BBAY Vocab Terms

Entrepreneurship & Teamwork

Entrepreneur – a person who focuses on seeking out opportunities, taking action and

finding ways to solve other people’s problems in a profitable way.

Creative – lateral thinking, challenging assumptions, learning something new, learning

from observing others different from you, not accepting the typical way to solve a

problem, as the “only” way to solve it.

Innovation – the application of new solutions that meet new requirements, inarticulate

needs or existing market needs. This is accomplished through more effective products,

processes, services, technologies, or ideas that are readily available to markets and

society. Something original and new that "breaks into" the market or into society.

Free Enterprise – Business governed by the laws of supply and demand, not restrained

by government interference, regulation or subsidy (also called free market). Anyone

can start, own or sell a business

Role of an Entrepreneur in a free- enterprise economy – meet people’s needs, take

initiative, take advantage of opportunities, use scare resources efficiently and

profitably, create jobs for others.

Opportunity – not all ideas make good opportunities. Opportunities are those that

satisfy customers’ needs at an affordable and profitable price, good timing, and

sufficient resources/skills.

Opportunity Costs - What one has to give up in order to attain another product, job,

friend, etc.

Decision Making – Usually involves listing and comparing the costs and benefits of

each opinion before making a choice. Decision = Benefits – Costs. If benefits minus

costs is a positive number then the decision is probably a good one.

The Five Stages of a Team - Forming, Norming, Storming, Performing and Adjourning.

Social Loafer – a team member who is uncooperative and does not contribute to the

team

Business & Organization

Business - A business provides a product or service to consumers.

Start-up companies - entrepreneurs who have pooled their ideas and resources

together to form a business. Initially all monies,labor and time is provided by members

of the start-up company, their families, friends, etc.

Consumers – customers, people who purchase goods

Limited Partnership (LP) – The Limited partnership comprises general partners who

run the business and are exposed to personal liability and limited partners who invest

in the business and have only their invested capital at risk. Limited partnerships are

especially useful for raising capital since they permit investors to participate financially

in the business without incurring personal liability.

Limited Partnership (LLP) – the limited liability partnership is similar to a limited

partnership except that all partners in an LLPenjoy limited liability. Limited liability

partnerships are common among professionals such as attorneys and accountants

who are not allowed to use corporations to limit their liability. Limited liability

partnerships offer both the pass-through taxation of a partnership and the liability

protection of a corporation.

Corporation (‘C’ & ‘S’) – the corporation is the most common form of business entity

among larger companies. Unlike sole proprietorships and partnership, corporations are

separate and distinct from their owners in the eyes of the law. As a separate entity,

corporations have several distinguishing characteristics including limited liability, easy

transferability of shares and perpetual existence. Corporations also have centralized

management who may be different persons from the actual owners.

Uniform Commercial Code – Businesses are formed under state laws and are

governed by the Uniform Commercial Code (UCC), which made business laws similar

in all states. Before the UCC, businesses had to know and deal with the different laws

in all of the states in which they operated.

Intellectual Property - is protected in law by, for example, patents, copyright and

trademarks, which enable people to earn recognition or financial benefit from what

they invent or create.

Intellectual property refers to creations of the mind: inventions; literary and artistic

works; and symbols, names and images used in commerce. Intellectual property is

divided into two categories:

Industrial Property includes patents for inventions, trademarks, industrial designs and

geographical indications.

Copyright covers literary works (such as novels, poems and plays), films, music,

artistic works (e.g., drawings, paintings, photographs and sculptures) and architectural

design. Rights related to copyright include those of performing artists in their

performances, producers of phonograms on their recordings, and broadcasters in their

radio and television programs.

Brand - A brand is the identity of a specific product, service, or business from its

competition. A brand can take many forms, including a name, sign, symbol, or slogan.

The word brand began simply as a way to tell one person's cattle from another by

means of a hot iron stamp. A legally protected brand name is called a trademark. The

word brand has continued to evolve to encompass identity - in effect the personality of

a product, company or service.

Mission Statement - The mission statement should be a clear and succinct

representation of the enterprise's purpose for existence. It should incorporate socially

meaningful and measurable criteria addressing concepts such as the moral/ethical

position of the enterprise, public image, the target market, products/services, the

geographic domain and expectations of growth and profitability.

Logo – a distinctive company trademark or sign that symbolizes your business to

customers, i.e. The Nike “swoosh” and McDonalds “Golden Arches are examples of

logos.

Slogan - advertising slogans are short, often memorable phrases used in advertising

campaigns. They are claimed to be the most effective means of drawing attention to

one or more aspects of a product. Its purpose is to emphasize a phrase that the

company wishes to be remembered, particularly for marketing a specific corporate

image or connection to a product or consumer base.

Pitch - a brief letter almost never longer than one page, written to accompany press

releases, media advisories, venture capitalist or bank or a 30 second – 1 minute talk to

pique their interest in your business. They needn't tell the whole story. Rather, they are

"teasers" for the meat of your story angle or business.

Product & Services

Product – a tangible item produced/manufactured for consumer use.

Service – work offered for sale by a business, group or individual that benefits another.

Supply and Demand - The market price of a good is determined by both the supply

and demand for the product.

Supply is how much of something is available. For example, if you have 9 baseball

cards, then your supply of baseball cards is 9.

Demand is how much of something people want. It sounds a little bit harder to

measure, but it really isn't. To measure demand, we can use a very simple numbering

system, just like the supply one. If 8 people want baseball cards, then we can say that

the demand for baseball cards is 8.

R&D – An acronym used for the research and development of a product or service

Quality- bad, poor and superior are terms used to describe a product

Warranty – a term in which a product can be serviced free of charge by the

manufacturer/company.

Marketing & Sales

4Ps – (also referred to as the marketing mix) – Product, Place, Price and Promotion

● Product –Something tangible that is offered for sale by a business

● Place - the method for making your product available to the consumer.

● Promotion – the specific mix of advertising, personal selling, sales promotion,

and public relations a company uses to pursue its advertising and marketing

objectives.

● Price - Price is the amount of money charged for a product or service.

Target Segment - where your product or service fits into the marketplace

Consumers – customers, people who purchase goods or services B2B – Business to

Business B2C – Business to Consumer

Flyers – a form of promotion that is found on a bulletin board, poles, or handed out

Distribution channel – television, internet, supermarket, catalogs

Follow-up – a way of maintaining a client’s business

Money & Financing

Capital – Money used to finance a business

Working Capital – Bank loans used for day-to-day operations of a business

Long term Capital – Money used to purchase equipment, property, etc.

Venture Capitalist – A person or group that invests money in a business for shares of

stock or partial ownership

Financial Accounting

Interest – annual percentage charged to a business to borrow money from a bank

Bank Loan – Money borrowed from a bank to assist in the growth of a company

EOU – Economics of One Unit. One unit of the product or service a business sells.

Production/Manufacturing = one order

Service = one hour or block of time

Wholesale = dozen, gross, pallet

Retail = one unit or item

Revenue –money received from sales of the company’s product or service

Formula: Total Revenue – total COGS = Total Gross Profit

Expenses – Costs incurred by a business. (utilities, materials, salaries, etc.)

COGS (Cost of Goods Sold) - these are the costs of the materials used to make the

product (or deliver the service) plus the costs of labor used to make the product (or

deliver the service). A monthly income statement reports total COGS for a month.

Formula: COGS =Beginning inventory + Purchases – Ending Inventory

COGS (unit cost of goods sold) = cost of selling one additional unit

Fixed Costs - The cost of operating a business that do not vary with sales. The most

common fixed costs are utilities, salaries, advertising, insurance, interest, rent,

depreciation and others.

Variable Costs - A cost of labor, material or overhead that changes according to the

change in the volume of production units. They are expenses that change in proportion

to the activity of a business.

Gross Profit – Income before Expenses are subtracted. To calculate gross profit,

subtract COGS and other variable costs from revenue.

Formulas: Revenue- COGS = Gross Profit

Selling Price per Unit –COGS per Unit = Gross Profit per Unit

Total Revenue – total COGS = Total Gross Profit

Breakeven Analysis - is used to determine how much sales volume your business

needs to start making a profit. The breakeven analysis is especially useful when you're

developing a pricing strategy, either as part of a marketing plan or a business plan.

Formula: Fixed Costs divided by (Revenue per unit - Variable costs per unit)

Income Statement - also referred as profit and loss statement (P&L), earnings

statement, operating statement or statement of operations is a company's financial

statement that indicates how the revenue is transformed into the net income. It

displays the revenues recognized for a specific period, and the cost and expenses

charged against these revenues, including write-offs (e.g. depreciation and

amortization of various assets) and taxes. The purpose of the income statement is to

show managers

and investors whether the company made or lost money during the period being

reported.

Balance Sheet - or statement of financial position is a summary of the financial

balances of a sole proprietorship, a business partnership or a company. Assets,

liabilities and owners’ equity are listed as of a specific date, i.e. end of financial year. A

balance sheet is often described as a "snapshot of a company's financial condition".

the balance sheet is the only statement which applies to a single point in time of a

business' calendar year.

Cash forecast is a management tool which can eliminate much of the anxiety that, can

plague you if your business goes through lean months.

Financial Risk & Returns

Assets - The cash, inventory, property, plant and equipment, and other investments a

company has made.

Risk premium represents the additional return that investors expect to earn to

compensate them for a security’s risk.

Return - The difference between the selling price and purchasing price of an asset

plus any cash distributions expressed as a percentage of the buying price.

Risk Return trade off - Higher risk is associated with greater probability of higher

return and lower risk with a greater probability of smaller return. This trade off which

an investor faces between risk and return while considering investment decisions.

Concept of Risk - A person making an investment expects to get some returns from

the investment in the future. However, as the future is uncertain, the future expected

returns too are uncertain. It is the uncertainty associated with the returns from an

investment that introduces a risk into a project.

Credit risk— also known as default risk—is the danger associated with borrowing

money. Should the borrower become unable to repay the loan, they will default.

Investors affected by credit risk suffer from decreased income from loan repayments,

as well as lost principal and interest. Creditors may also experience a rise in costs for

collection of the debt.

Principal - The original amount you saved.

Compound Period - How often interest earned gets added to the principal amount. The

more often interest is compounded the more you earn.

APR/APY (Annual Percentage Rate) - The amount of interest you earn over a year

taking-into -account the effect of compounding.

Present Value of an investment (PV) - The value of a cost or benefit computed in

terms of cash today. Sometimes we care about the value of an investment in today’s

dollars.

Future value of an investment - The value of a cash flow that is moved forward in

time. Sometimes we care about the value of an account in future dollars.

Net present value (NPV) - The difference between the present value of a project’s or

investment’s benefits and the present value of its costs.

A Portfolio: is a way of valuing the returns of many securities.

● Most portfolios hold more than one security

● Some securities will do well, but others might do poorly

Discounting - The process of converting a cash flow to its present value.

Compounding - The process of converting a cash flow to its future value, taking into

account the fact that interest is earned on prior interest payments.

Annuity - A stream of equal periodic cash flows over a specified time period. These

cash flows can be inflows of returns earned on investments or outflows of funds

invested to earn future returns.

Perpetuity - A stream of equal cash flows that occurs at regular intervals and lasts

forever.

Opportunity costs - The best available expected return offered in the market on an

investment of comparable risk and term to the cash flow being discounted; the return

the investor forgoes on an alternative investment of equivalent riskiness and term

when the investor takes on a new investment.

Dividend payments - Payments made at the discretion of the corporation to its equity

holders.

Stock - The ownership or equity of a corporation divided into shares.

Business Model Canvas

A Business Model Canvas is a tool that helps designers map out a business or

product's key elements. It can be used to outline the fundamental building blocks of a

business or for individual products. The Business Model Canvas can help identify

requirements to deliver a service and test a business model against the market.

There are 9 areas on the canvas: Key Partners, Key Activities, Key Resources, Value

Proposition, Customer Segment, Channels, Customer Relationship, Cost Structures and

Revenue Streams. The name of each and description is given in bold below.

Key Partners: In order to optimize operations and reduce risks of a business model,

organizations usually cultivate buyer-supplier relationships so they can focus on their

core activity. Strategic alliances can be between competitors or non-competitors.

Key Activities: The most important activities in executing a company's value

proposition. For example, production, marketing, training, management, etc.

Key Resources: The resources that are necessary to create value for the customer.

They are considered assets to a company that are needed to sustain and support the

business. These resources could be human, financial, physical and intellectual.

Value Proposition: the collection of products and services a business offers to meet

the needs of its customers. The value propositions may be quantitative – price and

efficiency or qualitative – overall customer experience and outcome.

Customer Segments: To build an effective business model, a company must identify

which customers it tries to serve. Various sets of customers can be segmented based

on their different needs and attributes to ensure appropriate implementation of

corporate strategy to meet the characteristics of selected groups of clients. The

different types of customer segments include:

● Mass Market: There is no specific segmentation for a company that follows

the Mass Market element as the organization displays a wide view of

potential clients.

● Niche Market: Customer segmentation based on specialized needs and

characteristics of its clients.

● Segmented: A company applies additional segmentation within an existing

customer segment. In the segmented situation, the business may further

distinguish its clients based on gender, age, and/or income.

● Diversified: A business serves multiple customer segments with different

needs and characteristics.

● Multi-Sided Platform / Market: For a smooth day-to-day business operation,

some companies will serve mutually dependent customer segments. A credit

card company will provide services to credit card holders while

simultaneously assisting merchants who accept those credit cards.

Channels: A company can deliver its value proposition to its targeted customers

through different channels. An organization can reach its clients through its own

channels (store front), partner channels (major distributors), or a combination of both.

Customer Relationships: To ensure the survival and success of any businesses,

companies must identify the type of relationship they want to create with their

customer segments. There are 3 elements to address: How the business will get new

customers, how the business will keep customers purchasing or using its services and

how the business will grow its revenue from its current customers.

Cost Structure: This describes the most important monetary consequences while

operating under different business models.

Classes of Business Structures:

● Cost-Driven – This business model focuses on minimizing all costs and

having no frills.

● Value-Driven – Less concerned with cost, this business model focuses on

creating value for products and services.

Characteristics of Cost Structures:

● Fixed Costs – Costs are unchanged across different applications.

● Variable Costs – Costs vary depending on the amount of production of goods

or services.

● Economies of Scale – Costs go down as the amount of goods are ordered or

produced.

● Economies of Scope – Costs go down due to incorporating other businesses

which have a direct relation to the original product.

Revenue Streams: The way a company makes income from each customer segment.

Several ways to generate a revenue stream:

● Asset Sale – Selling ownership rights to a physical good.

● Usage Fee – Money generated from the use of a particular service.

● Subscription Fees – Revenue generated by selling access to a continuous

service.

● Lending/Leasing/Renting – Giving exclusive right to an asset for a particular

period of time.

● Licensing – Revenue generated from charging for the use of a protected

intellectual property.

● Brokerage Fees – Revenue generated from an intermediate service between

two parties.

● Advertising – Revenue generated from charging fees for product advertising.