A founder's glossary
A short answer, the formula and an example from a real check for every word you will meet in a report, a concept or a business plan.
We have no such term yet. Check your idea: the report explains every term on your own numbers.
A
- Angel investora person who puts their own money into an early-stage startup
- Average order valuewhat a customer pays for one purchase
B
- Brand bookthe rules for how a brand looks and sounds
- Break-even pointthe sales at which income covers every cost
- Business conceptwho you sell to, what and at what price, on one page
- Business planthe document that shows how an idea turns into money
- Business risksevents that can stop a project
C
- CACwhat one paying customer costs to win
- Conversion ratethe share of visitors who take the action you want
- Customer acquisition costwhat you spend to win one new customer
- Customer interviewstalks with customers about how they solve the job today
- Customer pain pointswhat annoys customers, in the words of their reviews
D
- Demand and seasonalityhow often people search and in which months more
- Direct and indirect competitorsthose who sell the same thing, and those who solve the job another way
F
- Financial modela forecast of income, costs and payback by month
- Franchiserunning a business under someone else's brand and model
H
- Hypothesisan assumption a number can confirm or refute
I
- Idea validationproof that people need an idea, before you invest
- Ideal customer profile (ICP)who exactly buys, and in what situation
J
- JTBDthe job a customer hires a product to do
L
- Landing pageone page for one offer
- LTVthe money a customer brings over their whole lifetime
- LTV/CACwhether acquisition pays: a healthy ratio starts at 3
M
- Marginthe part of a price left after the direct costs
- Market researchgathering data on a market, its customers and its competitors
- Market segmentationsplitting customers into groups with different jobs
- Market sharethe part of a market's money that comes to you
- Market sizehow much buyers spend on a product in a year
- MVPthe simplest version of a product that tests demand
N
- Namingfinding a name and checking that it is free
O
- Offera concrete proposal: what, for how much and why now
P
- Payback periodthe months until an investment comes back
- PESTpolitics, economy, society and technology around a project
- Pitch decka short presentation of a project for an investor
- Positioningthe place a product takes in a customer's mind
- Price rangefrom the lowest to the highest price in a niche
R
- Roadmapthe plan of a project's steps by week or month
S
- Startupa new project still looking for a model that works
- SWOTstrengths, weaknesses, opportunities, threats
T
- TAM, SAM, SOMthree levels of a market: total, serviceable, obtainable
- Target audiencethe people who need a product most
- Targeted advertisingads shown by an audience's interests and traits
U
- Unit economicswhether you make money on one customer
- USPwhat sets you apart in a way the customer cares about
V
- Value propositionthe benefit a customer gets, and why from you
Questions
What is the marketing mix in business?
The marketing mix is the set of decisions you make about your product, its price, the place where you sell it and how you promote it. For a new business, start by defining your target market and your unique selling proposition. An idea check then shows how your price compares with what existing players charge.
What does capital mean for a small business?
Capital is the money and assets you use to start and run the business, such as savings, loans, investor money and equipment. Choose bootstrapping, funding growth from your own revenue, if your start costs are low and customers pay early; consider venture capital, selling a share of the company to investors, if the business needs heavy spending long before it earns revenue.
What is the difference between working capital and cash flow?
Working capital is a snapshot: current assets minus current liabilities, read from your balance sheet on a given day. Cash flow is the movement of money in and out over a period, such as a month.
Which business terms should I know before writing a business plan?
Learn target market, business model, break-even point, cash flow and gross margin first, since lenders and investors ask about each of them. The SWOT entry gives you a simple frame for the risks section. Our guide on how to start a business walks through where each term appears in the plan.
How do fixed and variable costs change my break-even point?
Fixed costs, such as rent, stay the same however much you sell, and variable costs, such as materials, rise with every unit. Your break-even point is fixed costs divided by the price minus the variable cost per unit. You can test different prices and costs in the unit economics calculator before you commit to a lease or an order.
Is gross margin the same as return on investment?
No. Gross margin is revenue minus the direct cost of the goods sold, shown as a share of revenue, and it tells you how much each sale leaves to cover overhead. Return on investment compares the profit from a specific outlay, such as new equipment or an ad campaign, with what that outlay cost.
The terms, on your own numbers
In the check's report every concept is worked out for your idea: market size, demand, LTV, CAC and the payback period.