Business areas - the first step to the foundation of successful businesses

Choosing the business scope is one of the most important strategic decisions an entrepreneur has to make when starting a new business. It defines the scope and area of operations of the future company, setting the framework for the products, services and markets it will address. Therefore, the right choice of scope can have a significant effect on the success and longevity of your business.

An inspired choice of a firm's business scope offers multiple advantages. First of all, it helps the entrepreneur to focus his efforts and resources on a specific area, allowing him to develop in-depth expertise and become a competitive player in the market. Secondly, a well-chosen field of activity takes into account existing market opportunities, ensuring a solid demand for your products or services. In addition, the right choice of business area makes it easier to attract investors, partners and customers, as it conveys a clear vision and a solid business plan.

However, as well as the obvious benefits, choosing your field of activity also brings its own challenges. For example, as an entrepreneur, you need to consider legal regulations and industry-specific requirements, as well as barriers to entry. It is also important to carefully assess existing competition and identify untapped niches or opportunities.

That's why, in what follows, we'll explore the concept of a business domain in detail, provide concrete examples of popular domains and look at the key factors to consider when choosing the optimal domain for your business. Whether you're a first-time entrepreneur or an experienced businessperson, a thorough understanding of this essential aspect of planning your business can make the difference between success and failure.

Publishing date: 09.04.2024

Contents:

1. What is a company's field of activity in Romania. The role of a business' scope of activity in determining the purpose and direction of a business

2. Examples of popular types of business in Romania and the world

3. Changing a firm's core business - challenges and considerations

4. Useful tips for entrepreneurs in choosing a business for new or expanding businesses

 1. What is a company's field of activity in Romania. The role of a business' scope of activity in determining the purpose and direction of a business

In the context of setting up and developing a business, the business domain is the foundation on which the whole structure of the business is built. It defines the main area in which the company will conduct its operations and offer its products or services. It is essentially the company's commercial identity, which, together with the brand or trademark, communicates to customers, partners and competent authorities what the company produces or provides.

Choosing the business focus is a critical step in the process of setting up a new business entity, as it determines the strategic direction and investment areas. For example, a company that chooses IT as its field of activity will invest in technology and expertise in software or hardware, while an agricultural company will allocate significant resources to the purchase or lease of agricultural land and specific equipment and machinery.

Moreover, the main areas of activity of firms are influenced by the applicable regulations and legal requirements, but may, in turn, influence the eligibility of the entity for certain types of funding or support programs. It is therefore essential that entrepreneurs understand not only what a business line is and what it means, but also the implications that choosing one or more types of business lines has on all aspects of the business. It is also necessary to understand the importance of the rules in a targeted field of activity before choosing it, when setting up the business, or before changing the main field of activity.

• The role of business scope in determining the purpose and direction of a business

The choice of business scope is vital as it guides the entire subsequent business strategy, from planning operations and allocating resources, to developing products or services and addressing target markets. A clearly defined business line already provides a roadmap for a company, allowing it to focus its efforts and build a solid reputation in that area.

• Relationship between the field of activity and the main object of activity of the firm

While the scope of business - understood generically - refers to the general area of operations and expertise of the company, the core business is the specific economic activity that the company performs within that scope. For example, a company may have agriculture as its field of activity, but its principal object of activity could be the growing and marketing of cereals, animal husbandry or fruit growing. The main activity must fall within the general limits of the selected field of activity, even if there are many companies with more than one field of activity. It is useful in this respect to study the CAEN code of national economic activities when choosing the field of activity.

It is important to emphasise that although the field of activity sets the general direction of the business, this does not mean that the company cannot diversify or expand into related or complementary fields in the future. However, the initial focus on a well-defined business area is essential to build a solid foundation and niche expertise.

2. Examples of popular types of business in Romania and the world

Exploring examples of business areas is key to understanding the broad spectrum of options available to entrepreneurs and identifying which ones best fit their business vision and goals. Each business area included in the CAEN has unique characteristics and offers different advantages, depending on the entrepreneur's resources, knowledge and passions.

Information Technology (IT) 

This field is constantly expanding and innovating. IT (Information Technology) is one of the most dynamic and profitable fields of business today. It covers a wide range of activities, from developing software and applications to providing consulting services and technology solutions for companies. The main advantages of choosing this field of activity include:

• Constant and growing demand for IT products and services due to accelerated digitisation;
• Opportunities for continuous innovation and development of innovative solutions;
• High potential for scalability and rapid growth for successful businesses;
• Possibility to access global markets due to the nature of the technology.

Agriculture

A vital sector for any country's economy, agriculture, with all its sub-branches, offers the opportunity to contribute to the food security of the population and to the creation of added value through the processing of raw materials obtained from soil cultivation and animal husbandry.

Agriculture remains one of the most important areas of activity, ensuring the production of food essential for human survival. It includes activities such as growing plants, raising animals and processing agricultural products. The key advantages of this sector are:

• Constant demand for basic food products;
• Opportunities for innovation through modern and sustainable agricultural technologies;
• High export potential and access to international markets;
• Contribution to food security and rural development;

Constructions

The construction sector is one of the pillars of infrastructure development in a national economy. Construction is a key sector for developing infrastructure and facilitating economic growth. It includes the construction of residential and commercial buildings, civil engineering works and civil engineering projects, and other types of construction. The main benefits of involvement in this area are:

• Continued demand for new construction and renovations due to urbanisation and real estate development;
• Opportunities for long-term contracts and collaboration with public authorities;
• Potential to diversify into sub-areas such as industrial or infrastructure construction;
• Contribution to the sustainable development of cities and communities.

Real estate

Real estate trading and development remain profitable areas even in the medium term. Real estate is closely related to construction, but focuses on the acquisition, development, management and marketing of real estate. The advantages of choosing this field of activity include:

• Potential to increase the value of assets over the long term;
• Opportunities to generate recurring revenue through rentals or real estate developments;
• Diversity of options, from residential to commercial or industrial properties;
• Opportunity to take advantage of favorable real estate market trends and economic growth.

These listed areas of professional activity are just a few examples that illustrate the diversity of options available to entrepreneurs and highlight some of the specific advantages of each area.

These are just a few examples, the areas of activity listed above represent only a small part of a 'vast ocean' of opportunities. Entrepreneurs need to carefully evaluate each area, consider current and future trends and align their choices with their values and goals.

3. Changing a firm's core business - challenges and considerations

Although establishing your initial scope of activity is a crucial step in starting a business, the circumstances of the moment may sometimes require you to change or diversify. This decision involves both opportunities and significant challenges that entrepreneurs need to consider carefully.

Reasons for changing business

There are various reasons why a company's management might want to change its core business, including:

• Adapting to changing market and consumer trends;
• Exploiting new business and growth opportunities;
• Diversification to reduce risks and increase financial stability;
• Responding to regulations or legislative changes in the original field;
• Aligning with the entrepreneur's changing skills or passions.

Legal and administrative implications

The change in the core business involves a number of legal and administrative issues that need to be properly addressed, including through competent, external and independent tax, financial advisory and accounting services as appropriate. These may include:

• Amendment of the articles of association and the object of activity in the commercial register;
• Obtaining authorisations, licenses or certifications specific to the new field;
• Compliance with regulations and rules applicable to the new field;
• Reviewing contracts and agreements with existing suppliers, customers and partners.

Effects on operations and business strategy

Moving to a new business requires a partial or total reset of operations and business strategy. This may involve:

• Restructuring internal processes and workflows;
• Purchasing new equipment, machinery or infrastructure;
• Hiring staff with skills and experience in the new area;
• Reviewing the business model, product/service offering and marketing strategy;
• Building a new reputation and customer base in the new field.

It is also essential to carry out a detailed analysis of the market, competition and demand for the new business, similar to that carried out at the initial business start-up stage, even using external business consultancy services to get the most accurate and complete picture of the data needed to make such a decision.

Changing your core business can be a strategic decision necessary for the survival and growth of a business, but it also involves significant challenges. With careful planning, expert advice and solid execution, companies can overcome these challenges and take advantage of the opportunities offered by the new field.

4. Useful tips for entrepreneurs in choosing a business for new or expanding businesses

Choosing one or more business areas - if it is a multi-business firm - is one of the most important decisions an entrepreneur will make in the initial stages of setting up a business.

This decision will not only directly influence the type of products or services offered, but will also have a significant impact on the market strategy, operational structure and growth potential of the business. Even for a simple professional wondering how many areas of business their PFA can cover, decisions based on accurate data and current information are a good starting point for a solid business. 

To go through this process successfully, entrepreneurs can turn to specialised business consultancy services that can provide valuable advice when choosing, for example, the most profitable business areas. For a proper choice of business area, an entrepreneur needs to consider several key factors:

• Your passions and knowledge in a particular area of professional activity. It is vital to choose a field that is related to the entrepreneur's passions and in which he or she has or can develop solid expertise. This will help to sustain personal motivation in the long term and build a sustainable business.
• Market research. Understanding market demand and identifying untapped niches can provide valuable opportunities. Analyzing the competition and current trends are also crucial. In this sense, business consulting services can become a valuable support when setting up a new company or even when a company moves to new fields of activity.
• Regulations and Compliance. Each business area of business comes with its own set of legal regulations and compliance requirements. Entrepreneurs must be always aware of these aspects to avoid further legal complications. In this sense, for a fluid process of choosing and studying the field of activity, the professional services of financial consulting, accounting and, of course, tax can be the basis of an informed decision and an inspired choice. The importance of rules in one or another field of activity should not be underestimated at this stage.
• Resources and Investments. Assessing the required resources, including capital, equipment or machinery required, and personnel, is essential to determine the feasibility of the chosen field of activity.
• Scalability and the future of business. Think about how your chosen field of activity can adapt and grow with the evolution of the business and the market.
• Social effects and sustainability. Currently and in the medium and long term, it is increasingly important for entrepreneurs to consider the social and ecological effects of the business they start or expand to other fields of activity. A sustainable business can attract customers and contribute to a better future.

Therefore, the choice of the field of activity should not be treated superficially. It requires thorough analysis and strategic planning, including calling in external experts through professional business consulting, financial consulting, tax consulting, and even accounting consulting, as appropriate, to ensure all factors involved in making a decision that the business foundation is solid and set for success.

Attracting the services of experienced external professionals such as those from Mazars in Romania in the fields of consultancy already listed, can bring a series of significant benefits in the process of choosing the field of activity:

• Access to up-to-date information on market trends, regulations and business opportunities in various fields;
• Detailed analyses of market potential, competition and demand for various business areas;
  Objective assessments of the strengths and weaknesses of your business about the specific requirements of a certain field;
• Guidance on legal, fiscal, financial-accounting and regulatory aspects associated with different fields of activity;
• Strategic planning and the development of a solid business plan adapted to the selected field.

Therefore, choosing the right field of activity is an essential step on the entrepreneurial path. Therefore, give it due attention and make the decision wisely, because it will be the foundation of a successful future business.