As a start-up and a founder, you’ll hear a lot of jargon in various rooms, programmes, online, and so much more. This can get confusing pretty quickly, but it doesn’t need to be hard to understand. With a few pieces of knowledge, a conversation that sounds complicated can become much more accessible. So, to help our community learn about this space, we’ve explained some common jargon, split up based on what area of business or the ecosystem that it relates to.
Thanks to some of our partners for contributing.
Brand: Much more than your business name, logo, typeface or colours. Your brand is the experience customers have when engaging with your business and the perception this leaves.
Branding: The name, symbol, design or appearance that differentiates your product, service or business from others.
Business plan: Concise document that describes your business, its market, aims and strategy.
Cap table: is a capitalisation table which outlines the company’s shareholders’ equity. Usually, in spreadsheet form, it details the ownership of equity in forms such as common equity shares, preferred equity shares, warrants, and convertible equity. It's commonly used to keep shareholders updated about equity distribution and is also used when issuing new shares to a shareholder.
Churn rate/ attrition rate: the rate at which a company loses customers over a specific period of time. To calculate your churn rate, you take the number of customers you lost in a specific period and divide it by the total number of customers you had at the beginning of the same period. Take this number and turn it into a percentage and you have your churn rate.
Competitors: Other businesses within your market that compete with you for sales. To be successful, you must be able to set your business apart from your competitors.
Elevator Pitch: A 30-second overview/highlight of your business, meant to hook someone into what you’re doing, so that they're interested in learning more and so they know about what you do in a short space of time.
Entrepreneur: An innovative person who takes personal risk to set up a business or businesses. They notice a gap in a market or a need that a certain group of people have, and want to bridge that gap and serve that target user. Ideally, they aren’t just driven by wanting to work for themselves.
Executive summary: Appears at the front of your business plan and highlights its key points, enabling people to speed-read your business plan.
Franchising: Selling licenses to franchisees who can then sell your products or services using your brand, processes and other intellectual property. Becoming a franchisee might enable you to run your own business.
Incorporation: The legal process of forming a company, which is a separate legal entity to its owners, meaning there's unlikely to be any personal financial liability should the business fail.
Intellectual property: Creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, images, music, etc. All businesses have IP which can be protected.
KPI (Key performance indicators): These can help you measure how your business is performing in particular areas, so that you can improve. Examples include monthly sales, new customers, net profit, customer retention rate, etc.
LTV (Life time value): is the estimated amount of revenue a customer will generate during their time using your product or services. To calculate this, you need to understand the average amount of revenue a customer generates in a specific period of time (often annually) multiplied by the average customer lifespan. An early-stage startup may not have the data to know their customer lifespan exactly, but you can make a robust assumption considering the length of your contracts or the number of repeat purchases your customers make.
Market: The place where goods are bought and sold. They can be physical or virtual; they can refer to a geographic location or type of customer, etc.
Market research: Essential work that enables you to gain a better understanding of your customers and competitors, so you can make your products and services more appealing.
Niche market: A smaller, more defined market segment. Niche marketing involves targeting a specific segment. Niche market products are usually more specialised.
Seasonal business: A business that only runs for part of the year rather than throughout. For example, in the summer only.
Sector: Part of the economy in which businesses share the same or related products or services.
Segment: A group of customers or buyers who share common characteristics, tastes, habits, wants and needs. 'Segmentation' means splitting a larger market into different groups.
Self-employed: Someone who works for themselves, also known as a sole trader (see below). They pay tax on their business profits, not personal earnings, but are personally liable for business debts.
Shares: A business is an entity that has ownership by people. That ownership is expressed in a percentage, which theoretically represents the percentage of any responsibility, and also profits, that someone has in that business. A “share” is a bit like a unit of measurement, certifying that someone owns that amount of the business. The more shares you have, the more of the business you own.
Small business: A business with up to 50 employees and/or a turnover of up to £10m a year.
SME: Small and medium-sized enterprise – a term that is really only useful when distinguishing large businesses from all others. A medium-sized business has fewer than 250 employees and a turnover of up to £50m.
Social entrepreneur: A social entrepreneur is someone who sets up their business with social good/responsibility in mind, with aims, a mission, and a vision that are at core to make something in the world better for people. These can, and should, still be profitable organisations, but are set up to use that to give back.
Start-up: A newly established business. Usually, this refers to a tech business (not just any kind of business), aiming to develop something new and innovative.
Strategy: A plan of action designed to achieve a long-term or overall aim. A business' strategy and objectives should be explained within its business plan.
SWOT analysis: Essential to any sound business plan. Doing a SWOT analysis enables you to identify your business' strengths and the opportunities these offer, as well as your weaknesses and the threats these pose. Stands for “Strengths, Weaknesses, Opportunities, and Threats”. Usually communicate as a quadrant/table.
Target market: A specific group of consumers or customers at whom a business specifically aims its products and services.
Term sheet: is a document outlining the basic terms and conditions of an investment. It's non-binding and used to agree the details of the terms and conditions before drawing up the final investment contract.
Traction: Showing that you are getting somewhere with the business. Ideally, this means having customers, interested parties, expressions of interest, interest from investors, or anything else to show that you’re starting to make an impact.
Unique selling proposition (USP): The thing that sets your business apart from its competitors and gives customers a compelling reason to buy from you.
Angel investor: A wealthy, successful person who invests in start-ups and high-growth companies for a share in the business. Visit the UK Business Angels Association website to find out more.
Crowdfunding: An alternative way of funding a project or venture by raising small amounts from many people, typically online.
Pre-Seed: Connotes a stage of development. If you are “raising pre-seed”, then you’re raising investment. This is the earliest round of funding you raise, usually to validate the concept and get the initial steps of development out of the way.Can also test propositions and demand, and is usually used a lot for operations as opposed to allocating large marketing budgets (though marketing is still important!). This can be raised through investment, family and friends, loans, crowdfunding, and more. This is the most common round to raise through non-investment means, such as friends and family.
Seed: The next, most common round of funding to raise after pre-seed. Raising this usually means that your start-up has some traction and you need to start to build the final product, build the audience, and start to expand the initial team. This is an important step for long-term development of your start-up. Usually, investors take equity proportional to the amount of investment they give you, in accordance with your valuation.
Series A +: Each round you raise at this point is a Series, usually the next one in the alphabet. For example, Series B after A, then Series C, then D, etc until you stop raising investment rounds. At this point (usually by Series B), you’re considered at the “growth stage” of business, as opposed to “start-up”.
Venture Capital and Venture Capitalists (VC): Venture capital is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth. A VC (venture capitalist) usually manages a fund at a VC Firm, which invests money on behalf of the company or high net worth individuals. They will usually negotiate for a percentage of equity in your business.
Business Operations - Marketing
Channel: How products or services reach a market. Examples include online, offline, exporting, selling directly to customers or indirectly via an agent, wholesaler or distributor.
Marketing: The process by which products and services are conceived, developed, readied for market, promoted and distributed/delivered.
Marketing mix: Refers to four key areas of marketing – product, price, promotion and place – all key considerations in how you speak to / market to a customer.
Marketing plan: Details your marketing objectives and strategy, while also providing a way to measure your success so you can get better.
BD (Business Development): Generally a “BD” person is someone who creates new business for the company. In other words, a sales person. Could connote any new business, such as gaining new customers through advertising.
Business Operations - Finances
Bookkeeping: Recording details of your sales and costs. By law you must maintain accurate financial records, but understanding your income, costs and cash flow can also help you to manage your business more effectively.
Bottom line: The last line in a business' accounts or spreadsheet that shows total profit or loss. Many factors – chiefly costs – affect the bottom line.
Breakeven: The amount your business must make in sales to cover your costs before you generate a profit.
Budgeting: Creating a plan for how your business will spend money. Sound budgeting can help you to control your business finances.
Burn rate: the rate at which a company spends its capital. It's also known as negative cash flow. This is usually communicated in a figure per month.
Cash flow: The relationship between cash entering and leaving your business. Enough cash must enter your business so you can pay your bills on demand.
Credit control: The system that helps to ensure that credit is only given to customers who are able to pay, and that they pay on time.
Forecast: Using historical data or information to predict the future. So, previous annual sales figures might be used to forecast this year's sales or used with cost data to forecast cash flow.
Gross profit: Turnover (total sales/income) minus cost of sales and direct costs. Gross profit percentage = gross profit/turnover x 100.
Invoice: A bill for goods or services that you send to customers for payment. Invoices must include certain details including what's been supplied, price and VAT, if charged.
Margin: The difference between sale price and cost of bringing a product or service to market. Gross profit margin is gross profit expressed as a percentage (ie gross profit/sales revenue x 100).
Net profit: Gross Profit minus indirect costs and expenses. Net profit percentage = net profit/turnover x 100.
Overheads: Day-to-day running costs, such as rent, rates, etc. Sometimes they're called fixed costs, because they aren't affected by how many products you make or sell. Variable costs increase when you make or sell more.
Turnover: Total value of sales made by a business in a particular period (usually a year).
Working capital The cash your business needs to trade day to day and stay afloat (ie "your current assets minus your current liabilities").
Business Operations - People/Staff
Employment contract: Explains the legal terms and conditions for employees and workers. If you don't provide an employment contract, you must at least provide a written statement of employment on or before the first day of work.
Memorandum of Understanding: A memorandum of understanding is a type of agreement between two or more parties. It expresses a convergence of will between the parties, indicating an intended common line of action. They aren’t always legally binding and are a good type of agreement to start certain relationships with.
Mentor: Usually an experienced businessperson who provides advice, guidance and support to help you start and grow your business.
National Living Wage (NLW): UK ONLY - Available to those aged 23 and over, the National Living Wage is the minimum hourly pay almost all workers are entitled to. Not paying the NLW or NMW is a criminal offence.
Cloud computing: Using remote servers hosted online to access, store and manage data. Businesses use 'the cloud' to manage their accounts, access customer relationship management data or for project collaboration. Often it's used simply to share files or store data safely.
Note - This is a live document, so we will update this piece with new Jargon over time.
Thanks to our partners who have contributed so far: Forward Partners, and more coming soon…
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