Money In & Out
- Revenue
- All the money a business earns from selling what it sells, before anything is taken away. The top line.
- Cost
- Money a business spends to operate and to make what it sells. Some costs change with sales; some don't.
- Profit
- What is left when all costs are taken away from revenue. The bottom line. Negative profit is a loss.
- Margin
- Profit shown as a percentage of revenue. Also the gap between price and cost on a single sale.
- Cash flow
- The actual money moving into and out of the business over a period. A company runs out of cash, not profit.
- EBITDA
- Earnings before interest, taxes, depreciation and amortization. Profit with some costs left out, to compare how operations perform.
- Break-even
- The point where revenue exactly covers costs: no profit, no loss. Below it you lose money, above it you make it.
- Burn rate
- How fast a loss-making company spends its cash, usually per month. Divide cash left by burn to get the runway.
Financial Statements
- Income statement
- The report that shows revenue, costs, and profit over a period. Also called the profit and loss (P&L).
- Balance sheet
- A snapshot of what a business owns, what it owes, and what's left for the owners, on a single date.
- Cash flow statement
- The report that shows where cash came from and where it went over a period, split into operations, investing, and financing.
- Asset
- Anything a business owns that has value: cash, equipment, inventory, money customers owe it, even patents.
- Liability
- Anything a business owes to someone else: loans, unpaid supplier bills, wages due, taxes due.
- Accrual
- Recording revenue when it's earned and costs when they're incurred, not when cash changes hands.
- Depreciation
- Spreading the cost of a long-lasting asset across the years it's used, rather than counting it all at once.
- Working capital
- Current assets minus current liabilities. The short-term cushion a business has to pay its bills.
Ownership & Funding
- Shareholder
- A person or organization that owns part of a company through its shares. Also called a stockholder.
- Equity
- Ownership of a company. Also the balance-sheet value left for owners once all debts are paid.
- Valuation
- What a company is estimated to be worth. For startups, set by what investors pay for a share of it.
- Dilution
- When a company issues new shares, each existing owner's percentage goes down, even though their number of shares stays the same.
- Debt
- Money borrowed that must be paid back, usually with interest. Doesn't give the lender any ownership.
- Venture capital
- Investment funds that buy equity in young, risky, fast-growing companies, hoping a few become huge.
- IPO
- Initial public offering. When a private company first sells shares on a public stock exchange.
- Dividend
- A share of a company's profit paid out in cash to its shareholders.
Strategy & Markets
- Business model
- How a business makes money: who pays, for what, how much, and how often.
- Value proposition
- The specific reason a customer should choose you: what problem you solve, for whom, better than the alternatives.
- Market share
- The percentage of all sales in a market that one company captures.
- Competitive advantage
- Something that lets a business beat its rivals in a way that's hard to copy. Also called a moat.
- TAM
- Total addressable market: the total revenue available if you sold to every possible customer. The ceiling on size.
- B2B and B2C
- Business-to-business vs business-to-consumer: whether your customers are companies or individual people.
- Economies of scale
- When making more of something lowers the cost of each unit. Bigger can mean cheaper.
- Product-market fit
- When a product satisfies a real market so well that customers keep buying and telling others, with little pushing.
Sales & Marketing
- Lead
- A potential customer who has shown some interest, such as signing up or making contact, but hasn't bought yet.
- Funnel
- The stages a person moves through from first hearing about you to buying, with fewer people at each step.
- Conversion rate
- The percentage of people who take a desired next step, such as visitors who sign up or trials that pay.
- CAC
- Customer acquisition cost: how much you spend on sales and marketing to win one new customer.
- LTV
- Lifetime value: the total profit you expect from one customer over the whole time they stay with you.
- Churn
- The rate at which customers stop buying or cancel over a period. The leak in the bucket.
- Pricing
- Deciding what to charge and how: the amount, the structure, and what each price includes.
- Brand
- What people think and feel about a company, beyond the product itself: its reputation and identity.
Operations
- Supply chain
- Every step and company involved in getting a product from raw materials to the customer.
- Inventory
- Goods a business holds to sell or to make things with: raw materials, work in progress, and finished products.
- Lead time
- How long it takes from starting a process to finishing it — for example, from placing an order to receiving it.
- KPI
- Key performance indicator: one of the few numbers a team watches to judge whether it is succeeding.
- OKR
- Objectives and key results: a goal-setting method pairing an ambitious aim with a few measurable results.
- Bottleneck
- The single slowest step in a process, which limits how fast the whole process can go.
- Outsourcing
- Paying another company to do work you could do in-house, like manufacturing, support, or payroll.
- SLA
- Service level agreement: a written promise about the level of service a provider will deliver, with consequences if it misses.
People & Decisions
- Stakeholder
- Anyone affected by, or with influence over, a business or a decision: owners, staff, customers, suppliers, and more.
- Budget
- A plan for how much money will be earned and spent over a period, used to set limits and priorities.
- Forecast
- A prediction of future results — like revenue, costs, or cash — based on data and assumptions, updated as things change.
- Headcount
- The number of people a company employs. Also each approved position in the plan.
- P&L owner
- The manager accountable for a business unit's revenue, costs, and profit — its own profit and loss.
- ROI
- Return on investment: how much you gain from spending money on something, compared to what it cost.
- Opportunity cost
- The value of the best alternative you give up when you choose one option over another.
- Sunk cost
- Money or effort already spent that can't be recovered, and so shouldn't affect what you decide next.