By a business enterprise we mean an undertaking which is entered into for the purpose of making a profit. As a general thing there are two sides to the business enterprise. First there is the technical side of the organization of production, and secondly, the commercial side of the purchase of materials and the sale of the product. The enterpriser or undertaker is the person who organizes the business and who attempts to secure for himself a margin between his expenditures in the business and the selling price of his product, - in other words, profit. In the preceding paragraphs of this chapter we have discussed the different stages through which society has passed in its efforts to secure a living for its members. In the following paragraphs we shall consider the different steps that have been gone through in the development of the modern business enterprise. These steps we shall characterize as, first, the housework system; second, the hire system; third, the handicraft system; fourth, the commission system; and fifth, the factory system.

13. The Housework System

This system corresponds in point of development with the first stage of economic development which we have spoken of above, independent household economy. The housework system of production is not yet a business enterprise. It is a sort of introduction to enterprise. There is no buying and selling and there is no profit. Production is by the members of the household and directly for the members of the household. The household was busy, but it was not engaged in business enterprise in the sense of producing for profit.

14. The Hire System

A step was made in the development towards modern business enterprise when the worker who had heretofore worked in and for the household developed a special skill which he undertook to sell to neighboring households. This was the beginning of the hire system. The worker went from place to place stopping temporarily with the households which needed his services and which paid him in addition to his board, and possibly his lodging, a wage for his work. The traveling carpenter or tailor will serve as an example. But the worker instead of going to the families which required his services might have a place of business of his own to which his customers came with the materials upon which they wished him to work. This is exemplified by the medieval miller or baker, to whom customers brought wheat or flour and from whom they received their flour or bread after a deduction had been made for the service performed. In the hire system, while the tools and even sometimes elaborate machinery might belong to the worker, the material upon which the work was done belonged to the customer. The services of the worker were sold to the customer but there was no possibility of making a profit on the material itself.

15. The Handicraft System

In the next step of development towards modern business enterprise, the worker purchased the materials and worked upon them with his own tools. Instead of selling his labor he sold the finished product to the customer. This was the handicraft system. It was definitely a business enterprise. This step as well as the preceding one corresponds generally with the second stage in economic development, namely, town economy. The gild system of the Middle Ages embraced both the hire system and the handicraft system.