or service is generated. However, an enterprise is a broader concept involving the legal and economic entity that organizes the factors of production and labor. An enterprise also presents itself under a legal form identified by the law.