BUSINESS TERMS TO KNOW
Business Terms to Know
Starting a business can feel intimidating when you’re learning what all the new terms mean. Our goal at Founding Females® is to equip you with the knowledge and know-how to feel confident running your business.
Below, you’ll find a list of relevant entrepreneur terms and their definitions to empower you to better understanding the language of business.
Important Note: This glossary of business terms was originally published in Dream, Build, Grow: A Female’s Step-by-Step Guide for How to Start a Business, a how-to-start-a-business guide teaching women how to become entrepreneurs. Each of the terms below is explained in context inside the book. The business terms list is repurposed below to help female entrepreneurs become knowledgeable about the world of business.
A
Abandoned Cart Rate
The number of customers who add items to their online shopping cart but abandon it before checking out compared to the total number of shopping carts created.
Analytics
Using data to answer business questions, discover relationships, predict future outcomes.
Assets
In business, an item of value owned by a company, including a vehicle, real estate, equipment, and office furniture.
Average Order Value (AOV)
The average dollar amount spent by customers. To calculate the AOV, divide total revenue by the total number of transactions.
B
B2B
Stands for business-to-business and is when a business’s customers are other businesses.
B2C
Stands for business-to-consumer and is when a business’s customers are consumers.
Bootstrapping
A term that describes starting a business only with the cash a business owner has in the bank without taking out a loan or sourcing any additional funding.
Bottom Line
A term used in business that refers to how much money a business makes after expenses are considered. The bottom line can be improved by increasing revenue or decreasing costs.
Break Even Point
The point where the cost to produce one unit of an item equals the revenue the item generates.
Brokerage Fees
The income someone makes who pairs people or businesses together.
Bundle
A sales strategy where a customer is offered a group of related products at a discounted price.
Business Model Canvas
A concept used to describe, visualize, assess, and change business models.
Buyer Persona
A detailed description of the kind of person who represents your business’s target customer. Also called Ideal Client Avatar. Read: Two Simple Steps to Figuring Out Your Ideal Client as a Female Entrepreneur
C
Capital
Money a company has available to pay for day-to-day operations and to fund future growth.
Cash Flow
Measures the ability of a company to pay its bills and is the cash coming into the business minus the cash paid out during a time period.
Cash on Hand
The cash a business has immediate access to.
Churn Rate
Metric that measures the percentage of customers who end their relationship with a company in a particular period.
Consultation Call
The first call between a business and a potential client to discuss working together.
Conversion Rate
The number of people who buy compared to the total number in the audience (visitors on a website, for example).
Conversion Rate Optimization (CRO)
The process of improving the effectiveness of a marketing strategy to increase the number of people who take a desired action.
Cost of Goods Sold (COGS)
The direct costs of producing or acquiring a product to sell.
Cross Sell
A strategy for increasing sales that involves inviting customers to purchase complementary or related products to what they’ve already decided to purchase.
Crowdfunding
Sourcing a small amount of capital for starting a business from a large number of individuals.
Customer Relationship Management (CRM)
Technology for managing a company’s relationships and interactions with customers and potential customers.
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D
Data
Facts and statistics collected together for reference or analysis.
Data-Driven Decision-Making
Using facts, metrics, and data to guide strategic business decisions.
E
Elasticity
An economic term that describes the extent of a change in supply and demand at varying prices and availability of an offering.
Equity
The value of a business owned by shareholders. If a business has no shareholders, the business owner has 100% equity.
Expense
A cost of operations that a company incurs to generate revenue.
G
Gross Profit Margin
Revenue minus the cost of goods sold divided by net sales and multiplied by 100.
Gross Revenue
Also referred to as “top line” revenue because it’s presented at the top of financial statements and is the total amount of sales a business generates without taking expenses into consideration.
I
“Imposter Syndrome”
A form of intellectual self-doubt where high achievers often attribute their accomplishments to luck rather than to ability and fear that others will eventually unmask them as a fraud.
Indirect Costs
Costs not directly related to production.
Intellectual Property (IP)
Creations of the mind, like literary works, inventions, designs, or symbols.
Interest
The money owed when borrowing or paid when lending.
Interest Rate
The amount charged by a lender to a borrower for the use of assets and typically expressed as an annual percentage of the loan’s outstanding principal balance.
K
Key Performance Indicators (KPIs)
A measurement term that reflects the critical indicators of progress toward an intended result.
L
Liabilities
Something the company owes, usually a sum of money, and part of ongoing and long-term operations.
License
An agreement through which a licensee leases the rights to a legally protected piece of intellectual property from a licensor.
Lifestyle Creep
When a person’s lifestyle spending increases as their discretionary income increases.
M
Market Share
A portion of the market controlled by a company or product and expressed as a percentage as sales divided by an industry’s total revenue.
Markup
The difference between what a product or service costs the business to make or acquire and the price it sells the product for.
Mastermind
A group of like-minded people who come together with the intention to get better together. Inside our female business mastermind, we host monthly calls about an important business topic to help female entrepreneurs grow as business owners.
N
Net Income
Sales minus cost of goods sold, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses.
Net Profit Margin
The total amount of income left over after all additional revenue streams and expenses are considered, divided by total revenue and multiplied by 100.
Net Sales
The total amount of gross sales minus returns, allowances, and discounts.
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STEP-BY-STEP GUIDE FOR HOW TO T A BUSINESS
O
Operating Expense
What it costs the business to stay in business during a specified time period, including things like rent, inventory costs, marketing, payroll, and insurance.
Operating Profit Margin
Income minus the cost of goods sold, overhead, operating administrative, and sales expenses required to run the business.
Opportunity Costs
The alternative options given up when another option is chosen.
Overhead
Ongoing expenses not directly tied to creating a product or service but necessary for the running of the business, such as rent, salaries, insurance.
P
Payment Terms
Specified conditions surrounding the payment for a sale.
Principal
In terms of investing, the original amount invested. In terms of loans, the amount of money the borrower agrees to pay back in addition to interest.
Profit
The amount earned after taking into account the amount spent to produce something.
Profit Margin
A performance measure used to understand the degree to which a business makes money. In simple terms, it’s a ratio of how many cents a business generates for each dollar of sales.
Proof of Concept
A test to see if a product or service is viable.
Referral Program
A program instituted by a business for incentivizing customers to refer their friends and family to become customers of the business.
R
Return on Investment (ROI)
A performance measure in percentage or ratio used to understand the efficiency of an investment by how much income is generated compared to the amount of the investment.
Revenue
The income a business generates from the sale of a product or service.
Revenue Model
The strategy for managing a company’s incoming revenue streams and the resources required for each.
Revenue Stream
Various sources that a business makes money from through the sale of products or services.
S
Scale
Growing a business to make an offering widely available without an incremental increase in costs.
Search Engine Optimization (SEO)
The strategy of improving a website to increase visibility in relevant searches.
“Shiny Object Syndrome”
The tendency to follow trends and results with- out first determining if they’re aligned with big picture goals.
Site Speed
A metric that reports how quickly users are able to see and interact with content on a website.
Subscription Model
Selling a product or service to receive monthly or yearly recurring subscription revenue.
Substitutes
Alternatives for an item that seem almost the same or identical to customers.
Supply and Demand
The relationship between the quantity of an offering that producers are willing to sell and the quantity that customers are willing to buy at varying prices.
T
Taxes
Mandatory payments levied on people and organizations by the government, based on income.
The Buying Cycle
The process a customer goes through when purchasing a product or service. Read more about how The Buying Cycle fits into the marketing your business in How to Start a Business: Step-by-Step Guide for Female Entrepreneurs.
U
Unemployment Rate
The percentage of the labor force without a job and currently seeking work.
Upsell
A sales strategy where a customer is led to purchase a higher priced option to meet the same need.
Usage Fees
A revenue stream based on how often someone uses a service.
V
Value-Based Pricing
A pricing strategy where you set your prices not based on an hourly or project rate, but as an investment knowing your client will use your expertise to make more money.
Value Ladder
The process of organizing your offerings in ascending order based on value and price to create options for customers based on their needs.
Value Proposition
A specific quality about a business or its offering that is attractive to customers.
