In any field, the first step to success is learning the lingo.
Here are some words and phrases that are helpful for any entrepreneur to know:
- Angel investors: Individuals who back emerging entrepreneurial ventures with capital they are willing to risk. Angel investors serve as a bridge from self-funding to the point that a business can attract venture capital.
- Business incubator: Provides space, coaching, and support services to entrepreneurs and early-stage businesses, often at a reduced cost.
- Business plan: A document describing a proposed venture, covering current status, expected needs, and projected results for the enterprise. It contains thorough analysis of the product, market and competition, marketing strategy, operating plan, and management, as well as profit, balance sheet, and cash flow projections.
- Corporation: A business form that is an entity legally separate from its owners and providing limited liability, easy transfer of ownership, and unlimited life.
- E-commerce: The sale of products and services over the Internet.
- Entrepreneur: A person who organizes, operates, and assumes the risk for a business venture.
- Equity: An ownership interest in a business.
- Intangible assets: Items of value that have no tangible physical properties, such as ideas.
- Joint venture: A legal entity created by two or more businesses joining together to conduct a specific business enterprise with both parties sharing profits and losses.
- Limited partnership: A business arrangement in which the day-to-day operations are controlled by one or more general partners and funded by limited or silent partners who are legally responsible for losses based on the amount of their investment.
- Marketing: The process of researching, promoting, selling, and distributing a product or service. Marketing covers a broad range of practices, including advertising, publicity, pricing, and overall packaging of the goods or services.
- Partnership: A legal form of business in which two or more persons are co-owners who share profits and losses.
- Small Business Administration (SBA): An independent agency of the US federal government that aids, counsels, assists, and protects the interests of small businesses.
- Small business technology development center (SBTDC): SBA program using university faculty and others to provide management assistance to current and prospective small business owners. Visit www.misbtdc.org for additional information.
- Small business innovation research (SBIR): A federal program, run by the SBA, which awards federal research grants to small businesses for product commercialization.
- Seed financing: A relatively small amount of money provided for proof of concept; it may involve product development or market research.
- Sole proprietorship: A business form with one owner who is responsible for all of the firm's liabilities.
- Start-up financing: Funding provided to companies for use in product development and initial marketing—usually funding for firms that have not yet sold their product commercially.
- Venture capital (VC): A form of financing for a company in which the business gives up partial control in exchange for capital over a limited time frame—usually three to five years.
- Venture investors: An institution specializing in the provision of large amounts of long-term capital to enterprises with a limited track record but with the expectation of substantial growth. Venture capitalists may also provide varying degrees of managerial and technical expertise.
- Bottom Line: Net earnings and net income both fall under the “bottom line” description. You may hear people talk about “affecting the bottom line” of the company and this is simply any action that may increase or decrease the company’s net earnings, or overall profit. The term “bottom” is in reference to the typical location of the number on a company’s income statement, below both revenues (top line) and expenses. Needless to say, this is an important term to know.
- Gross Margin: Gross margin is expressed as a percentage and represents the percent of total sales revenue that a company keeps after subtracting the cost of producing its goods or services. The higher the percentage, the more the company keeps on each dollar of sales (that will eventually go toward paying its other costs and obligations). In simple terms, if a company’s gross margins are 25 percent, for every dollar of revenue that is generated, the company will retain $0.25 before paying its overhead, which includes salaries, rent, and more.
- Fixed Costs: A fixed cost is exactly what is sounds like, a cost that does not change with increases or decreases in the volume of goods or services that are produced by your company. These costs are obviously the easiest to predict and plan for. Rent, salaries, and utilities all usually fall into this category.
- Variable Costs: They can vary depending on a what a company is producing (such as Amazon Web Services usage), and as a result are much harder to forecast.
- Equity versus Debt: The “equity versus debt” comparison may seem silly to some, but you would be surprised at how many people I have come across who have no idea what either really means. Equity is simply money obtained from investors in exchange for ownership of a company, while debt comes in the form of loans from banks that must be repaid over time. Both are necessary for growth, with their own pros and cons. Equity versus debt is a critical decision for any entrepreneur and it is important to know the difference as the future of your business may depend on it.
- Leverage: Leverage can be interpreted a couple different ways. In the financial world, leverage is most commonly known as the amount of debt that can be used to finance your business’ assets. In simple terms, the amount of money you borrowed to run your business. The balance you want to strike as an entrepreneur is that of your debt and equity. If you have way more debt than equity, you will be considered “highly leveraged” aka “very risky” to potential investors.
- Capital Expenditures (CapEx): Capital expenditures are any items purchased by your business that create future benefits. Basically, if something you bought is going to be useful to your business beyond the taxable year in which you purchased it, capitalize the item(s) as assets in your accounting. Examples include computers, property, or acquisitions.
- Concentration: Concentration is simply the measure (usually a percentage) of how much business you are doing with a specific client or partner. Relying on one or a couple of clients and partners to do business is a prime example of over-concentration. This is a losing strategy for any business because if something goes wrong with those limited relationships your business will be in serious trouble. Focus on keeping low concentrations for your accounts and investors will be impressed.
Words & Phrases that Every Real Entrepreneur Should Remember: INFOGRAPHIC
References -
https://www.entrepreneur.com/
https://www.udemy.com/
http://www.superior-innovations.com/top-20-terms.html
http://venturebeat.com/2013/06/08/startups-financial-terms/