If you’re starting a new company, there are several standard business terms you’ll hear often. Those who don’t have a business background may not be familiar with some, but be sure you understand what they mean to increase your chances of success. Below are some essential business terms
Simply put, the US Small Business Administration explains that a business plan is a road map that explains your company’s purpose, what you expect to accomplish, financial information, and how you’ll reach your goals. The information you include helps you plan your budget, marketing strategies and stay on track. Potential lenders or investors want to see a thorough business plan before they provide funds, so they’re comfortable that they’ll be getting a satisfactory return on investment.
Most businesses today rely on a solid online presence to reach and service potential clients. Southern New Hampshire University notes that digital marketing can include:
- Email marketing
- Social media ads
- Text messages
These are all elements you can use for content marketing, which is a type of marketing that focuses on creating, publishing, and distributing content online for a targeted audience; (click here to learn more about this specialized form of business promotion). Utilizing digital marketing platforms allows you to reach a vast number of people to promote your products and brand relatively inexpensively.
Your company needs to be legally structured and registered with the appropriate authorities. The most popular business structures are:
- Limited liability company
- S corporation
- Sole proprietorship
Hiring a business coach can benefit you in several ways when you’re getting started. Ask such an expert about the structure they recommend.
Limited Liability Company (LLC)
Many entrepreneurs choose to form an LLC because of the benefits this structure offers:
- Less Paperwork
- Limited personal liability
- Tax benefits
If significant lawyer fees aren’t in your budget, you can file yourself or use a formation service. Be sure to read reviews of the best LLC services to find reliable and affordable options.
You’ll need to understand many accounting terms, whether you hire someone to keep your books or do it yourself.
Accounts Payable and Receivable
Knowing how much you owe and expect to receive at all times is crucial. Accounts payable include bills that you owe, usually reported on a monthly basis. Accounts receivable are funds you will receive from sales you’ve earned but haven’t yet been paid for.
Your balance sheet shows your company’s assets and liabilities at a glance. You and your investors can see your current financial situation and history. Although you can run these statements quarterly and annually, it’s a good practice to do so monthly so you’ll have an accurate and timely idea of your company’s successes and problem areas.
Cost of Goods Sold
If your company will sell goods, you’ll need to know how much it costs to produce them to set your pricing and determine your profit. Include:
- Shipping costs to get your materials
Your business takes money to run even if you don’t produce or sell a single item. Your operating expenses include:
- Employee salaries and benefits
- Equipment and supply purchases
- Marketing and advertising
- Rent, lease, or mortgage payments
- Web hosting
These items don’t make a profit, but you can’t run a business without them. Be sure to include these items in your budget and account for them when deciding how to price your goods.
Learning about common business terms – including digital and content marketing, as well as accounting terms – will help you be able to speak authoritatively to bankers, potential investors, and others. While you’re researching, look into the benefits you’ll get if you choose to form an LLC.
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