Small Business Key Terms

Consumable Model
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Terms in this set (61)
Consumable Model
Making the customer come back for more; sell the printer, make them come back to buy more ink
Opportunity Cost
Starting a new venture; "Mom and Pop," investment backed business, growth business.
Product Line Strategy
single-product company, or multiple categorically related products
Capital Expenditures
money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
Sunk Costs
cost that has already been incurred and cannot be recovered.
High Margin Pricing Strategy
Selling something that is worth a lot
High Volume Pricing Strategy
Selling multiple products because of the price
Gross profit Margin
Revenues - COGS (cost sale minus cost to make)
Net Profit Margin
the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's total revenue.
Exit Strategy
Selling the company back to investors
Product Monetization Strategyevent a new product, be the first to enterLow Barrier to Enterother competitors that threaten your company's successStructured brainstormingTakes a middle path between boundless speculation and quantitative data analysisLeanvirtual manufacturing companyProduct Positioningthe process marketers use to determine how to best communicate their products' attributes to their target customers based on customer needs, competitive pressures, available communication channels and carefully crafted key messages.Customer SegmentationFinding your demographicT&M (Time and Materials)actually being charged for the materials that need to be used, as well with the time workedRoyalty ArrangmentLike "smart design" for Oxo, when manufacturers are partners and gain profit off of the productAssortmentthe presentation of one's products in the store (how oxo would display their kitchen supplies)Business Modela design for the successful operation of a business, identifying revenue sources, customer base, products, and details of financingCustomer Value Propositionswhat the "value" of your product or service will provide to the customerMarketing ResearchData research for your businessDifferentiationMaking your product complete different in the market so that consumers will buy yours over othersLow Cost StrategyA pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share.Price DiscriminationChoosing your price point. Are you going to sell at Walmart? or William SonomaPrice ModelHow are we pricing our product? (subscription, unit, licensing etc)Network EffectsValue of my service increases due to popularity (Facebook has no value if no one is on itSwitch Costs**Going from AT&T to Verizon. Business model that makes the consumer want to change their loyaltyWillingness to PayWRT (with respect to) whatever the customers are willing to payTotal Costs of Ownership**Buying a cheaper car first, but having problems with it later. Or buying the expensive car and not having problemsSupply Chainexamples; vertical and horizontal integrationVertical Integrationthe combination in one company of two or more stages of productionIntellectual PropertyQuantifiable thing that you can point at and say "I own that"Trade Secret"secret recipes." Restaurants- KFC's batter recipe has a key spice that makes their chicken taste so goodPadenDescribe in such detail, that someone very skilled in the art, can reproduce it. (your mom can't analyze chemical compounds but a chemist should based on your directions)Economies of ScaleReduce the overall cost per unit, increase level or production. (razor blades)Fixed CostsSet costs that need to be made for the companyVariable Costsa cost that varies with the level of output. (can change)Cash Flowthe total amount of money being transferred into and out of a business, especially as affecting liquidityLean StartupHow Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful BusinessesMargin Requirementthe percentage of marginable securities that an investor must pay for with his/her own cash.Exclusively Arrangementsessentially requirements contracts in which a seller agrees to sell all or a substantial portion of its products or services to a particular buyer, or when a buyer similarly agrees to purchase all or a portion of its requirements of a product or service from a particular sellerLife Time Value (LTV)the product can (could) last a lifetime. Also used in terms of contractsCustomer Acquisition Cost (CAC)cost associated in convincing a customer to buy a product/serviceConversion Funnelphrased used in e-commerce to describe the journey a consumer takes through an Internet advertising or search system, navigating an e-commerce website and finally converting to a sale.Network Effectsa company's decision to invest in customer acquisitionCurrent Assetscash and other assets that are expected to be converted to cash within a yearNon Current Assetsan asset that is not likely to turn to unrestricted cash within one year of the balance sheet datePP&E (Plant, Property & Equipment)non current assetsDepreciationa reduction in the value of an asset with the passage of time, due in particular to wear and tear.Accumulated Depreciationa long-term contra asset account (an asset account with a credit balance)Current Liabilitiesrepresent monies owed to creditors that must be paid back within one yearNon Current LiabilitiesA business's long-term financial obligations that are not due within the present accounting year. Examples include long-term borrowing, bonds payable and long-term lease obligations.Owners Equityis the total assets of an entity, minus its total liabilities. This represents the capital theoretically available for distribution to shareholders.Balance Sheet"Shows a snapshot in time" with assets, equity and liabilitiesFundamental Accounting EquationAssets - Liabilities = Owners' EquityNetworking CapitalCurrent Assets - Current LiabilitiesInventoryThis is the one that's most tangible and that plays the most notable role in the day-to-day operations of small businessAccrual TypeAn adjusting entry made at the end of the accounting periodPayment termsFor example, "Net-30" or "Net-60"Business Format Franchisingrelationship the franchisor provides to the franchisee not just its trade name, products and services, but an entire system for operating the business.