Glossary for Entrepreneurs and Micro-enterprises

If You are Going Walk the Walk then Talk the Talk

The Entrepreneur’s Advisor™ is happy to provide a glossary of terms most frequently used to describe the world of small business and micro-enterprises. The definitions below will be helpful to anyone wanting to understand how the small business world works.

New terms will be added regularly and if you see a term missing please contact us and let us know.

Glossary of Relevant Terms for Entrepreneurs and Micro-enterprises

Glossary of Relevant Terms for Entrepreneurs and Micro-enterprises

Blog

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A blog is a term used to describe a particular type of website. A blog may be part of a website or may be the website itself. An increasingly popular method of setting up a blog is to use a free blog theme hosted by an open source site such as WordPress. Blogs may be used for any purpose (personal, advertising, corporate, spin doctoring).
Burn Rate

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The Burn Rate for a company is the speed per month at which your start-up capital (cash) is being used up before you are able to have positive cash flow. The Burn Rate includes everything that you will outlay money for (wages, marketing, utilities, supplies, licensing, professional fees, computers etc…).
Business Accelerator

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A Business Accelerator is very similar to an incubator but differs in that they usually have a greater focus on companies entering or growing in a national or global market. Business accelerators are more likely to be financed by venture capitalist looking for an opportunity to finance growth potential through defined action plans.
Business accelerators will generally offer all of the services offered by a business incubator. The key difference is the level of hands on involvement.
Business Incubator

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The definition of a Business Incubator can be described as a set of programs set up by a government, business alliance or academic group though a variety of services/training. The intent is to help small companies in the incubator have abetter chance of survival through the start-up phase. Services may include but not limited to:

  • Office space: Usually at a reduced rate.
  • Office services: Receptionist, conference rooms, computers, office equipment etc.
  • Entrepreneurial advice and mentoring: Entrepreneur advisor services can range from establishing a web presence to identifying IP licensing opportunities to raising capital.
  • Business planning and market adjustment consulting: Business plans are dynamic and constantly need to be adjusted to fit the market.
  • Contacts and Networking: The biggest advantage of a business incubator is its access to experienced entrepreneurs, innovators and professionals who can answer questions, provide guidance and resources.
Business Plan
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A business plan is defined for entrepreneurs and micro-enterprises as a method for thinking through your idea. A business plan will answer and identify the Who, What, Why, How, When and Where, enabling you to create a road map for your success. Business plans come in three major forms:
  • Simple – Detailed road map – not normally used to raise capital and should be done by entrepreneur.
  • Complex – may include detailed financials, competitive and market analysis, intellectual property evaluation, identification of the need being addressed, summary and road show components – used to help raise capital – normally requires professional assistance.
  • True – a dynamic and flexible planning tool that includes all of the components listed above but is constantly updated, maintained and used for making action plans and annual or 5 year plans.
Cash Flow

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Cash flow is defined as the rate of monies coming in and out of the business. The ability to manage your cash flow is critical to the success of a business. Sales and other revenues are only considered cash once the money has been deposit and cleared by your bank. Positive cash flow means more money is coming in than going out. Initially a negative cash flow should be expected for most new venturesa and entrpreneurs should take this into account when planning.
Change Management

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Change management for entrepreneurs and micro-enterprises is a term we are using to describe the need for flexibility and innovation management. It can be defined in this context as the ability to adjust to changing conditions to continue on the path to business fruition. Change management should be part of the culture of the company to try new ideas and discard ideas that are not working.

“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”

Source: Thomas Edison Quotes from Brainyquote.com

The three major components of change management for any size organization are:

  • Analysis – due diligence to determine the pain being addressed, who will participate, achieving buy-in.
  • Implementation – has two components, initial and action. Initial includes: Set up of tasks, determine the personnel to be involved, set up benchmarks, process flow, work flow analysis (before), outline change process (staged roll out or all at once), Gant charts, identify forms and procedures to be converted. Action includes: restructuring, systems set up, conversion processes, training, issue resolution, install tracking mechanisms (benchmarks), and procedures staffing.
  • Follow up – a poorly planned or executed follow-up is a recipe for failed conversion. Follow-up is like preventative maintenance in that if you don’t do it your change will not last or be utilized correctly.
Client Retention

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Client retention is defined as practices that businesses engage in to retain their customer base after the sale has been made.

“Poor customer service is the number one reason customers do not return to make additional purchases. Implementing client retention programs will not only lower your loss client ratio but also increase your long term revenues.”

Source:Stuart W. Smith

Copyrights

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A copyright is an exclusionary right that conveys the right to prevent others from copying, selling, performing, displaying or making derivative versions of a work of authorship. A copyright is normally for 70 years.
DBA

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DBA is an abbreviation for Doing Business As

that refers to the trade name used by the company to conduct or promote business. For example, ABC Company DBA as Joe’s Garage.

Entrepreneur

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An entrepreneur is a person who recognizes opportunity, sets forth a plan of action and then acts upon the plan taking responsibility for its outcome. Being an entrepreneur is a mindset or a personality as it describes a person who is willing to create value or take a new direction. Although being an entrepreneur is most commonly associated with people who start a new venture, the term also refers to anyone who recognizes and pursues an opportunity within an ongoing business either on a small or corporate scale.
Entrepreneur Advisor

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A person or organization with the experience base and educational knowledge necessary to guide an entrepreneur from concept through business fruition. The more technical the venture, the more important education becomes especially with regards to intellectual property.
Fraudulent Advisor

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A person or organization that willfully seeks to take advantage of an inexperienced entrepreneur or micro-enterprise owner. There are two types of fraudulent advisors:
  1. People or organizations only looking out for their own best interest and not the entreprenuer’s best interest. They can easily identified because they want you to purchase something from them first. There is a very fine line between a fraudulent advisor and an unqualified advisor. The difference is the intent to defraud you. See Unqualified Advisor. Examples include but are not limited to people or organizations that:
    • Charge fees for information that can be obtained freely
    • Charge you up front fees for advice
    • Sell you services you don’t need
  2. Scam artists – people or organizations offering products or services that are not deliverable or do not work. Examples include bu are not limited to:
    • instant success
    • get rich quick schemes
    • Guaranteed success (fund raising, internet traffic, sales etc.)
Intellectual Capital

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Sum of all knowledge in an enterprise. Intellectual Capital is the sum of Intellectual Assets and Intellectual Property.
Intellectual Assets

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The knowledge, experience and skills that have been obtained, preserved, catalogued and made available for sharing.
IP

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IP is an abbreviation for Intellectual Property

See Intellectual Property

Intellectual Property

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Intellectual assets that have been legally protected. Intellectual Property is often referred to as IP. Types of Intellectual Property include:
  • Patents
  • Trade Secrets
  • Know-how
  • Trademarks
  • Copyrights
Lost Client Ratio

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The Lost Client Ratio for an organization is defined as the percentage of clients that stop buying your products or services.
For example: Number of clients at begginning of year/Number of clients who have left = loss client ration.
Controllable losses – losses not attributable to clients going out of business, relocating or otherwise unable to purchase.
Non-controllable losses – clients who leave as result of price, customer service issues, competition and other non-going out of business issues.
Mentor

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Is defined as a person who is; willing to be a sounding board for your ideas and issues, provide guidance, teach or direct you to the needed resources and is willing to tell you what you need to hear and not what you want to hear. Mentors are often found or placed on a Board of Advisors or Board of Directors.
Micro-enterprise

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Is a term used to describe very small businesses that have less than 5 employees and annual revenues under $250,000. This term is frequently used to describe home and farm based businesses or businesses with no employees other than the owner. In some Countries, States and Provinces micro-enterprises make up the vast majority of the workforce. The term can also be used to describe a new venture in its early formation such as a new technology company that is just forming or only in a research and development stage.
Outsourcing

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Outsourcing is the assigning of non-core functions of your business to an outside party in order for you to have more time to concentrate on your main (core) business functions. Typical outsourced functions for a small business include, payroll, legal, sales, marketing, computer services and himan resources.
Patents

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Conveys the right to the owner (not necessarily the inventor) the right to prevent others from making, selling, using, offering for sale or importing the patented invention. There there are four types of patents, 1)Utility, 2)Design, 3)Plant, 4)Animal.
Reserve Study

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A Reserve Study is a report that details the assets, asset life and funds needed to cover major repairs/replacement of common area items.

“A reserve study is a budgeting guide which provides a detailed inventory of all the common element components with (usually) 2-30 year useful lives that will need to be repaired or replaced. The reserve study determines the remaining life of each item, the cost to repair or replace it and calculates the annual contribution required to adequately fund each item. If an adequate funding plan is followed, special assessments will be unnecessary.”

Ernest Lahti writing for APRA Newsletter Sept-Oct 2009

Sales Metrics

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Sales metrics are the variables used to define how you will achieve your sales projections. This includes; knowing how many sales people or web site visits it will take to generate a qualified lead, how many leads it takes to generate a sale or client, cost per sale and the length of the sales cycle. Sales metrics are the cornerstone of the sales and marketing functions for new ventures.
Scam

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An act of deception or fraud intent on obtaining money, products or services for free from the unwitting victim.
SEO

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SEO is an abbreviation for Search Engine Optimization

See Search Engine Optimization

Search Engine Optimization

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Describes the methods used to obtain a higher page ranking when a search term in a search engine is used. The theory is the higher the website appears on a page listing the more visitors it will attract.

“Search engine optimization (SEO) is the process of improving the volume or quality of traffic to a web site from search engines via “natural” or un-paid (“organic” or “algorithmic”) search results as opposed to search engine marketing which deals with paid inclusion. ”

Source:Wikipedia

Social Media

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Social Media is defined as the Internet websites that allow people or businesses to share information with each other. Social media websites are used to develop personal contacts, develop links, gain exposure and to promote your product or service. Social media websites may contain personal or business profiles, record shared documents, videos, pictures or articles as well as provide an outlet for the latest news or opinions.
Strategic Planning

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A tool used in the process of determining how to achieve the companies long term goals.

“The process of determining a company’s long-term goals and then identifying the best approach for achieving those goals.”

Source:InvestorWords.com

Start Up

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A Start Up is defined as a new business that has yet to achieve a sustainable positive cash flow or has been in operation for a limited period of time.
Start Up Capital

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Start Up Capital is the amount of cash that is needed for the new business to go from conception to production. It is sometimes referred to as seed money.
Trademarks

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A word, symbol or combination of word and symbol used to identify the source of goods. Registration (Federal or State) is not required.
Turnaround

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A turnaround is defined as a business or business unit that is struggling or on the verge of failing that has engaged in substantial re-engineering or redesign to correct the problems.
Unqualified Advisor

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A person or organization that lacks the experience base and educational knowledge necessary to guide a business from concept through fruition. Unqualified advisors may have only specific or niche knowledge (such as marketing or legal) and offer advice beyond there scope of their skills. For entrepreneurs, unqualified advisors also includes people or organizations with limited personal start up experience (less than 3 businesses) and have no history of failure.
Work Flow

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Work flow is defined as the business process itself from initial sales to operations to fulfillment. Work flow at it’s basic level is the same for all organizations in that work comes in (sales), work is processed (operations) and work is completed (fulfillment). The complexity of the work flow is dependent on the organization. Understanding the details of work flow is crucial to the success of a business.