Glossary of Terms

acceleratorAn organization that provides money, office space, mentorship, or other support to a new business during a defined period of time. In exchange, the accelerator receives a small percentage of ownership in the new business.

accounts payable (A/P)Money that a business owes its suppliers for services or products that the business has purchased on credit.

accounts receivable (A/R)Money that a business is due from customers for services or products that the customers have purchased on credit.

action partnerA group member who supports and holds accountable another group member in keeping his or her weekly commitments.

angel investorA wealthy investor who provides money and mentorship to a new business in exchange for partial ownership of the business.

assetAn item, tangible or intangible, that a business owns or controls and that will provide a future benefit. The value of a business’s total assets is summarized on a balance sheet.

bad debtA debt that a business incurs when a customer who has received credit from a business fails to pay the money owed. The business writes off the balance owed as uncollectible or bad debt.

balance sheetA financial statement that summarizes a business’s assets and liabilities, as well as the owner’s equity, during a defined period of time. On the balance sheet, the business’s assets will be equal to the total of its liabilities plus the owner’s equity.

best practiceA way of doing something that is regarded as the most effective approach for a certain business or industry.

bootstrappingThe process of a person building a business by doing the work himself or herself.

business structureA recognized legal entity selected by a business, such as a sole proprietorship, partnership, or corporation.

capitalBusiness assets, such as cash, equipment, or property, used to produce services or products.

cash balanceThe amount of money currently available in an account.

cash flowA measure of the amount of money that moves in and out of a business during a defined period of time.

cash flow projectionA forecast of cash received and paid over a defined period of time.

competitive advantageA condition or circumstance that allows a business to operate more efficiently, offer higher quality, or provide greater benefits than other businesses. A competitive advantage enables a business to gain or keep more customers.

core businessThe main activity that a business was created to perform. A business should continually work at improving and achieving excellence in this activity.

costThe amount of money a business spends to produce something or to provide a service.

creditAn agreement between a lender and a borrower that enables a borrower to purchase services or products now and repay the lender at a future date.

crowdfundingA financing method in which large numbers of people support a business by individually contributing small amounts of money through the internet.

customerA person or organization who buys services or products from a business.

debtMoney that is borrowed and owed to another person or organization.

demandThe quantity of a service or product that customers are willing and able to buy at a certain price.

depreciationAn accounting method used to reduce the value of an asset over its productive life. The reductions roughly correspond to the expected deterioration in the asset due to it becoming obsolete or wearing out.

distributorA business that supplies related products to other businesses.

efficiencyAchieving a desired result without wasting time, energy, materials, or money.

engageTo actively involve or encourage participation by another individual or party.

equityThe value of ownership. In many cases, equity is the monetary value of ownership after all liabilities are deducted from all available assets.

expenseMoney that a business spends to obtain services or products.

feedbackHelpful information shared to provide perspective and encourage improvement.

fixed costAn expense a business incurs regardless of how much it produces or sells. Examples of fixed costs might include rent, insurance payments, and administrative salaries.

franchiseA right that allows a business to operate and sell certain services or products at a particular location.

grantFunds given for a specific purpose that typically do not need to be repaid.

gross profitThe difference between variable costs and sales revenue. Gross profit is important because it reflects a business’s core profitability. Gross profit is shown on an income statement.

gross profit marginThe percentage of money a business has left over after its variable costs are subtracted from its sales revenue (and before its fixed costs are deducted). Gross profit margin is important because it allows a business to compare itself with other similar businesses.

income (for a business)The money that remains after expenses are subtracted from revenue. Income is also called net profit or the bottom line.

income (for an individual or family)The money that the individual or family receives or earns.

income statementA financial statement that summarizes revenue and expenses over a defined period of time and states whether a business has achieved a profit or loss. Also called a profit and loss statement (P&L).

intellectual propertyIdeas or innovation whose ownership has been protected legally.

interestMoney that is paid on borrowed funds (or received on loaned funds).

interest expenseThe cost incurred for borrowing money.

interest incomeMoney that is earned for lending money over a defined period of time.

inventoryA summary of all products or materials on hand that a business can sell or use.

invoiceAn itemized bill from a business that lists the services or products provided.

liabilityA business’s debt or obligation. The cost of a business’s total liabilities is shown on a balance sheet.

licenseOfficial or legal permission to do or use something.

line of creditA loan arrangement that allows a business to borrow money as needed up to a specified amount, usually for short-term purposes.

lossA financial decrease in which revenue minus expenses is a negative amount.

marketPeople or organizations that have the potential to buy services or products.

mentorA trusted and experienced adviser who guides and encourages a person with less experience.

microfinance loanA relatively small amount of money lent by an organization to a business that does not have access to traditional banking services.

milestoneAn event that marks and measures the progress of a business.

net profitThe difference between sales revenue and all costs (both variable costs and fixed costs). Also referred to as net income or the bottom line. Net profit is shown on an income statement.

net profit marginThe percentage of money a business keeps after both the variable costs and the fixed costs are subtracted from its sales revenue. Net profit margin is important because it allows a business to compare itself with other similar businesses.

networkA group of interconnected people or organizations.

non-wage employee expensesEmployer-paid expenses associated with an employee, such as taxes, insurance coverage, and other non-wage benefits.

operations manualA document that contains step-by-step instructions describing how to perform specific business activities.

owner’s equityThe value that remains after subtracting a business’s total liabilities from its total assets. The value of the owner’s equity is summarized on a balance sheet.

partnerAn organization or person in alliance with a business to support its business dealings.

patentA right registered by a business with the government that precludes other parties from making, using, or selling the business’s invention.

payment termsConditions agreed upon between customers and sellers to complete a sale.

peer-to-peer lendingA method of lending in which individuals lend to an unrelated business owner through an online service.

personal business plannerA template used to continually organize the details and evaluate the practicality of a business opportunity.

profitA financial gain in which revenue minus expenses is a positive amount.

profit and loss statement (P&L)A financial statement that summarizes revenue and expenses over a defined period of time and states whether a business has achieved a profit or loss. Also called an income statement.

receiptDocumentation acknowledging that a business has received money in exchange for services or products.

regulationA rule or law established by a government organization.

resourceAnything that is used to help run a business.

retailerA business that sells directly to consumers.

revenueMoney that a business receives from customers for selling services or products.

revenue and expense logA financial form used to record revenue and expense transactions.

sales channelA means through which a business sells its services or products to customers.

search engine optimization (SEO)The process of improving a website’s positioning in an online search result in order to drive more potential customers to that website.

seasonalityA regular and predictable pattern in which business activity fluctuates depending on the season or time of the year.

self-relianceThe ability, commitment, and effort to provide the spiritual and temporal necessities of life for self and family.

social mediaOnline tools used to communicate with, engage, and listen to customers.

statement of cash flowsA financial statement that summarizes cash inflows and cash outflows based on a business’s operating, investing, and financing activities.

supplierA business that sells services or products to another business.

utilitiesPublic services such as electricity, gas, or water.

variable costA business expense that varies based on how much a business sells or produces. A variable cost could be the amount of money spent on raw materials or labor for a product.

venture capitalA large amount of money that a financial firm invests in a business with the expectation of significant business growth and an eventual highly profitable business sale.

visionA picture of a desired future state.

wageA regular payment made by a business to an employee, traditionally based on the number of hours worked.

wholesalerA business that sells large quantities of products to retailers.

workflowA sequence of repeatable steps or tasks that are performed consistently to achieve a desired outcome. Also called a business process.