Sometimes starting a business feels like learning a new language. We have developed the attached glossary for quick reference as you read through our website and naivgate the realm of business development.
Accessory Goods
Products required by commercial operations to conduct business, such as office copiers, automobile wheel balancers, auxiliary power supplies, air compressors, etc.
Accounts Payable
Short-term debts incurred as the result of day-to-day operations.
Accounts Receivable
Monies due to your enterprise as the result of day-to-day operations.
Accrual Based Accounting
An accounting method that enters income and expenses into the books at the time of contract versus when payment is received or expenses incurred.
Assets
All real or intellectual property owned by the enterprise that has a positive financial value.
Balance Sheet
A statement of assets and liabilities.
Barriers to Entry
Conditions that create difficulty for competitors to enter the market. For example: copyrights, trademarks, patents, dedicated distribution channels and high initial investment requirements.
Break-Even Point
The point at which revenues are equal to expenses.
Business Services
Services offered to commercial enterprises, such as equipment maintenance, supplying of part time personnel, engineering, design, and management consulting, etc.
Capital
The financial investment required to initiate and/or operate an enterprise.
Cash Based Accounting
An accounting method that enters income and expenses into the books at the time when payment is received or expenses incurred.
Cash Flow
The transfer of monies into and out of an enterprise.
Collateral
Assets that can be pledged to guarantee a loan.
Convenience Goods
Goods often used by the consumer, but the consumer is unwilling to spend “shopping time” to acquire them. This covers a broad spectrum of products including, candy, cigarettes, drugs, newspapers, magazines, and most grocery products.
Corporate Image Advertising
A “corporate image” ad is designed to primarily promote the enterprise and secondarily promote the products or services of the enterprise.
Cost of Goods
The direct costs involved in producing a product or service, which usually includes labor and materials.
Cost of Sales
The cost of goods plus the expenses involved in selling and delivering the product or service.
Current Assets
Assets that can be converted quickly to cash.
Current Liabilities
All debts incurred in the normal day-to-day business and due within on calendar year.
Debt Service
The regular payments required to keep a loan current.
Depreciation
The gradual erosion of the usability and value (possibly due to obsolescence) of an enterprise’s fixed assets. In some cases, depreciation can be declared as a tax deduction.
Direct Sales Method
Selling direct to the end user with promotional efforts using advertising, direct mail or telephone sales.
Distributor
An enterprise that purchases your products for resale to their customers who are usually retail outlets. The distributor expect to receive a significant price discount for providing the distribution center.
Equity
A percentage ownership of an enterprise, usually in the form of stock.
Fashion Goods
Goods where style is important and price is secondary. These products could include clothing, jewelry, furniture, draperies, and dishes, but can sometimes be stretched into other areas such as umbrellas, walking canes, cigarette holders, etc.
Fixed Assets
These usually non-liquid assets are integral to the enterprise’s day-to-day business operations such as plants, equipment, furniture, and real estate. Sometimes called long-term assets.
Fixed Costs
The day-to-day cost of doing business that is pre-committed, such as salaries, insurance, lease expenses, utilities, etc.
Full Service Retail Sales Method
Selling from a sales outlet directly to the end user at retail prices with sales personnel who can explain the purpose and value of the product or service.
Gross Profit
Revenues less cost of sales.
Impersonal Service at Customer’s Site
This service usually involves working with the customer’s property and seldom deals with factors that the customer deems confidential. Examples of this type of service would be lawn service, typewriter repair, office cleaning, trucking services, etc.
Impersonal Service, Volume
This type of service is usually designed such that the same service will satisfy the needs of all customers. It is often the case that the servicer and the customer never meet. Examples of this type of service would be classified ads, storage lockers, moneychangers, etc.
Income and Statement
A statement of revenue and expenses. Sometimes call Profit & Loss Statement.
Installation Goods
Products requiring large and expensive capital investments that will have a long life. This could include homes, office buildings, manufacturing facilities, and other types of commercial facilities or equipment such as tractors, printing presses, cranes and robotic assembly line processors.
Intangible Assets
Non-physical assets such as patents, trademarks, a customer base, brand recognition of your products, etc. This is sometimes called goodwill.
Inventory Turnover
A ratio for evaluating sales effectiveness. For a given accounting period, divide total revenue for the product by the average retail value of the product inventory.
Licensing Agreement
An agreement between two enterprises allowing one to sell the other’s products or services and to use their name, sales, literature, trademarks, copyrights, etc. in a limited manner.
Liquidity
The percentage of an enterprise’s assets that can be quickly converted into cash.
Long Term Assets
These are usually non-liquid assets that are integral to the enterprise’s day-to-day business operations such as plants, equipment, furniture and real estate. Sometimes call Fixed Assets.
Long Term Liabilities
All debts that are not current liabilities, that is, debts that are not due until at least one calendar year in advance.
Market Life Cycle
The period of time that a substantial segment of the buying public is interested in purchasing a given product or service form.
Market Penetration Pricing Strategy
The period of time that a substantial segment of the buying public is interested in purchasing a given product or service form.
Market Share
The percentage of the total sales (from all sources) of a service or product represented by the sales made by your enterprise. For example: your sales divided by total sales.
Material Goods
Normally raw or processed materials such as coal or steel that will become part of the purchaser’s end product.
Net Profit
Total revenues less total expenses.
Net Worth
Assets minus liabilities.
On-Site Sales Method
Selling directly to the end user using a sales force that calls on the prospect at their home or place of business.
Partnership
A legal relationship between two or more individuals to conduct a specifically defined business.
Parts/Sub Assembly Goods
Products that will normally become a part of the purchaser’s end product. Examples are screws, bolts, transistors, printed circuits, electric motors, forgings, castings, etc.
Personal Service at Customer’s Site
This service can be a one-to-one or one-to-many relationship between the servicer and customer, sometimes dealing with factors that the customer deems confidential. The service is traditionally provided at the customer’s enterprise. Examples of this service would be tutoring, consulting, etc.
Personal Service at Servicer’s Site
This service is usually a one-to-one relationship between the customer and servicer, often dealing with factors the customer deems confidential. The service is traditionally provided at the servicer’s enterprise. Examples of this type of service would be doctor, lawyer, accountant, educational institution, etc.
Personal Service, Volume
Some services deal with very high volumes but still require the “personal touch.” Examples are airline services or a parcel delivery service like Federal Express.
Pro Forma
Financial forms (invoices, P&L statements, balance sheets, etc) based on future expectations.
Product Benefits Advertising
A “product benefits” ad is designed to acquaint the prospect with the strengths of the product or service and the benefits resulting from those strengths.
Product Comparison Advertising
A “product comparison” ad compares the features of your product or service with those of one of more competitive products or services with the intent of showing yours to be more feature rich than the competition.
Product Family Advertising
A “product family” ad is designed to convince the prospect that they have a wide range of functionality to choose from today and after they buy they will not be locked into a single product or service environment in the future.
Production Capacity
The volume of products or services that can be produced by an enterprise using current resources.
Profit Margin
Total revenues less total expenses.
Proprietary Technology
Technology that is unique and legally owned by an enterprise. The technology may be integral to the product or service being offered or it may be used in the production of the product or service.
Pull Promotional Strategy
A process that requires direct interface with the end user of the product or service. Use of channels of distribution is minimized during the first stages of promotion and a major commitment to advertising is required. The objective is to “pull” the prospects into the various channel outlets creating a demand the channels cannot ignore.
Push Promotional Strategy
A process of maximizing the use of all available channels of distribution to “push” the product or service into the market place. This usually requires generous discounts to achieve the objective of giving the channels incentive to promote the product or service, thus minimizing your need for advertising.
Retained Earnings
Profits retained by the enterprise rather than disbursing to the shareholders. Retained earnings are used to improve the value of the enterprise through development and/or promotional programs.
Return on Investment (ROI)
Net profit divided by net worth. A financial ratio indicating the degree of profitability.
Service/Product Mix
This business, while involving both service and product, is distinct in that the quality of the service is often more important than the product received. Examples of this type of service would be fast food, catering, telephone, etc.
Self-Service Retail Sales Method
Selling from a sales outlet directly to the end user, usually at prices lower than full retail price. There are usually no sales personnel to explain the purpose and value of the product or service.
Service Goods
Goods viewed by the consumer as competitive products offering a standard “service” and are basically similar, so they will “shop” to get the best price. This would include such products as lawnmowers, refrigerators, televisions, automobiles, etc.
Skimming Pricing Strategy
If you desire quick cash and have minimal desires for significant market penetration and control, then you set your prices very high. This is sometimes called “skimming.”
Sole Proprietorship
An enterprise that is owned by a single individual.
Specialty Goods
Goods that appeal to a large segment of the buying public and are considered “special” enough that the consumer will specifically ask for the product. For instance, if you invented a cigarette that tasted good and was also proven to be good for your health, people would probably ask for the “healthy cigarette” (even if they did not know the name). The type of product is not the issue, but rather whether the product is “special” enough that the consumers will “seak it out.”
Strategic Relationships
An agreement between two or more enterprises to conduct specified business processes in a joint manner. Usually related to technology development and/or marketing and distribution efforts.
Supplies Goods
Production support products that will not become a part of the purchaser’s end product. Examples are drill bits, machine lubricants, wiping rags, etching chemicals, pencils, paper clips, etc.
Trademark
The name of a product or service that has been legally registered as the property of an enterprise.
Unsought Goods
Products that are usually purchased due to adversity rather than desire. For example: coffins, crutches, and medicine are all unsought goods. Another form of unsought goods is products such as life insurance and encyclopedias. They are products that the consumer seldom goes out looking for; therefore, a constant, aggressive selling process is required.
Vertical Integration
The potential within an enterprise to incorporate all aspects of management, production, sales, and distribution into their business operations. In theory, the greater the vertical integration, the less vulnerable an enterprise is to outside forces.
Wholesale Sales Method
Selling to distributors at significantly discounted prices who in turn sell to full service or self-service outlets.
Working Capital
The cash available to an enterprise for day-to-day operations.
