35 Critical Business Terms
Practicing the Language of Business & Money
EPISODE 05 – February 18, 2017
This episode of the podcast is formatted differently than any previous episodes. Earlier this week, I was having a conversation with some respected businessmen. During that conversation I noticed a big difference in the way they spoke, specifically in the terminology they were using. It was like they were speaking a different language.
They were speaking a different language. They were speaking the language of business. The language of business is also the language of money.
It was clear, this was terminology I needed to know so I can speak the same language. I did my research and started studying what I thought were the most critical business terms I needed to engrain in my head.
As I was doing this, I remembered that usually whatever knowledge I find valuable, a million other people will find valuable as well. I turned on my mic on and made these definitions available to everyone who also want to better speak the language of business and money.
Listen to the 35 critical business terms everyone should know here, in Episode 05:
Here are the business terms written out that I cover in episode 05 of The KNP:
- Affiliate Marketing: The process in which an individual or company promotes a product or service in return for a commission. The commission is received only when a customer makes a purchase as a result of the affiliate’s promotion.
- Angel Investor: An individual who invests their personal capital directly in new businesses or start-ups and gets equity in return. So, if you need cash to take your business to the next level, you’ll look to find an Angel Investor with whom you can trade a percentage of your company for a monetary investment.
- Assets: Assets are the property or equipment purchased for business use and have monetary value.
- Business Model: A proposed design for the successful operation of a business and how it will become profitable. The business model can include revenue, as well as all expenses. Businesses often create a business model to present to potential investors.
- Cash flow: The amount of cash moving into and out of a business. If a business is successful, the inflow of cash will be greater than the outflow. This is known as “positive cash flow”.
- C Corporation: A type of business that is taxed separately from its owners. As opposed to an S Corporation which taxes its owners personally.
- Costs of Goods Sold (COGS): The cost of goods sold is the total amount of expenses that are necessary in order to make a product. These expenses can include cost of labor, cost of materials and taxes.
- Due Diligence: Researching specific facts of a business related to a potential investment to make sure everything is in order before entering into an agreement with another party.
- Fixed Cost: The total of all expenses required for a company to operate on a weekly, monthly or yearly basis. For example, salary and rent are fixed costs.
- Franchise: A franchise is a large business with multiple locations that can each be purchased by individuals. For example, each McDonald’s location in the United States is independently owned by a franchisee under the McDonald’s name.
- Fringe Benefits: Benefits provided by an employer to its employees in addition to their standard salaries. For example, health insurance or access to a company vehicle are fringe benefits.
- General Partnership: The association of two or more people to run a business. The partners are personally liable for the other partners’ actions and have a shared goal of earning a profit.
- Gross Profit: A company’s gross revenue minus the cost to make the product.
- Gross Revenue: The financial gain of company over a given period of time.
- Independent Contractor: An individual, business or corporation that provides a service to another entity for a set fee. This can be facilitated through a verbal agreement or formal contract.
- Intellectual Property: One’s knowledge or ideas that have value and are protected under copyright, trademark, or patent laws.
- Joint Venture: A short-term business arrangement between two or more parties in which the parties combine resources for a specific project. The partners are equally responsible for both positive and negative developments.
- Letter of Intent: A non-binding document between two parties that declares the intentions of a business transaction. I often do this with my subcontractors at work – if I don’t have a full contract ready to go for them but need them to start, I’ll write a letter of intent letting them know I have full intention to award them the job.
- Liabilities: A financial debt or obligation that a business is responsible for.
- Limited Liability Company (LLC): A business structure in which the owners are not personally responsible for the debts or problems of the business.
- Limited Partnership: A type of business in which only one partner is liable for their capital investment.
- Marketing: A part of a business that focuses on getting the concept of the product to the customer. This is division of the business that uses certain tactics to entice people to buy their product or service.
- Mission Statement: A written statement used to communicate the business’s values and intentions to customers.
- Net Profit: A company’s gross profit minus deductions.
- Net Worth: The net worth is the sum of a company’s assets, such as capital, machinery, buildings, minus any liabilities. Side note on personal net worth.
- Profit Margin: The percentage of profits earned from the sale of a product over a certain period of time. It shows what percentage of sales remains for the business after all the costs are paid.
- Revenue: The amount of money that the company makes.
- S Corporation: A type of business that is created through IRS tax election. The business is not required to pay corporate income tax because the shareholders file their own personal tax returns on the profits they receive from the corporation.
- Sole Proprietorship: A type of business that is owned by one person and taxed as a personal account.
- Strategic Alliance: The collaboration of two or more parties working together to achieve shared goals. The parties do not create a new venture, but collaborate for mutual benefit while remaining separate.
- Supply Chain: Individuals assisting with the production and delivery of a business. This is a division of the company that deals with how the product gets from the factory to the shelves.
- Target Market: A specific segment of the overall market that a business targets their products to through marketing and advertising.
- Unique Value Proposition: A statement that suggests the value in a product or service and gives specific reasons regarding why someone should buy the product or service they are selling.
- Vendor: A person or company that provides goods and services to a specific business.
- Venture Capitalist: An investor that provides capital in exchange for equity in a company that is in its early stages.