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Glossary

The business, finance and marketing terms behind every business plan. One term, one page, explained in plain language.

A

Average Revenue Per User Average revenue per user is the revenue your business earns per customer in a given period. ARPU

B

B2B vs B2C B2B means you sell to businesses, B2C means you sell to private consumers. B2B, B2C Barriers to Entry Barriers to entry are the obstacles a new company must clear before it can compete in your market at all. Benchmarking Benchmarking compares your own numbers against a reference point: a competitor, an industry average, or your own past performance. Brand Identity Brand identity is the set of visible and audible elements you control so people recognise you: name, logo, colours, typography, imagery, tone of voice, and the promise behind them. Break-Even Point The break-even point is the sales volume at which your revenue exactly covers your costs, so your profit is zero. Burn Rate Burn rate is the speed at which your company spends cash, usually measured per month. burn

C

Call to Action A call to action is the specific next step you ask someone to take: a button, a link, or a line of text. Start free trial, Book a call, Add to cart. CTA Capital Expenditure Capital expenditure, or CAPEX, is money you spend on assets you will use for more than one year: machines, vehicles, buildings or larger software systems. CAPEX Capital Requirements Capital requirements are the total amount of money you need to start your business and run it until it covers its own costs. Cash Flow Cash flow is the money that actually moves into and out of your bank account in a period. Churn Rate Churn rate is the share of customers who stop paying during a period, usually one month. Cohort Analysis Cohort analysis groups your customers by the month they joined, then tracks each group separately over time. Commission Model A commission model earns you a percentage or a fixed fee on each transaction you help create, instead of charging for the product itself. Competitive Advantage A competitive advantage is a specific reason customers choose you over the alternatives, which competitors cannot copy quickly. Contribution Margin Contribution margin is what remains from one sale after you subtract the variable costs of that sale. Conversion Rate Conversion rate is the share of people who complete a specific action out of everyone who had the chance to. Core Competency A core competency is something your company does better than most others, that customers notice, and that you can apply to more than one product. Corporate Governance Corporate governance is the set of rules, roles, and decision rights that determine how a company is directed and controlled. Cost of Goods Sold Cost of goods sold, or COGS, is the direct cost of producing the products or services you sold in a period. COGS Cost Structure Cost structure describes how your total costs split between fixed and variable, and which categories they fall into. Cross-selling Cross-selling is offering a customer an additional product that complements what they already bought: insurance with a flight, a case with a phone, payroll software next to accounting software. Customer Relationship Management Customer relationship management is the practice of recording and organising every interaction with prospects and customers in one place. CRM Customer Retention Customer retention measures how many of your existing customers keep buying from you over a defined period. retention rate

D

Defensibility Defensibility is how hard it is for a competitor to take your customers once they decide to try. Depreciation and Amortization Depreciation and amortization spread the cost of a long-lived asset across the years you use it. D&A Due Diligence Due diligence is the structured examination a buyer, investor, or lender performs before committing money.

E

EBIT EBIT means earnings before interest and taxes. EBITDA EBITDA stands for earnings before interest, taxes, depreciation and amortization. Economic Moat An economic moat is the structural reason your profits survive attack. moat Equity Equity is the ownership share in a company.

F

First-Mover Advantage First-mover advantage is the benefit you get from entering a market before anyone else: the best brand name, early customers, and supply deals signed at low prices. Fixed Costs Fixed costs are expenses that stay the same no matter how much you sell. Flat rate A flat rate is a fixed price for unlimited or generously bounded use within a period. Freemium Freemium is a pricing model with a free version that stays free forever and a paid version with more features, more capacity or fewer limits.

G

Gross Margin Gross margin is what is left from your revenue after you subtract the cost of goods sold, shown as a percentage.

H

Hidden Revenue Hidden revenue is money a business already earns, or could earn, from activities it does not track as a separate income line.

I

Ideal Customer Profile An ideal customer profile describes the type of customer that gets the most value from your product and is cheapest for you to serve. ICP Intellectual Property Intellectual property is the legal ownership of things you create with your mind rather than your hands: brand names, inventions, texts, software code, designs, and business secrets. IP

L

Lead Generation Lead generation is the work of finding people or companies that might buy from you and collecting a way to contact them. Liquidity Liquidity is your ability to pay bills when they fall due. Lock-in effect A lock-in effect exists when switching to a competitor costs the customer money, time or data, so they stay even when a better offer appears. lock-in Long tail The long tail is a sales pattern where a large number of rarely sold products together generate more revenue than the few bestsellers.

M

Market research Market research is the systematic collection of information about customers, competitors and market size before you commit money. Monetization Monetization is how you turn usage, attention, or data into money. Monthly Active Users Monthly active users, or MAU, counts the unique people who performed a defined action in your product within the last 30 days. MAU

N

Net Income Net income is what remains after every cost is subtracted from revenue: cost of goods sold, operating expenses, depreciation, interest and taxes.

O

Onboarding Onboarding is the structured first phase after someone joins you: a new customer starting to use your product, or a new employee starting the job. Operating Expenses Operating expenses, often called OPEX, are the costs of running your business that are not tied to producing a single unit. OPEX Opportunity Cost Opportunity cost is the value of the best option you give up when you choose something else.

P

Patent A patent is a time-limited monopoly on a technical invention. Pay-per-use Pay-per-use charges for actual consumption: per kilowatt hour, per API call, per gigabyte, per hour of rental, per printed page. Pivot A pivot is a deliberate change to one core element of your business: the customer, the problem, the product, or the revenue model. Pricing Strategy A pricing strategy is the method you use to set and change your prices, plus the reasoning behind it. Profit and Loss Statement A profit and loss statement, also called a P&L or income statement, lists your revenue and all your costs for a period and ends with net income. P&L Profit Margin Profit margin shows what percentage of your revenue remains as profit after costs.

R

Razor and blade Razor and blade means selling a base product cheaply and earning on the consumables it needs. Recurring Revenue Recurring revenue is income that repeats on a predictable schedule, usually from subscriptions or service contracts. ARR, MRR, annual recurring revenue, monthly recurring revenue Regulatory Compliance Regulatory compliance means running your business within the rules that apply to it: business registration, tax reporting, data protection, employment rules, product safety, and sector licences. compliance Return on Investment Return on investment measures how much profit an investment produces compared to what it cost. ROI Revenue Stream A revenue stream is one distinct source of money coming into your business, defined by what you sell and how customers pay for it. Risk Matrix A risk matrix is a table that sorts the things that can go wrong by two questions: how likely is it, and how badly would it hurt? Runway Runway is the number of months your business can keep operating before the cash runs out.

S

Sales Channel A sales channel is a route through which your product reaches a paying customer. Sales Motion A sales motion is the repeatable way you turn interest into a signed deal. sales-led, self-serve Seasonality Seasonality is the pattern of predictable ups and downs in demand across the year. Sensitivity Analysis Sensitivity analysis tests how your result changes when one assumption changes. SMART Goals SMART goals are objectives written to be Specific, Measurable, Achievable, Relevant, and Time-bound. Stakeholder A stakeholder is any person or group affected by your business or able to affect it: founders, employees, customers, suppliers, investors, lenders, landlords, regulators, and neighbours. Startup Costs Startup costs are the one-time expenses you pay before your business earns its first euro. Supply Chain A supply chain is the full path a product takes from raw material to the customer's hands: suppliers, manufacturing, transport, storage, and delivery, plus the returns that come back. Switching Costs Switching costs are everything a customer must give up to move from your product to another one: money, time, retraining, lost data, and risk.

T

Time to Market Time to market is the time between starting work on a product and the moment customers can actually buy it. Touchpoint A touchpoint is any moment a person comes into contact with your business: an ad, a search result, your website, a package, an invoice, a support reply, a review. Trademark A trademark is a protected sign that identifies your goods or services and separates them from others: a name, a logo, a slogan, sometimes a sound or colour. Two-sided market A two-sided market brings two different user groups together and creates value by matching them: drivers and riders, hosts and guests, buyers and sellers.

U

Unique selling proposition A unique selling proposition, or USP, is the one reason a customer picks you over the alternatives, stated in a way a competitor cannot copy today. USP Upselling Upselling is selling a customer a larger, better, or longer version of what they are already buying: a bigger plan, a longer contract, more seats, or a premium model.

V

Value Chain A value chain is the ordered set of activities your company performs to turn inputs into a product a customer pays for. Variable Costs Variable costs rise and fall with the number of units you sell. Venture Stage Venture stage describes how far your business has progressed, from an untested idea to a product with paying customers. idea, launched, mvp Volatility Volatility describes how strongly a value swings around its average over time: revenue, prices, exchange rates, order volume, costs.

W

White label White label means you produce a product or service that another company sells under its own brand. Working Capital Working capital is your current assets minus your current liabilities.