Define the line of business of your enterprise and differentiate yourself from your competition
Knowing about the line of business can come in handy to simplify those productive and economic processes of a company. For this reason, this type of concept helps you to classify the different work environments of a given company.
Every day new ideas are developed, new companies are created and new opportunities appear. In addition, technology changes at a rapid pace and the possibilities are limitless when you want to innovate.
There are specific moments, when starting a new project, in which it is important to understand what your line of business will be, since it allows you to define not only the type of undertaking you will carry out, but also what will be the main activity of your company. Knowing and managing this type of definition is perfect to be able to distinguish how different organizations work.
In this post, we will explain everything you need to know to define the line of business of your venture, and we will tell you what you can do if you have a project in which things are not going very well.
Also, we will see the different types of business lines according to the sector of activity of a company. And if you want to change your activity, but you don’t know how to carry out the business line, in this article you will find everything you need to know about it. join us!
what is a business line of business?
A line of business, also known as line of business, is the classification given to an enterprise, depending on the activities it performs . That is to say, this concept refers to the economic activity to which a certain company is dedicated.
Companies are engaged in different activities to supply their consumers. Depending on the type of activities performed by the company, it is assigned a line of business. It is a term that defines the activities that an enterprise is allowed to perform, and it is part of the legal requirements to obtain a business license in most countries.
The commercial line of business of a company can be very varied, because although it is regularly divided into three main types of activities, there is a wide list of subcategories that depend on the specific activity that a business uses to obtain profits.
One way to easily understand what a business line of business is is by looking at the activities of a company. do you want to know what they are?
what are business activities?
To meet a customer’s needs, a business can focus on more than one line of business.
Here we will explain how business activities are classified:
1. Main activity of a business.
It is the heart of the business, the most important piece that makes the company go round. Basically, it is the main source of income that a given organization can have.
If your company generates more than 50% of its revenue from this activity, you can say that this is the core business activity.
2. Secondary activity of a business
Most organizations usually have a secondary activity that generates income, but if the business decided to eliminate this activity, it would still exist.
In other words, the secondary activity would mean an alternative way to obtain income, which is complementary to the first option. It is mainly of an exploratory nature, which means that it can be a direction in which profitability is not obtained in the short or medium term, but which allows the diversification of the company’s activities and provides it with greater stability.
3. Auxiliary activities of a business
Both the main activity and the secondary activities generate some product or service. The auxiliary activities do not generate any product or service, but are necessary for the correct operation of the company.
Let’s put it this way: imagine that a video game company decides to design a particular game that requires a peripheral device to fit the controller. Producing and selling that item represents an ancillary activity.
why is it important to determine the line of business?
Knowing the line of business is fundamental for any entrepreneur to be able to develop his business ideas effectively. Before investing your money, it is necessary that you know what are the conditions that apply to the sector in which you plan to undertake.
Likewise, the line of business is the first thing that must be developed within a business plan if you want to attract investments for a commercial project. In this way, it can be easily recognized if it is a company with a good projection of profitability, or if it is a project with little future.
In addition, in order to create a company, it is a requirement to specifically define the line of business from which its economic activities will be developed. Generally speaking, the line of business is one of the most important parts in the development of a venture.
what are the types of business lines?
Within the business lines there are a great variety of activities, so that a large number of subcategories can be derived from them.
The activities performed by a company are categorized by their importance and the purpose of the enterprise. Defining an organization with a single line of business is not so simple, since a company can have different lines of business.
If a company wants to participate in more lines of business, it can adapt a structure of different business units.
Business lines are in constant movement and today’s ventures are multifaceted. Therefore, it would be very difficult to pigeonhole a venture into one, although there are three general types that can be used to classify them:
1. Industrial Businesses
When we talk about an industrial line of business, we refer to businesses engaged in the manufacture of goods, which use natural resources or raw materials to transform them into a finished product.
Within the industrial line of business there are two main categories:
Businesses with an industrial line of production goods are those that are dedicated to manufacture a material, which later another company or business will use, it is worth the redundancy, to produce.
In this category, you will be able to see from companies that produce coffee to companies that manufacture coffee pots.
On the other hand, we have the businesses of an industrial line of consumer goods, where the companies destine their goods to users that consume the product.
In other words, these are businesses that sell the final product directly to users. An example of this could be a chair factory.
2. Commercial businesses
Basically, they are those that take goods from the producer to the consumer. The objective of these commercial businesses is to facilitate the access of products to customers.
The most frequent categories are:
Wholesale businesses are those that sell in large quantities. In general, other smaller businesses are usually their main customers.
They often do not seek to sell to the final consumer, but to a series of intermediaries.
Retail businesses, unlike wholesalers, sell on a per-unit basis and usually target an end consumer.
This type of business is one of the most common, since it refers to ventures that you go through on a daily basis, such as stores, pharmacies or supermarkets.
There is a third branch, the commission agents, who are those people who do not buy what they sell to the consumer. That is, they serve as a kind of bridge and only keep a commission in case they obtain a sale.
However, unlike the two referred to above, the involvement of commission agents in the production chain is much less.
Trading is very important and, if you want to start a business, it would be better if you know this line of business. That yes, remember what the Medium site mentions: “the commercial area is fundamental in a business because having a product or service with added value that gets to differentiate perfectly from the competition is important, but it is not everything”.
3. Service businesses
Businesses that fall into this category are all those that offer an intangible good. This type of business operates in a similar way to the commercial line of business, but with the fundamental difference that they only work with what is impossible to touch.
Frequently, we can find companies that require a tangible good in order to provide the service. These goods are considered value added, but they do not modify the line of business.
A good example is the case of telephone companies; although they are service companies, they also sell telephones. Remember that the line of business is often defined by the origin of the main income.
Among the elements that can be found in a service line of business, we have the following categories:
Transportation, both for moving people and products.
Public services (energy, water, telephony, etc.)
4. New business lines
The digital transformation we are living day by day generates new business needs and opportunities. Therefore, new categories are emerging in the business lines.
Innovation in technology has brought new ways of interacting as a society. Now we have fully digital services such as digital marketing and new concepts such as frugal innovation and sustainable innovation.
Social media services, community management, web design and UX, to name a few, are new activities that have emerged as a result of the revolution brought by the internet. can you imagine what other services the 4.0 revolution brings?
Examples of business lines
As you have seen, a company can have more than one activity, but its line of business will be defined by its main activity, which is defined by the percentage of revenue it represents.
do you want to see an example of the activities of a business represented in the same company and what different models they would be? Suppose you have a company that sells digital cameras:
On the one hand, you have as your main activity the manufacturing of the cameras, so the business line of your company will be industrial because of the manufacturing of the product.
On the other hand, this same company can offer training or courses to use the cameras and take good pictures. Thus, with this secondary activity, you would be considered to have a service line of business, but since most of your income comes from the sale of the cameras, the enterprise is still an industrial line of business.
Finally, a company that sells cameras may develop software for its own use. Software development, in this case, would be its ancillary activity because it is not offering the software to a consumer.
Now, we will show you some examples of business lines in real life, with which you will be able to better understand the meaning of this type of concept.
1. Example of an industrial line of business
A clear example would be Grupo Bimbo, which is dedicated to the production of breads, donuts and pancakes. These products are generated by obtaining raw materials from different suppliers.
2. Example of a commercial business
Any supermarket chain would be considered a commercial business, since they provide access to consumer goods to satisfy their customers.
3. Example of a business with a service line of business
By having an offer to share knowledge, private universities or business schools fall into the category of business with a service line of business.
Now, a question: what do you think Crehana’s line of business is?
Crehana has an educational service line of business, taking into account that it has ancillary activities focused on providing online courses with the best possible quality.
Frequently asked questions about the business line
It is understandable that many doubts and concerns arise about what is a line of business. Well, we will give you answers to all those questions you may have on this subject.
Let’s take a look at some frequently asked questions about the line of business of your company.
is it possible to change the line of business of the company?
As we mentioned at the beginning, the line of business is part of the legal requirements that a company must meet in order to obtain a business license. Tax systems around the world establish, through the line of business, a framework to regulate the economic activities of companies.
In other words, if your line of business defines you as a service provider, you will only have a license to develop the specific activities that are directly related to it. For example, a bakery cannot stop selling bread to start selling clothes, without first performing all the legal procedures to make a commercial line of business.
But what happens if the business line we took did not turn out as we expected? what can we do if we want to change the line of business and dedicate ourselves to another activity?
Fortunately, a company can change its line of business if it wishes to do so, although it must comply with the regulations established by law. Due to the current conditions, many companies have had to change this concept in order to remain operative, and the regulations of some countries such as Peru have helped this to happen in a quick and simple way.
Changing the commercial line of business of a company can be simpler and cheaper than eliminating the commercial license and incorporating a new company. So you have options in case the line of business you chose does not generate as much profit as you expected, you just have to inform yourself of the rules established by the tax system of your country to do so.
how to know which line of business to choose?
Normally, it is advisable that the selection of a line of business be as broad as possible in the definition, so that together with the secondary and auxiliary activities, the company has the possibility of developing its commercial functions without fear of receiving sanctions from the tax authorities.
This applies if you are just starting out in the world of entrepreneurship and do not have much knowledge about the area in which you plan to venture. If you already have very well defined what you are going to do, do not worry about this point.
It is important to keep in mind that, depending on the line of business you choose, you will have to pay a certain percentage of your company’s income to the tax system of your country, so it is also a good idea to exclude from your business license some activities that are taxed with higher taxes, especially if they are activities that are not going to be an important source of income.
Likewise, we recommend you to take into account the importance of businesses that operate mainly in the digital world. Juan Pablo Saldaña, teacher of our online course of create and manage your own digital business, talks about the relevance of choosing a line of business that is complementary to the advances in technology and adapts to the needs of consumers today:
“The digital world is becoming the most common medium for those who want to undertake. This situation is due to the development that the Internet has had, which today, facilitates anyone to access information, and recently has been assuming an increasingly influential role in the consumer’s own buying process.”
what elements should you take into account to implement a business turn?
When you start a business, it can be complex not to know in which area to specialize your company. This type of orientation can be determined not only by the emotional part, but also by the conditions, both particular and external.
If you want to know what line of business you can adopt, you should take into consideration some elements. Mainly, the right choice will depend on factors such as the following:
An enterprise in which your own ideas are the ones that promote and sustain the business will always be a good alternative. Maintaining originality will allow you to seek the accelerated development of your company, without the need to be aware of the competition.
If you transmit originality, you will offer greater security to your clients. Many successful businesses take originality as a flag.
Choosing a business line will depend a lot on what you want to do and how passionate you are about the idea of starting a certain business. The more love and affection you feel for your company, the easier it will be for you to know which direction to take.
Always keep the passion for everything you do, this way you will obtain better quality final processes and you will produce elements that will be to your liking.
Competitiveness does not mean the same as competition. Many people tend to view this factor negatively, believing that both terms are synonymous, when this is not the case.
It is important for you to know that competitiveness refers mainly to the fact of determining growth factors, in which goals and objectives must be surpassed, always seeking optimization, growth and quality in each of the actions undertaken.
Another element you should pay attention to regarding the line of business is the market. If you know the environment in which your company will develop, you will have a clearer idea of what activity to focus your company on.
A very important piece of advice at this point is not to improvise, but to investigate where the demand is going and what the consumer prefers in that area.
Earlier, we highlighted the role that technology is playing in the workplace. Well, it is an element that can be of great help to you, if you have not yet applied it in the corresponding way.
how can the implementation of new technologies benefit you? Not only can you maintain a direct connection with your customers remotely, but you can also take advantage of various business opportunities and, of course, be able to measure the development of your company and adopt the appropriate strategies to stay the course or change it completely.
Now that you already have knowledge about the details of each business line and learned how to choose the right one for your venture, we will share with you some resources that can be very helpful.
Free resources for entrepreneurs
Now that you can tell the difference between a business line or activity, you are one step closer to your own business venture.
how about getting a head start with the files in our free resources section? Here is a selection of tools that will help you regardless of the line of business you choose.
1. Income Statement Template
If you want to know what line of business your company belongs to, we share with you an income statement template to help you find the activity that brings you the most income.
Download the free income statement template
2. Guide to create a business plan for your venture
Learn how to build a strategic plan for a venture and improve the viability of a business with this free guide.
A business plan is a document for a new business venture. It communicates who you are, what you plan to do and how you plan to do it, based on a previous market study.
In this document, you will lay the foundations that will define what kind of business activities you will carry out in your venture, and, therefore, what will be your line of business.
download the guide to build the business plan for your venture
3. Canvas model templates for A3 printing
do you have a business idea that you need to work on? We want to share with you 3 Canvas model templates that will help you shape your future venture.
The Canvas model or “Business Model Canvas” summarizes the nine basic components you need to consider before starting a business model, regardless of your type of business line:
download the Canvas Model Templates
4. Work plan format in Excel
Assuming that you already have a clear idea of what kind of business you will start and what kind of venture it will be, let’s move on to the day-to-day management of the business.
Imagine that you have a lot of projects to carry out. how can you get organized without panicking? Download this work plan template and get ahead of the chaos typical of business activities.
A work plan is a tool for assigning tasks, deadlines and people in charge, among others, and to keep track of a project. The most important elements of this document are the following:
Objective to be achieved.
Start date and end date.
download the work plan format in Excel
5. Template for calculating return on investment for web in Excel
To find out if the business line you want to start is profitable, the best thing you can do is to calculate its profitability rates and the time in which you could achieve the return on investment.
To make things easier for you, we share with you this Excel ROI calculation template, with it you will be able to analyze if the investments you plan to make are convenient, or if on the contrary, you should change the line of business to other activities.
This resource is designed for those who plan to include a website as part of their business plan and business line. So with it, you will be able to calculate the ROI of what you invest in the campaigns of your commercial page.
download the ROI calculation template
6.financial profitability formulas in Excel, calculate your investment!
With this template you will have the opportunity to calculate the profitability of your business over time. That is to say, you will be able to determine if what you are planning as a business line can be maintained as with a good profitability during a specific period, and what will be the level of profits you will obtain from it.
By applying the profitability formulas, you will also have interesting information that you can use to attract investors to your business line.
download the template with financial profitability formulas
7.sales funnel: Excel template
For your business line to produce as much profit as you expect, the main thing is to reach customers and increase the level of sales. Therefore, we recommend you to use this Excel sales funnel template.
A sales funnel is a tool used in marketing strategies to generate more conversions, so it will be very useful to reach your customers more effectively.
download the sales funnel template
Today, access to technology allows you to create ventures with multiple economic activities. Business lines are starting to mix more and, as we saw before, new business lines are starting to emerge.
We hope this article has been useful to answer your doubts about business lines, one of the first elements you should take into consideration when starting a business. and remember: there is always the possibility of changing.
This point is reminded by the Forbes portal with the case of Simetrik, which had a completely different business model and today is a company that is valued at more than USD 100 million.
This has been our post. If you want to know more about the business line, sign up for our innovation training programs, with which you will have the opportunity to visualize those processes and trends that your company needs to consolidate in the market you want.