Entrepreneurship Vocabulary: A Glossary for Startups
May 23, 2022
Startup professionals speak a specialized lingo crammed with jargony entrepreneurship vocabulary and acronyms. Need a crib sheet? Bookmark this glossary.
The Great Resignation arrived in 2021, when the number of Americans quitting their jobs reached an historic high of 47.8 million. Where are these newly independent workers going? Many are starting small businesses: that is, they are becoming entrepreneurs.
According to Guidant Financial, the primary motivations of people who quit jobs to start their own businesses include a readiness to be their own boss (60.9 percent) and dissatisfaction with corporate America (47.6 percent).
With 413,958 new business applications filed in March 2022, entrepreneurship is booming. If you, too, are starting your own business, you'll need to learn some key phrases and vocabulary words that you are likely to come across often. This article covers essential entrepreneurship vocabulary terms.
The takeover of one company by another by means of purchasing a controlling number of stock shares.
A financer who provides capital or financial support to startups or early-stage businesses in return for an ownership percentage.
A resource, owned by an individual or corporation, that holds economic value, Assets are controlled with the expectation that they will provide a future benefit, such as increasing a firm’s value or improving its operations.
Barrier to entry
An obstacle. Barriers to entry for entrepreneurs can range from high startup costs to regulatory hurdles.
A market that is an ideal target to sell a new product or service; the term is military in origin. What makes a chosen beachhead market ideal is the compatibility of available resources, the product or service, and the market conditions. Once goals are met at the first beachhead market, a startup can then find and expand to other beachhead markets.
The introduction of a ready product to a limited number of customers before releasing it to the general public. This is done to gather input on the product and make modifications before the product is released en masse. It is also a chance to refine the marketing and communication about the product.
Training camps designed to get entrepreneurs ahead in their start-up journeys. They target skill-building, understanding the startup world, and learning about business formation and strategy. Bootcamps can also help you refine your business idea, business plan, and financial needs and prospects.
A strategic roadmap document that details how a business will achieve its objectives. It provides direction to a business with its finances, operations, market research, and marketing.
The net amount of money that moves in and out of a business during a specific accounting period. It’s an indicator of a company's solvency; improving cash flow is key to maintaining a successful business model. Cash flow is a measure of liquidity.
Factors that enable a company to outperform its rivals. These factors vary from intellectual property to branding to cost structure.
An innovation mechanism that replaces outdated business practices with new, more profitable ones. It defines the dynamic nature of the modern economic system and comes in the form of disruptions. The digital revolution represents a recent example of creative destruction.
The practice of raising small amounts of capital from a number of individuals. This is usually done online through crowdfunding platforms like Kickstarter and GoFundMe.
Customer acquisition cost (CAC)
The cost incurred by a company to acquire a new customer.
The relationship between a company’s total debt and total equity being used to finance the company’s assets. Debt-to-equity ratio is a measure of a company’s financial leverage and health.
Major industry changes caused by the innovation of new products or services that decrease the use of conventional products and services.
A startup company with a valuation of $12 billion or more, net of venture funding.
The first group of people to start using a new product or new technology before the general population.
An acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. This metric is used to measure a company’s operational efficiency and profitability. EBITDA is a helpful indicator of a company’s health and valuation.
Economies of scale
Cost advantages that a firm experiences when it increases its level of output.
A business whose main focus is to operate sustainably and help the environment. This can be through efforts such as tackling climate change or developing better recycling technology. Also known as environmental entrepreneurship.
A concise and compelling proposal that outlines an idea for a particular product or service within 30-60 seconds. This pitch should ideally cover your business’s purpose, target customer base, and unique selling point (USP).
A positive bias garnered toward your firm, either by customers or investors. For business ventures in their funding stage, this may occur when a sizable investment is made in their company or when a highly regarded venture capitalist invests, encouraging other offers to follow largely based on the nature of the investment.
Hockey stick growth
A sudden and sharp increase in growth after an initial period of losses. For startups, this often occurs at the point when startup expenses shrink and revenues increase.
Organizations, programs, or spaces dedicated to assisting new startup ideas. Incubators help people create viable business plans and offer entrepreneurs all of the resources they need to grow their initiatives.
A self-employed person or organization who performs work for other firms as a nonemployee. When working with an independent contractor, the payer only controls the result of the work and not how it is done. This also means that independent contractors do not receive the benefits of an employee, such as retirement plans or insurance.
Initial public offering (IPO)
The process by which a private company first sells shares of stock to the public. This allows the company to be listed on the stock exchange and raise capital from participating public investors.
The ownership of the intangible assets of a company or individual. IP enables individuals and companies to protect inventions, creative work, names, and images in patents, copyright, and trademarks. Once legally protected, these assets cannot be used or implemented by others without consent.
An employee who acts as an organization's entrepreneur. This can refer to employees who pursue innovative products and services for their company and take the lead on such projects.
Key performance indicators (KPI)
Quantifiable measures that help determine how well businesses are performing. More specifically, they help determine a company’s strategic, financial, and operational achievements.
When a business strategically releases a new product or service into the public market, making it officially available for purchase.
Limited liability company (LLC)
A hybrid entity involving a strategic alliance that combines the characteristics of a corporation and a partnership or sole proprietorship. LLCs benefit from the flexible taxation of partnerships and sole proprietorships, but they maintain the limited liability status of corporations. This protects the business owners from personal responsibility for the company’s debts or liabilities.
A measure of the ease with which a company can pay off its short-term liabilities.
The difference between the revenue earned from a product and its costs. The higher the margin, the more profit is earned by a company.
Minimum viable product (MVP)
A product with the minimum set of features and value to be released to the public. This is a strategy to get early-adopter customers to provide feedback on the product early on in the product development cycle.
A simple and concise sentence that explains a company’s goals and functions.
The process of developing new contacts and maintaining a system of mutually beneficial connections for both parties.
The practice of a business contracting with a third party to perform certain job functions instead of having an in-house department or employee perform them. It is often undertaken as a cost-cutting measure.
When a company recalibrates and makes significant shifts in its business strategy based on innovation, customer preferences, or any other factor that has an impact on its bottom line.
The size of a business with regard to its operations, production costs, output, performance, and overall industry standing and market share. As a verb, "scale" refers to suitability to growth, e.g., "This process effectively serves 100 customers. Will it work when we have 100,000 customers? In other words: will it scale?"
Series A, B, and C funding
Series A and B refer to the first and second rounds of significant funding that a start-up receives, typically from a venture capital firm. Series C is the third round of funding, meant for established start-ups in the later stages of their growth.
A a young company founded by one or more entrepreneurs focused on developing a product or service for which they believe there is a demand.
An agreement between two parties that gives the buyer the right to buy or sell a stock at a predetermined price and before a certain date. An employee stock option is a form of equity compensation given by a company to an employee.
A privately-owned start-up that has reached a valuation of over $1 billion.
A company’s promise of value that communicates why buyers should choose their products or services.
Venture capital (VC)
Financing that potential investors provide to start-ups and small businesses with long-term growth potential.
The process by which a founder or employee earns company shares over time rather than having immediate equity in a company.
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