Entrepreneurship 5e by Barringer, Ireland

Entrepreneurship 5e by Barringer, Ireland is the fifth edition of the Entrepreneurship: Successfully Launching New Ventures textbook authored by Bruce R. Barringer, Oklahoma State University, and R. Duane Ireland, Texas A & M University, and published by Pearson Education, Inc. in 2016.

• 7(A) loan guaranty program. The main Small Business Administration (SBA) program available to small businesses operating through private sector lenders providing loans that are guaranteed by the SBA; loan guarantees reserved for small businesses that are unable to secure financing through normal lending channels.
• 10-K. A report that is similar to the annual report, except that it contains more detailed information about the company's business.
• Accounts receivable. The money owed to a firm by its customers.
• Accredited investor. A person who is permitted to invest in high-risk investments such as business start-ups.
• Acquirer. The surviving firm in an acquisition.
• Acquisition. The outright purchase of one firm by another.
• Adverse selection. The challenge a firm must face as it grows such that as the number of employees a firm needs increases, it becomes more difficult to find the right employees, place them in appropriate positions, and provide adequate supervision.
• Advertising. Making people aware of a product or service in hopes of persuading them to buy it.
• Advisory board. A panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis; unlike a board of directors, an advisory board possesses no legal responsibilities for the firm and gives nonbinding advice.
• Agency theory. A management concept that argues that managers, because they are paid a salary, may not be as committed to the success of the businesses they manage as the owners, who capture the business's profits. This theory supports the notion of franchising, because franchisees are in effect the owners of the units they manage.
• Area franchise agreement. Agreement that allows a franchisee to own and operate a specific number of outlets in a particular geographic area.
• Articles of incorporation. Documents forming a legal corporation that are filed with the secretary of state's office in the state of incorporation.
• Assignment of invention agreement. A document signed by an employee as part of the employment agreement that assigns the employer the right to apply for the patent of an invention made by the employee during the course of his or her employment.
• Assumptions sheet. An explanation in a new firm's business plan of the sources of the numbers for its financial forecast and the assumptions used to generate them.
• Balance sheet. A snapshot of a company's assets, liabilities, and owner's equity at a specific point in time.
• Barrier to entry. Conditions that create disincentives for a new firm to enter an industry.
• Basis of differentiation. What causes consumers to pick one company's products over another's.
• Board of advisors. A panel of experts asked by a firm's management to provide counsel and advice on an ongoing basis.
• Board of directors. A panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm.
• Bootstrapping. Using creativity, ingenuity, or any means possible to obtain resources other than borrowing money or raising capital from traditional sources.
• Brainstorming. A technique used to quickly generate a large number of ideas and solutions to problems; conducted to generate ideas that might represent product or business opportunities.
• Brand. The set of attributes—positive or negative—that people associate with a company.
• Brand equity. The set of assets and liabilities that is linked to a brand and enables it to raise a firm's valuation.
• Brand management. A program that protects the image and value of an organization's brand in consumers' minds.
• Break-even point. The point where total revenue received equals total costs associated with the output.
• Budgets. Itemized forecasts of a company's income, expenses, and capital needs that are also important tools for financial planning and control.
• Bug report. A popular technique that is used in classrooms to teach brainstorming.
• Burn rate. The rate at which a company is spending its capital until it reaches profitability.
• Business angels. Individuals who invest their personal capital directly in new ventures.
• Business format franchise. By far the most popular approach to franchising in which the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.
• Business method patent. A patent that protects an invention that is or facilitates a method of doing business.
• Business model. A company's plan for how it competes, uses its resources, structures its relationships, interfaces with customers, and creates value to sustain itself on the basis of the profits it generates.
• Business plan. A written document describing all the aspects of a business venture, which is usually necessary to raise money and attract high quality business partners.
• Buyback clause. A clause found in most founders' agreements that legally obligates the departing founder to sell to the remaining founders his or her interest in the firm if the remaining founders are interested.
• Buzz. An awareness and sense of anticipation about a company and its offerings.
• C corporation. A legal entity that in the eyes of the law is separate from its owners.
• Carry. The percentage of profits that the venture capitalist gets from a specific venture capital fund.
• Certification marks. Marks, words, names, symbols, or devices used by a person other than its owner to certify a particular quality about a product or service.
• Channels. A company's description of how it delivers its product or service to its customers.
• Churn. The number of subscribers.
• Closely held corporation. A corporation in which the voting stock is held by a small number of individuals and is very thinly or infrequently traded.
• Code of conduct. A formal statement of an organization's values on certain ethical and social issues.
• Collective marks. Trademarks or service marks used by the members of a cooperative, association, or other collective group, including marks indicating membership in a union or similar organization.
• Common stock. Stock that is issued more broadly than preferred stock and that gives the stockholders voting rights to elect the firm's board of directors.
• Competitive analysis grid. A tool for organizing the information a firm collects about its competitors to see how it stacks up against its competitors, provide ideas for markets to pursue, and identify its primary sources of competitive advantage.
• Competitive intelligence. The information that is gathered by a firm to learn about its competitors.
• Competitor analysis. A detailed evaluation of a firm's direct, indirect, and future competitors.
• Computer Software Copyright Act. In 1980, Congress passed this act, which amended previous copyright acts; now, all forms of computer programs are protected.
• Concept statement. A preliminary description of a business that includes descriptions of the product or service being offered, the intended target market, the benefits of the product or service, the product's position in the market, and how the product or service will be sold and distributed.
• Concept test. A representation of the product or service to prospective users to gauge customer interest, desirability, and purchase intent.
• Constant ratio method of forecasting. A forecasting approach using the percent of sales method in which expense items on a firm's income statement are expected to grow at the same rate as sales.
• Consultant. An individual who gives professional or expert advice. Consultants fall into two categories: paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or governmental agency.
• Contribution margin. The amount per unit of sale that is left over and is available to "contribute" to covering the firm's fixed costs and producing a profit.
• Copyright. A form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits of the work.
• Copyright bug. The letter c inside a circle with the first year of publication and the author copyright owner (e.g., © 2007 Dell Inc).
• Copyright infringement. Violation of another's copyright that occurs when one work derives from another work or is an exact copy or shows substantial similarity to the original copyrighted work.
• Core competency. A unique skill or capability that transcends products or markets, makes a significant contribution to the customer's perceived benefit, is difficult to imitate, and serves as a source of a firm's competitive advantage over its rivals.
• Core strategy. The overall manner in which a firm competes relative to its rivals.
• Corporate entrepreneurship. Behavior orientation exhibited by established firms with an entrepreneurial emphasis that is proactive, innovative, and risk taking.
• Corporate venture capital. A type of capital similar to traditional venture capital, except that the money comes from corporations that invest in new ventures related to their areas of interest.
• Corporation. A separate legal entity organized under the authority of a state.
• Cost-based pricing. A pricing method in which the list price is determined by adding a markup percentage to the product's cost.
• Cost of goods sold. The materials and direct labor needed to produce firm's revenue.
• Cost of sales. All of the direct costs associated with producing or delivering a product or service, including the material costs and direct labor costs (also cost of goods sold).
• Cost reduction strategy. A marketing strategy that is accomplished through achieving lower costs than industry incumbents through process improvements.
• Cost structure. A description of the most important costs a business incurs to support its business model.
• Creative destruction. The process by which new products and technologies developed by entrepreneurs over time make current products and technologies obsolete; stimulus of economic activity.
• Creativity. The process of generating a novel or useful idea.
• Crowdfunding. A method of funding in which people pool their money and other resources, usually via the Internet, to support efforts initiated by other people or organizations.
• Current assets. Cash plus items that are readily convertible to cash, such as accounts receivable, inventories, and marketable securities.
• Current liabilities. Obligations that are payable within a year, including accounts payable, accrued expenses, and the current portion of long-term debt.
• Current ratio. A ratio that equals the firm's current assets divided by its current liabilities.
• Customer advisory boards. A panel of individuals set up by some companies to meet regularly to discuss needs, wants, and problems that may lead to new product, service, or customer service ideas.
• Day-in-the-life research. A form of anthropological research used by companies to make sure customers are satisfied and to probe for new product ideas by sending researchers to the customers' homes or business.
• Debt financing. Getting a loan; most common sources of debt financing are commercial banks and the Small Business Administration's (SBA's) guaranteed loan program.
• Debt-to-equity ratio. A ratio calculated by dividing the firm's long-term debt by its shareholders' equity.
• Declining industry. An industry that is experiencing a reduction in demand.
• Derivative works. Works that are new renditions of something that is already copyrighted, which are also copyrightable.
• Design patents. The second most common type of patent covering the invention of new, original, and ornamental designs for manufactured products.
• Disintermediation. The process of eliminating layers of intermediaries, such as distributors and retailers, to sell directly to customers.
• Disruptive business models. Business models, which are rare, that do not fit the profile of a standard business model, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry.
• Distribution channel. The route a product takes from the place it is made to the customer who is the end user.
• Double taxation. Form of taxation in which a corporation is taxed on its net income. When the same income is distributed to shareholders in the form of dividends, it is taxed again on shareholders' personal income tax returns.
• Due diligence. The process of investigating the merits of a potential venture and verifying the key claims made in the business plan.
• Economic Espionage Act. Passed in 1996, an act that makes the theft of trade secrets a crime.
• Economies of scale. A phenomenon that occurs when mass producing a product results in lower average costs.
• Economies of scope. The advantage a firm accrues through the scope (or range) of its operations rather than from the scale of its production.
• Efficiency. How productively a firm utilizes its assets relative to its rate of return.
• Elevator speech (or pitch). A brief, carefully constructed statement that outlines the merits of a business opportunity.
• Emerging industry. A new industry in which standard operating procedures have yet to be developed.
• Employee. Someone who works for a business, at the business's location or virtually, utilizing the business's tools and equipment and according to the business's policies and procedures.
• Entrepreneurial alertness. The ability to notice things without engaging in deliberate search.
• Entrepreneurial firms. Companies that bring new products and services to market by creating and seizing opportunities.
• Entrepreneurial intensity. The position of a firm on a conceptual continuum that ranges from highly conservative to highly entrepreneurial.
• Entrepreneurial services. Those services that generate new market, product, and service ideas.
• Entrepreneurship. The process by which individuals pursue opportunities without regard to resources they currently control.
• Equity-based crowdfunding. This type of funding helps businesses raise money by tapping individuals who provide funding in exchange for equity in the business.
• Equity financing. A means of raising money by exchanging partial ownership in a firm, usually in the form of stock, for funding.
• Ethical dilemma. A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical.
• Ethics training programs. Programs designed to teach employees how to respond to the types of ethical dilemmas that might arise on their jobs.
• Exclusive distribution arrangements. An agreement that gives a retailer or other intermediary the exclusive rights to sell a company's products in a specific area for a specific period of time.
• Execution intelligence. The ability to fashion a solid business idea into a viable business is a key characteristic of successful entrepreneurs.
• Executive summary. A quick overview of the entire business plan that provides a busy reader everything that he or she needs to know about the distinctive nature of the new venture.
• External growth strategies. Growth strategies that rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.
• Factoring. A financial transaction whereby a business sells its accounts receivable to a third party, called a factor, at a discount in exchange for cash.
• Fair use. The limited use of copyright material for purposes such as criticism, comment, news reporting, teaching, or scholarship.
• Feasibility analysis. A preliminary evaluation of a business idea to determine if it is worth pursuing.
• Federal employee identification number (EIN). A tax identification number; is used when filing various tax returns.
• Fictitious business name permit. A permit that's required for businesses that plan to use a fictitious name, which is any name other than the business owner's name (also called dba or doing business as).
• Fiduciary obligation. The obligation to always act in another's best interest; it is a mistake to assume that a franchisor has a fiduciary obligation to its franchisees.
• Final prospectus. Documents issued by the investment bank after the Securities and Exchange Commission (SEC) has approved the offering that sets a date and issuing price for the offering.
• Financial feasibility analysis. A preliminary financial assessment of a new venture that considers the total start up cash needed, financial performance of similar businesses, and the overall financial attractiveness of the proposed venture.
• Financial management. The process of raising money and managing a company's finances in a way that achieves the highest rate of return.
• Financial ratios. Ratios showing the relationships between items on a firm's financial statements that are used to discern whether a firm is meeting its financial objectives and how it stacks up against industry peers.
• Financial statement. Written reports that quantitatively describe a firm's financial health.
• Financing activities. Activities that raise cash during a certain period by borrowing money or selling stock, and/or use cash during a certain period by paying dividends, buying back outstanding stock, or buying back outstanding bonds.
• First-mover advantage. A sometimes significant advantage, created by the opportunity to establish brand recognition and/or market power, gained by the first company to produce a product or service or the first company to move into a market.
• Fixed assets. Assets used over a longer time frame, such as real estate, buildings, equipment, and furniture.
• Fixed costs. The costs that a company incurs in operating a business whether it sells something or not (e.g., overhead).
• Focus group. A gathering of five to ten people who have been selected based on their common characteristics relative to the issue being discussed; conducted to generate ideas that might represent product or business opportunities.
• Follow-on funding. Additional funding for a firm following the initial investment made by investors.
• Forecasts. Estimates of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.
• Founders' agreement. A written document that deals with issues such as the relative split of the equity among the founders of a firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest (also shareholders' agreement).
• Founding team. A team of individuals chosen to start a new venture; has an advantage over firms started by an individual because a team brings more talent, resources, ideas, and professional contacts to a new venture than does a sole entrepreneur.
• Fragmented industry. An industry characterized by a large number of firms approximately equal in size.
• Franchise agreement. The document that consummates the sale of a franchise, which typically contains two sections: (1) the purchase agreement and (2) the franchise or license agreement.
• Franchise Disclosure Document (FDD). Accepted in all 50 states and part of Canada, a lengthy document that contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.
• Franchisee. An individual or firm that enters into a franchise agreement and pays an initial fee and an ongoing royalty to an franchisor in exchange for using the franchisor's trademark and method of doing business.
• Franchising. A form of business organization in which a firm that already has a successful product or service (franchisor) licenses its trademark and method of doing businesses to other businesses (franchisees) in exchange for an initial franchise fee and an ongoing royalty.
• Franchisor. A firm with a successful product or service that enters into a franchising agreement to license its trademark and method of doing business to other businesses in exchange for fee and royalty payments.
• Freelancer. A person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients.
• Full business plan. A document that spells out a company's operations and plans in much more detail than a summary business plan; the format that is usually used to prepare a business plan for an investor.
• General partners. The venture capitalists who manage a venture capital fund.
• General partnership. A form of business organization in which two or more people pool their skills, abilities, and resources to run a business.
• Geographic expansion. An internal growth strategy in which an entrepreneurial business grows by simply expanding from its original location to additional geographical sites.
• Geographic roll-up strategy. When one firm starts acquiring similar firms that are located in different geographic areas.
• Global industry. An industry that is experiencing significant international sales.
• Global strategy. An international expansion strategy in which firms compete for market share by using the same basic approach in all foreign markets.
• Guerilla marketing. A low budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques.
• Heterogeneous team. A team whose individual members are diverse in terms of their abilities and experiences.
• Historical financial statements. Reflect past performance and are usually prepared on a quarterly and annual basis.
• Homogenous team. A team whose individual members' experiences and areas of expertise are very similar to one another.
• Idea. A thought, impression, or notion.
• Idea bank. A physical or digital repository for storing ideas.
• Idea–expression dichotomy. The legal principle describing the concept that although an idea is not able to be copyrighted, the specific expression of an idea is.
• Illiquid. Describes stock in both closely held and private corporations, meaning that it typically isn't easy to find a buyer for the stock.
• Improving an existing product or service. Enhancing a product or service's quality by making it larger or smaller, making it easier to use, or making it more up-to-date, thereby increasing its value and price potential.
• Income statement. A financial statement that reflects the results of the operations of a firm over a specified period of time: prepared on a monthly, quarterly, or annual basis.
• Individual franchise agreement. The most common type of franchise agreement, which involves the sale of a single franchise for a specific location.
• Industry. A group of firms producing a similar product or service, such as airlines, fitness drinks, or electronic games.
• Industry analysis. Business research that focuses on the potential of an industry.
• Industry/target market feasibility. An assessment of the overall appeal of the industry and target market for the product or service being proposed.
• Initial public offering (IPO). The first sale of a company's stock to the public and an important milestone for a firm for four reasons: it is a way to raise equity capital; it raises a firm's public profile; it is a liquidity event; and it creates another form of currency (company stock) that can be used to grow the company.
• Innovation. The process of creating something new, which is central to the entrepreneurial process.
• Inside director. A person on a firm's board of directors who is also an officer of the firm.
• Intellectual property. Any product of human intellect, imagination, creativity, or inventiveness that is intangible but has value in the marketplace and can be protected through tools such as patents, trademarks, copyrights, and trade secrets.
• Intellectual property audit. A firm's assessment of the intellectual property it owns.
• Intent-to-use trademark application. An application based on the applicant's intention to register and use a trademark.
• Internal growth strategies. Growth strategies that rely on efforts generated within the firm itself, such as new product development, other product related strategies, or international expansion.
• International new ventures. Businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries.
• Intern. A person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience.
• Intranet. A privately maintained Internet site that can be accessed only by authorized users.
• Inventory. A company's merchandise, raw materials, and products waiting to be sold.
• Investing activities. Activities that include the purchase, sale, or investment in fixed assets, such as real estate and buildings.
• Investment bank. A financial institution that acts as an underwriter or agent for a firm issuing securities.
• Joint venture. An entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization.
• Key assets. The assets that a firm owns that enable its business model to work.
• Landing page. A single Web page that typically provides direct sales copy, like "click here to buy a Hawaiian vacation."
• Lanham Act. An act of Congress, passed in 1946, that spells out what is protected under trademark law.
• Leadership strategy. A competitive strategy in which the firm tries to become the dominant player in the industry.
• Lease. A written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for regular payments.
• Liability of newness. Situation that often causes new firms to falter because the people who start the firms can't adjust quickly enough to their new roles, and because the firm lacks a "track record" with customers and suppliers.
• Licensee. A company that purchases the right to use another company's intellectual property.
• Licensing. The granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.
• Licensing agreement. The formal contract between a licensor and licensee.
• Licensor. The company that owns the intellectual property in a licensing agreement.
• Lifestyle firms. Businesses that provide their owners the opportunity to pursue a particular lifestyle and earn a living while doing so (e.g., ski instructors, golf pros, and tour guides).
• Limited liability company (LLC). A form of business organization that combines the limited liability advantage of the corporation with the tax advantages of the partnership.
• Limited partners. Participants in a partnership, such as a venture capital fund, which have limited liability, meaning that they are only liable up to the amount of their investment and have no management authority.
• Limited partnership. A modified form of a general partnership that includes two classes of owners: general partners and limited partners. The general partners are liable for the debts and obligations of the partnership, but the limited partners are liable only up to the amount of their investment. The limited partners may not exercise any significant control over the organization without jeopardizing their limited liability status.
• Limited partnership agreement. Sets forth the rights and duties of the general and limited partners, along with the details of how the partnership will be managed and eventually dissolved.
• Line of credit. A borrowing "cap" is established and borrowers can use the credit at their discretion; requires periodic interest payments.
• Link joint venture. A joint venture in which the position of the parties is not symmetrical and the objectives of the partners may diverge.
• Liquid market. A market in which stock can be bought and sold fairly easily through an organized exchange.
• Liquidity. The ability to sell a business or other asset quickly at a price that is close to its market value; also, a company's ability to meet its short-term financial obligations.
• Liquidity event. An occurrence such as a new venture going public, finding a buyer, or being acquired by another company that converts some or all of a company's stock into cash.
• Long-term liabilities. Notes or loans that are repayable beyond one year, including liabilities associated with purchasing real estate, buildings, and equipment.
• Low-end market disruption. A type of disruption that is possible when the firms in an industry continue to improve products or services to the point where they are actually better than a sizable portion of their clientele needs or desires.
• Managerial capacity problem. The problem that arises when the growth of a firm is limited by the managerial capacity (i.e., personnel, expertise, and intellectual resources) that a firm has available to investigate and implement new business ideas.
• Managerial services. The routine functions of the firm that facilitate the profitable execution of new opportunities.
• Market analysis. An analysis that breaks the industry into segments and zeros in on the specific segment (or target market) to which the firm will try to appeal.
• Market leadership. The position of a firm when it is the number one or the number two firm in an industry or niche market in terms of sales volume.
• Market penetration strategy. A strategy designed to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency.
• Market segmentation. The process of studying the industry in which a firm intends to compete to determine the different potential target markets in that industry.
• Marketing alliance. Typically matches a company with a distribution system with a company with a product to sell in order to increase sales of a product or service.
• Marketing mix. The set of controllable, tactical marketing tools that a firm uses to produce the response it wants in the target market; typically organized around the four Ps—product, price, promotion, and place (or distribution).
• Marketing strategy. A firm's overall approach for marketing its products and services.
• Master franchise agreement. Similar to an area franchise agreement, but in addition to having the right to operate a specific number of locations in a particular area, the franchisee also has the right to offer and sell the franchise to other people in the area.
• Mature industry. An industry that is experiencing slow or no increase in demand, has numerous (rather than new) customers, and has limited product innovation.
• Mediation. A process in which an impartial third party (usually a professional mediator) helps those involved in a dispute reach an agreement.
• Mentor. Someone who is more experienced than you and is willing to by your counselor, confidant, and go-to person for advice.
• Merchandise and character licensing. The licensing of a recognized trademark or brand, which the licensor typically controls through a registered trademark or copyright.
• Merchant cash advance. A common type of alternative lending.
• Merger. The pooling of interests to combine two or more firms into one.
• Milestone. In a business plan context, a noteworthy event in the past or future development of a business.
• Mission statement. A statement that describes why a firm exists and what its business model is supposed to accomplish.
• Moderate risk takers. Entrepreneurs who are often characterized as willing to assume a moderate amount of risk in business, being neither overly conservative nor likely to gamble.
• Moral hazard. A problem a firm faces as it grows and adds personnel; the assumption is that new hires will not have the same ownership incentives or be as motivated to work as hard as the original founders.
• Multidomestic strategy. An international expansion strategy in which firms compete for market share on a country by country basis and vary their product or services offerings to meet the demands of the local market.
• Multiple-unit franchisee. An individual who owns and operates more than one outlet of the same franchisor, whether through an area or a master franchise agreement.
• Net sales. Total sales minus allowances for returned goods and discounts.
• Network entrepreneurs. Entrepreneurs who identified their idea through social contacts.
• Networking. Building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm.
• New market disruption. A market disruption that addresses a market that previously wasn't served.
• New product development. The creation and sale of new products (or services) as a means of increasing a firm's revenues.
• New-venture team. The group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm.
• Niche market. A place within a large market segment that represents a narrow group of customers with similar interests.
• Niche strategy. A marketing strategy that focuses on a narrow segment of the industry.
• Noncompete agreement. An agreement that prevents an individual from competing against a former employer for a specific period of time.
• Nondisclosure agreement. A promise made by an employee or another party (such as a supplier) to not disclose a company's trade secrets.
• One year after first use deadline. Requirement that a patent must be filed within one year of when a product or process was first offered for sale, put into public use, or was described in any printed publication. If this requirement is violated, the right to apply for a patent is forfeited.
• Operating activities. Activities that affect net income (or loss), depreciation, and changes in current assets and current liabilities other than cash and short-term debt.
• Operating expenses. Marketing, administrative costs, and other expenses not directly related to producing a product or service.
• Operating leverage. An analysis of the firm's fixed costs versus its variable costs.
• Operational business plan. A blueprint for a company's operations; primarily meant for an internal audience.
• Operations. Activities that are both integral to a firm's overall business model and represent the day-to-day heartbeat of a firm.
• Opportunity. A favorable set of circumstances that creates a need for a new product, service, or business.
• Opportunity gap. An entrepreneur recognizes a problem and creates a business to fill it.
• Opportunity recognition. The process of perceiving the possibility of a profitable new business or a new product or service.
• Organic growth. Internally generated growth within a firm that does not rely on outside intervention.
• Organizational chart. A graphic representation of how authority and responsibility are distributed within a company.
• Organizational feasibility analysis. A study conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to be successful.
• Other assets. Miscellaneous assets including accumulated goodwill.
• Outside director. Someone on a firm's board of directors who is not employed by the firm.
• Outsourcing. Work that is done for a company by people other than the company's full-time employees.
• Owner's equity. The equity invested in the business by its owner(s) plus the accumulated earnings retained by the business after paying dividends.
• Pace of growth. The rate at which a firm is growing on an annual basis.
• Partnership agreement. A document that details the responsibility and the ownership shares of the partners involved with an organization.
• Passion for their business. An entrepreneur's belief that his or her business will positively influence people's lives; one of the characteristics of successful entrepreneurs.
• Patent. A grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the patent.
• Patent infringement. This is when one party engages in the unauthorized use of another's patent.
• Peer-to-peer lending. A category of financial transactions which occur directly between individuals or "peers."
• Percent of sales method. A method for expressing each expense item as a percent of sales.
• Piercing the corporate veil. The chain of effects that occurs if the owners of a corporation don't file their yearly payments, neglect to pay their annual fees, or commit fraud, which may result in the court ignoring the fact that a corporation has been established, and the owners could be held personally liable for actions for the corporation.
• Place. The marketing mix category that encompasses all of the activities that move a firm's product from its place of origin to the consumer (also distribution).
• Plant patents. Patents that protect new varieties of plants that can be reproduced asexually by grafting or crossbreeding rather than by planting seeds.
• Position. How the entire company is situated relative to its competitors.
• Preferred stock. Stock that is typically issued to conservative investors, who have preferential rights over common stockholders in regard to dividends and to the assets of the corporation in the event of liquidation.
• Preliminary prospectus. A document issued by an investment bank that describes the potential offering to the general public while the SEC is conducting an investigation of the offering (also red-herring).
• Press kit. A folder typically distributed to journalists and made available online that contains background information about a company and includes a list of the company's most recent accomplishments.
• Price. The amount of money consumers pay to buy a product; one of the four Ps in a company's marketing mix.
• Price/earnings ratio (P/E ratio). A simple ratio that measures the price of a company's stock against its earnings.
• Price-quality attribution. The assumption consumers naturally make that the higher priced product is also the better quality product.
• Primary research. Research that is original and is collected firsthand by the entrepreneur by, for example, talking to potential customers and key industry participants.
• Prior entrepreneurial experience. Prior start up experience; this experience has been found to be one of the most consistent predictors of future entrepreneurial performance.
• Private corporation. A corporation in which all of the shares are held by a few shareholders, such as management or family members, and the stock is not publicly traded.
• Private placement. A variation of the IPO in which there is a direct sale of an issue of securities to a large institutional investor.
• Product. The element of the marketing mix that is the good or service a company offers to its target market; often thought of as something having physical form.
• Product and trademark franchise. An arrangement under which the franchisor grants to the franchisee the right to buy its product and use its trade name.
• Product attribute map. A map that illustrates a firm's positioning strategy relative to it's major rivals.
• Product/customer focus. A defining characteristic of successful entrepreneurs that emphasizes producing good products with the capability to satisfy customers.
• Product line extension strategy. A strategy that involves making additional versions of a product so they will appeal to different clientele.
• Product/market scope. A range that defines the products and markets on which a firm will concentrate.
• Product prototype. The first physical manifestation of a new product, often in a crude or preliminary form.
• Product/service feasibility analysis. An assessment of the overall appeal of the product or service being proposed.
• Productive opportunity set. The set of opportunities the firm feels it is capable of pursuing.
• Pro forma balance sheet. Financial statements that show a projected snapshot of a company's assets, liabilities, and owner's equity at a specific point in time.
• Pro forma financial statements. Projections for future periods, based on a firm's forecasts, and typically completed for two to three years in the future.
• Pro forma income statement. A financial statement that shows the projected results of the operations of a firm over a specific period.
• Pro form financial statements (or projected financial statements). Statements that are at the heart of the financial section of a business plan.
• Pro forma statement of cash flows. A financial statement that shows the projected flow of cash into and out of a company for a specific period.
• Profit margin. A measure of a firm's return on sales that is computed by dividing net income by average net sales.
• Profitability. The ability to earn a profit.
• Promotion. The marketing mix category that includes the activities planned by a company to communicate the merits of its product to its target market with the goal of persuading people to buy the product.
• Provisional patent application. A part of patent law that grants "provisional rights" to an inventor for up to one year, pending the filing of a complete and final application.
• Public corporation. A corporation that is listed on a major stock exchange, such as the New York Stock Exchange or the NASDAQ, in which owners can sell their shares at almost a moment's notice.
• Public relations. The efforts a company makes to establish and maintain a certain image with the public through networking with journalists and others to try to interest them in saying or writing good things about the company and its products.
• Ratio analysis. Ratios showing the relationships between items on a firm's financial statements that are used to discern whether a firm is meeting its financial objectives and how it stacks up against industry peers.
• Reference account. An early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product.
• Regression analysis. A statistical technique used to find relationships between variables for the purpose of predicting future values.
• Relevant industry experience. Experience in the same industry as an entrepreneur's current venture that includes a network of industry contacts and an understanding of the subtleties of the industry.
• Resources. The inputs a firm uses to produce, sell, distribute, and service a product or service.
• Revenue streams. A description of how a firm makes money.
• Rewards-based crowdfunding. This type of funding allows entrepreneurs to raise money in exchange for some type of amenity or reward.
• Road show. A whirlwind tour taken by the top management team of a firm wanting to go public; consists of meetings in key cities where the firm presents its business plan to groups of investors.
• Rounds. Stages of subsequent investments made in a firm by investors.
• Salary-substitute firms. Small firms that yield a level of income for their owner or owners that is similar to what they would earn when working for an employer (e.g., dry cleaners, convenience stores, restaurants, accounting firms, retail stores, and hairstyling salons).
• Sales forecast. A projection of a firm's sales for a specified period (such as a year); most firms though forecast their sales for two to five years into the future.
• Sarbanes-Oxley Act. A federal law that was passed in response to corporate accounting scandals involving prominent corporations, like Enron and WorldCom.
• Sales process. The systematic process a business engages in to identify prospects and close sales.
• SBA Guaranteed Loan Program. An important source of funding for small businesses in general in which approximately 50 percent of the 9,000 banks in the United States participate.
• SBIR Program. Small Business Innovation Research (SBIR) competitive grant program that provides over $1 billion per year to small businesses for early stage and development projects.
• Scale joint venture. A joint venture in which the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution.
• Secondary market offering. Any later public issuance of shares after the initial public offering.
• Secondary meaning. This arises when, over time, consumers start to identify a trademark with a specific product. For example, the name CHAP STICK for lip balm was originally considered to be descriptive, and thus not afforded trademark protection.
• Secondary research. Data collected previously by someone else for a different purpose.
• Service. An activity or benefit that is intangible and does not take on a physical form, such as an airplane trip or advice from an attorney.
• Service marks. Similar to ordinary trademarks but used to identify the services or intangible activities of a business rather than a business's physical product.
• Shareholders. Owners of a corporation who are shielded from personal liability for the debts and obligations of the corporation.
• Signaling. The act of a high-quality individual agreeing to serve on a company's board of directors, which indicates that the individual believes that the company has the potential to be successful.
• Single-purpose loan. One common type of loan in which a specific amount of money is borrowed that must be repaid in a fixed amount of time with interest.
• Skills profile. A chart that depicts the most important skills that are needed and where skills gaps exist.
• Social plug-ins. Tools that Web sites use to provide its users with personalized and social experiences.
• Solo entrepreneurs. Entrepreneurs who identified their business idea on their own.
• Sole proprietorship. The simplest form of business organization involving one person, in which the owner maintains complete control over the business and business losses can be deducted against the owner's personal tax return.
• Sources and uses of funds statement. A document, usually included in the financial section of a business plan, that lays out specifically how much money a firm needs, where the money will come from, and what the money will be used for.
• Spin-ins. A transaction that takes place when a large firm that has a small equity stake in a small firm, decided to acquire a 100% interest in the firm.
• Spin-out. The opposite of a spin-in that occurs when a larger company divests itself of one of its smaller divisions.
• Stability. The strength and vigor of the firm's overall financial posture.
• Standard business models. Models that depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders.
• Statement of cash flows. A financial statement summarizing the changes in a firm's cash position for a specified period of time and detailing why the changes occurred. Similar to a month end bank statement, it reveals how much cash is on hand at the end of the month as well as how the cash was acquired and spent during the month.
• Stock options. Special form of incentive compensation providing employees the option or right to buy a certain number of shares of their company's stock at a stated price over a certain period of time.
• Strategic alliance. A partnership between two or more firms that is developed to achieve a specific goal.
• Strong-tie relationships. Relationships characterized by frequent interaction that form between like-minded individuals such as coworkers, friends, and spouses; these relationships tend to reinforce insights and ideas the individuals already have and, therefore, are not likely to introduce new ideas.
• STTR Program. A government grant program, similar to the SBIR program, which requires the participation of a research organization, such as a research university or a federal laboratory.
• Subchapter S corporation. A form of business organization that combines the advantages of a partnership and C corporation; similar to a partnership, in that the profits and losses of the business are not subject to double taxation, and similar to a corporation, in that the owners are not subject to personal liability for the behavior of the business.
• Subfranchisees. The people who buy franchises from master franchisees.
• Summary business plan. A business plan 10 to 15 pages long that works best for companies very early in their development that are not prepared to write a full plan.
• Supplier. A company that provides parts or services to another company.
• Sustained growth. Growth in both revenues and profits over an extended period of time.
• Sweat equity. The value of the time and effort that a founder puts into a new firm.
• Tagline. A phrase that is used consistently in a company's literature, advertisements, promotions, stationery, and even invoices to develop and to reinforce the position the company has staked out in its market.
• Target. In an acquisition, the firm that is acquired.
• Target market. The limited group of individuals or businesses that a firm goes after or tries to appeal to at a certain point in time.
• Technological alliances. Business alliances that cooperate in R&D, engineering, and manufacturing.
• Technology licensing. The licensing of proprietary technology, which the licensor typically controls by virtue of a utility patent.
• Trademark. Any work, name, symbol, or device used to identify the sources or origin of products or services and to distinguish those products and services from others.
• Trade secret. Any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace.
• Trade show. An event at which the goods or services in a specific industry are exhibited and demonstrated.
• Triggering event. The event that prompts an individual to become an entrepreneur (e.g., losing a job, inheriting money, accommodating a certain lifestyle).
• Uniform Trade Secrets Act. Drafted in 1979 by a special commission in an attempt to set nationwide standards for trade secret legislation; although the majority of states have adopted the act, most revised it, resulting in a wide disparity among states in regard to trade secret legislation and enforcement.
• Utility patents. The most common type of patent covering what we generally think of as new inventions that must be useful, must be novel in relation to prior arts in the field, and must not be obvious to a person of ordinary skill in the field.
• Value. Relative worth, importance, or utility.
• Value-based pricing. A pricing method in which the list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion.
• Variable costs. The costs that are not fixed that a company incurs as it generates sales.
• Vendor credit. A form of credit in which a vendor extends credit to a business in order to allow the business to buy its products and/or services upfront but defer payment until later.
• Venture capital. The money that is invested by venture capital firms in start ups and small businesses with exceptional growth potential.
• Venture-leasing firms. Firms that act as brokers, bringing the parties involved in a lease together (e.g., firms acquainted with the producers of specialized equipment match these producers with new ventures that are in need of the equipment).
• Viral marketing. A new marketing technique that facilitates and encourages people to pass along a marketing message about a particular product or service.
• Virtual assistant. A freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office.
• Virtual prototype. A computer generated 3-D image of an idea.
• Weak tie relationships. Relationships characterized by infrequent interaction that form between casual acquaintances who do not have a lot in common and, therefore, may be the source of completely new ideas.
• Window of opportunity. The time period in which a firm or an entrepreneur can realistically enter a new market.
• Working capital. A firm's current assets minus its current liabilities.