Business Plan for Starting an SMB

Business Glossary

 
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Business Glossary


A

Accounting. The recording, classifying, summarizing, and interpreting of events of a financial character. These events can include income, expenses, and cash flow.

Amortization. Paying off debt in regular installments over a period of time, or deducting certain capitalized expenditures over a specified period of time.

Appreciation. The increase in the value of an asset.

Asset. Anything that an individual or an entity owns that has value. Cash, equipment and stocks are all considered assets.

 


B

Balance Sheet. A financial statement that includes a company“s assets and liabilities. A company's net worth is equal to its assets minus its liabilities.

Bankruptcy. A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts (Chapter 11) or liquidation of its assets (Chapter 7). In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. The action may be voluntary or involuntary.

Banner Ad. A common form of online advertising, banner ads come in a variety of sizes and typically appear on a Web page as a box or rectangle containing text, images, animation or other effects. Users who click on a banner typically follow a hyperlink to the advertiser“s Web site.

Business Plan. A planning document that describes a company, its market, its management team, its potential, its competitors, and all other relevant information about its business and its prospects.


C

Capital. (1) Assets less liabilities, representing the ownership interest in a business, (2) a stock of accumulated goods, especially at a specified time and in contrast to income received during a specified time period, (3) accumulated goods devoted to the production of goods, and (4) accumulated possessions calculated to bring income.

Capital Expenditures. Business spending on additional plant equipment and inventory.

 

Cash Flow. An accounting presentation showing how much of the cash generated by a business remains after both expenses (including interest) and principal repayment on loans are paid. A projected cash flow statement indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated for any given period of time, normally done on a monthly basis or yearly basis.

Collateral. Something of value pledged to support the repayment of an obligation or loan. Examples include real estate and certificates of deposit.

.com. One of the major Internet domains, usually representing for-profit business entities. Other major Internet domains include .net, .org, .gov, .info, .biz, and .edu.

Copyright. An exclusive ownership interest in an artistic or literary work. The term "literary work" includes computer software and other information stored in electronic form. Copyright is often noted by the following example: "Copyright© 2003 by AllBusiness.com."

Corporation. A form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability, if proper steps are followed. Corporations may take a number of forms, depending on the goals and objectives of the founders. Types include C, S and nonprofit corporations. Corporations are regarded as “persons” in the eyes of the law and may thus sue and be sued, own property, borrow money and hire employees.

Cost of Goods Sold. This term represents the cost of buying raw materials and producing the goods that a company sells. It also includes the cost of the company“s labor force and overhead costs.


D

Direct Mail. Marketing or advertising materials sent directly to a prospective customer via the US Postal Service or a private delivery company.

Direct Marketing. The process of sending promotional messages directly to individual consumers, rather than via a mass medium. Includes methods such as direct mail and telemarketing.

Doing Business As (DBA). A situation in which a business owner operates a company under a different name than the one under which it is incorporated. The owner typically must file a fictitious name statement or similar document with the appropriate county or state agency.

Domain Name. The text-based URL or address of a Web site. Domain names usually consist of several different segments. The name www.allbusiness.com, for example, includes the generic “www” and “.com” identifiers, along with the unique name “allbusiness.”

 


E

Entrepreneur. One who assumes the financial risk of the initiation, operation, and management of a given business undertaking.

Equity. An ownership interest in a business. For example, stock in a corporation represents equity in the corporation.

 


F

Financial Reports. Reports concerning the financial aspects of a business, such as:

(1) Balance Sheet - A report of the status of a firm's assets, liabilities and owner's equity at a given time.

(2) Income Statement - A report of revenue and expense which shows the results of business operations or net income for a specified period of time.

(3) Cash Flow - A report which analyzes the actual or projected source and disposition of cash during a past or future accounting period.

Financing. New funds provided to a business, either by way of equity infusion, or loans.

Fixed Costs. Costs of doing business, such as rent and utilities that remain generally the same regardless of the amount of sales of goods or services.

Flow Chart. A graphical representation for the definition, analysis, or solution of a problem, in which symbols are used to represent operations, data, flow, equipment, etc.

Foot Traffic. Consumer activity produced by visitors at stores, trade show exhibits or by popular retail locations.

 


G

Giveaway. A gift given to potential customers at trade shows and other marketing events to remind them of a product or service. Also known as a "freebie" or a "gimme."

 


H

Hard Sell. Aggressive, high-pressure sales techniques.

 


I

Interest. (1) An amount paid a lender for the use of funds, or (2) cost of using credit or another person“s or company“s money. Interest is usually calculated as a rate per a period of time, typically a year.

Interest Rate. Percentage of a sum of money charged for the use of the money. Borrowing $100 for one year at a 10 percent simple interest rate would cost $10.


J

Joint Venture. An agreement between two or more partners ("joint venturers") to pursue collaboratively a particular project or business, with a sharing of profits or losses.

 


K

Limited Liability Company (LLC). A flexible business structure, popular with small businesses, offering owners the advantage of limited personal liability and the choice of being taxed like a partnership or a corporation.

Limited Liability Partnership (LLP). A type of partnership recognized in many states that protects individual partners from personal liability for negligent acts committed by other partners and employees not under their direct control. Some states restrict this type of partnership to professionals, such as lawyers, accountants and architects.

Logo. A symbol that a company uses to represent itself or its brand.

 


L

Mailing List. Names, addresses and sometimes phone numbers of consumers or businesses aggregated by buying characteristics such as age, income, education, size of household or business and ownership of property. Mailing lists are used for direct mail and to generate sales leads.

Marketing Plan. A company plan for marketing products and services and increasing sales.

Market Share. The percentage of a product category“s sales, in dollars or units, that a particular brand, product line or company controls.

 

 

M

 


N

Nondisclosure Agreement (NDA). A contract in which a person or business agrees to maintain the confidentiality of proprietary information or trade secrets and not disclose such information without authorization. Employees, consultants, business partners and investors are often asked to sign nondisclosure agreements.

Nonprofit Corporation. A form of corporation in which no stockholder or trustee shares in profits or losses and which usually exists to accomplish some charitable or educational function. These organizations are exempt from corporate income taxes, and donations to these groups may be tax deductible.

 


O

Operating Expenses. In real estate, the costs of maintaining a property, such as utility charges and property taxes.


P

Partnership. A legal relationship existing between two or more persons or entitites contractually associated as joint principals in a business.

Patent. A patent secures to an inventor the exclusive right to make, use and sell an invention for a designated period of time. See information at www.uspto.gov.

Press Kit. A collection of publicity materials, including press releases and general company information, that is packaged and sent to media organizations.

Press Release. A document that communicates information to the press. Press releases can publicize good news such as positive earnings and new product or service launches.

Promotion. Forms of communication that call attention to products and services, typically by adding extra value to the purchase. Includes temporary discounts, allowances, premium offers, coupons, contests and rebates.

Proprietorship. The most common legal form of business ownership; about 85 percent of all small businesses are proprietorships. The liability of the owner is unlimited in this form of ownership.

Prospect. A prospective customer who has the capacity to buy a product or service, but who has not yet decided to do so.

Prospecting. The process by which salespeople determine whether or not a business or an individual could qualify as a potential customer.

Purchase Order. A form that contains pricing, quantity and other purchasing information.

 

 


Q

 


R

 


S

SBA. The US Small Business Administration (SBA), created by Congress in 1953 to help America’s entrepreneurs form successful small business enterprises. See www.SBA.gov.

Salary. Regular compensation paid to an employee as a condition of employment. Salary is generally computed on an annual or a monthly basis.

Sales Tax. A tax on retail products based on a set percentage of retail cost.

Self-Mailer. A direct mail piece, such as a postcard, that does not require an envelope or wrapper for mailing.

Sister Company. Sister companies share the same parent company or individual owner. Like a subsidiary, a sister company is typically a separately incorporated business.

S Corporation. A form of corporate organization where the profits of the entity pass through to shareholders and are taxed on their personal returns under subchapter S of the Internal Revenue Code.


T

Target Market. A specified audience or demographic group that an ad, product or service is intended to reach.

Trademark. A name, phrase, logo, image or combination of images used to identify and distinguish a business from others in the marketplace. The term is often used to include service marks, which apply to businesses providing services as opposed to selling products. Trademarks can be either registered or unregistered, with different levels of protection.

 


U

 


V

Venture Capital. Money used to support new or unusual commercial undertakings; equity, risk or speculative capital. This funding is provided to new or existing firms that exhibit above-average growth rates, a significant potential for market expansion and the need for additional financing for business maintenance or expansion.

 

 


W

Working Capital. The difference between current assets and current liabilities. Working capital finances the cash conversion cycle of a business — the time it takes to convert raw materials to finished products to sell and receive cash.

 


X

 


Y

 


Z

 

 
 

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