Definition of Business Plan

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glossary Business Plan

Business Plan Definitions

Definition of Business Planning Terms - HJ Ventures designs, develops and produces business plans for venture capital and angel investor presentations. We hope that you find our business plan glossary of terms valuable.

accounts payable Accounts Payable is the money owed by a company such as bills to be paid as part of the normal course of business. Accounts Payable is one of the most common liabilities which normally appear in the Balance Sheet listing of liabilities.
accounts receivable Accounts Receivable is the money that is owed to a company for goods and services it has provided to customers on credit. The accounts receivable amount is an asset to the company. Accounts receivable in the books of company goes as accounts payable in th
accumulated depreciation Accumulated depreciation is the total depreciation taken for an asset since it was placed in service. Also known as life-to-date depreciation and depreciation reserve. Accumulated depreciation is an account in the asset section of the balance sheet that s
acid test Acid Test is a ratio of the ready-cash items like cash, accounts receivable, and marketable securities, to the current liabilities of a company. Acid Test ratio is a test of a company's ability to meet its immediate cash requirements. A higher ratio of re
acquisition costs Acquisition costs are expenses incurred to acquire new business premiums and conserve renewal business. Acquisition costs includes costs of soliciting business, issuance of policies, collection of premium, agents' compensation, field supervision, advertis
adaptive firm Adaptive Firm is an organization that is able to respond to and address changes in their market, their environment, and/or their industry to better position themselves for survival and profitability.
adventure capital Adventure Capital is the capital needed in the earliest stages of the venture's creation before the product or service is available to be provided.
advertising opportunity Advertising opportunity is a product or service may generate additional revenue through advertising if there is benefit from creating additional awareness, communicating differentiating attributes, hidden qualities or benefits. Optimizing the opportunity
agent Agent is a business entity that negotiates, purchases, and/or sells, but does not take title to the goods.
amortization Amortization is the process of reducing principal and interest in equal installment payments at specific intervals over a set term. Such payments must be sufficient to cover both principal and interest. Writing off an intangible asset investment over the
asset Asset is anything having commercial or exchange value that is owned by a business, government, institution, or individual. Assets are any possessions that have value in an exchange. The primary classifications of assets are: current assets, long-term asse
asset turnover Asset turnover is sales divided by total assets. Asset turnover is important for comparison over time and to other companies of the same industry. Asset turnover is a standard business ratio.
available credit Available Credit is the amount of open but unused lines of credit. Too much Available Credit can negatively impact a person's Credit Score.
balance sheet Balance Sheet is a financial statement that shows the value of a business at a particular point in time. The Balance Sheet consists of two columns, Assets and Liabilities, which must be equal.
benchmark A benchmark is a standard or guideline used to compare some aspect of a business to some objective or external standard measure.
billable hours Billable Hours is the number of hours per period (such as a year or month) that a company expect to be working at the client's expense.
book value Book Value is the original purchase price of a Capital Expenditure minus accumulated Depreciation. Long Term Assets are listed on a Balance Sheet at Book Value.
brand equity Brand equity is the added value a brand name identity brings to a product or service beyond the functional benefits provided.
brand recognition Brand recognition means customer's awareness that a brand exists and is an alternative to purchase. Brand recognition is a process whereby a firm has to develop enough publicity for a brand that its name is familiar to consumers.
break-even analysis Break-even analysis is a technique commonly used to assess expected profitability of a company or a single product. Break-even analysis determines at what point revenues equal expenditures based on fixed and variable. The break-even analysis is a standard
break-even point Break-Even Point is the level of sales whereby you are neither making a profit or incurring a loss. Break-even point is a combination of sales and costs that will yield a no-profit, no-loss situation and is also known as Break-Even Sales.
broker Broker is an intermediary that serves as a go-between for the buyer or seller.
business mission Business mission is a brief description of an organization's purpose with reference to its customers, products or services, markets, philosophy and technology.
business plan Business Plan is a written document that details a proposed or existing venture. Business plan seeks to capture the vision, current status, expected needs, defined markets and projected results of the business.
buy-sell agreement Buy-sell Agreement is an agreement designed to address situations in which one or more of the entrepreneurs wants to sell their interest in the venture.
CAGR CAGr or Compound Annual Growth Rate is the year over year growth rate applied to an investment or other aspect of a firm using a base amount.
cannibalization Cannibalization is the term used for the undesirable tradeoff where sales of a new product or service decrease sales from existing products or services and minimize or detract from the total revenue contribution of the organization.
capital expenditure Capital expenditure is the spending on capital assets like plant and equipment or fixed assets, or long-term assets. Usually capital expenditures may not be deducted in the year they are paid, even if they are paid in connection with a trade or business.
cash flow projection Cash Flow Projection is a monthly forecast of the cash (checks or money orders) a business anticipates receiving and disbursing. Cash Flow Projection is useful in anticipating the cash portion of a business at specific times during the period projected.
cash flow statement Cash Flow Statement is a summary of the inflows and/or outflows of the business over a period of time. Cash flow statement is divided into 3 sections, namely, operating cash flow, investment cash flow, and financing cash flow.
central driving forces model Central Driving Forces Model is an entrepreneurial based model that considers the positives and negatives of three areas of the venture; founder(s), opportunities, and resources. CDF model then evaluates these areas regarding the "fits and gaps" that indi
channel conflicts Channel conflicts are situations where one or more channel members believe another channel member is engaged in behavior that is preventing it from achieving its goals. Channel conflict most often relates to pricing issues.
channels of distribution Channels of distribution is a system whereby customers are provided access to an organization's products or services.
commercial finance company Commercial Finance Company is a company that makes business loans for equipment collateralized by the equipment itself. Interest rates at a Commercial Finance Company are typically higher than at a bank.
competitive analysis Competitive analysis is the process of assessing and analyzing the comparative strengths and weaknesses of competitors; may include their current and potential product and service development and marketing strategies.
consumer finance company Consumer Finance Company is a company that makes small personal loans secured by collateral, such as a car title. Interest rates are typically higher at a consumer finance company than a bank.
core marketing strategy Core marketing strategy is a statement that communicates the predominant reason to buy to a specific target market.
corridor principal Corridor Principal is the principal where an entrepreneurial venture may find that it has significantly changed it's focus from the initial concept of the venture as it has continually responded and adapted to it's market and the desire to optimize profit
cost of goods sold Cost of goods sold is traditionally the costs of materials and production of the goods a business sells. For a manufacturing company COGS is materials, labor, and factory overhead. For a retail shop COGS would be what it pays to buy the goods that it sell
credit score Credit Score is a number calculated to reflect the likelihood of a particular person meeting their debt obligations. A Credit Score is reported to potential lenders when they review the credit report.
current assets Current Assets includes cash, securities, bank accounts, accounts receivable, inventory, business equipment, assets that last less than five years or are depreciated over terms of less than five years.
current liabilities Current Liabilities is the money owed by a business that must be paid within one year such as Accounts Payable and Loan Principal and Loan Interest that is due within one year.
current ratio Current Ratio measures the business' ability to meet obligations that are coming due soon such as payments to suppliers or taxes. Current ratio is derived by dividing current assets by current liabilities. Current ratio is particularly useful as an early
DBA (doing business as) DBA or Doing Business As is a company name, also commonly called a "Fictitious business name."
debt and equity Debt and equity is the sum of liabilities and capital. Debt and equity should always be equal to total assets.
debt to assets ratio Debt to Assets Ratio is total liabilities divided by total assets. The Debt to Assets Ratio is a measure of the riskiness of a business.
demographic information Demographic Information is the data about the company's existing and potential customers such as age, income, ethnicity, family size, etc. that can be used to design targeted marketing strategies. The US Census Bureau is a prime source of Demographic Info
depreciation Depreciation is an accounting and tax concept used to estimate the loss of value of assets over time.
direct costs Direct Costs are the costs that are directly related to production and change with the level of sales such as costs for Raw Materials (for a manufacturer) or Inventory bought for resale (for a retailer). Also known as Variable Costs.
direct marketing Direct marketing is any method of distribution that gives the customer access to an organization's products and services without intermediaries; also, any communication from the producer that communicates with a target market to generate a revenue produci
diversification Diversification is a product-market strategy that involves the development or acquisition of offerings new to the organization and/or the introduction of those offerings to the target markets not previously served by the organization.
dividend Dividends is the money distributed to the owners of a business as profits.
earnings Earnings is the amount of profit a company realizes after all costs, expenses and taxes have been paid. Earning is calculated by subtracting business, depreciation, interest and tax costs from revenues. Earnings are the supreme measure of value as far as
EBIT EBIT is earnings before interest and taxes. EBIT is calculated by subtracting costs of sales and operating expenses from revenues. EBIT is often used to gauge the financial performance of companies with high levels of debt and interest expenses.
economies of scale Economies of Scale is per unit cost savings that increase as the number of items produced increases. As the number of units produced increases, Fixed Costs remain the same; therefore, the currency amount added to each unit to recover Fixed Costs is reduce
ending balance Ending Balance is the amount of cash left over at the end of the month on a Cash Flow Statement, after all cash outflows have been subtracted from the total inflow of cash. Ending Balance always equals the Opening Balance of the next month.
equity Equity is the value of the owner's investment in the business. On the Balance Sheet, Equity is calculated by subtracting Total Assets from Total Liabilities and is written on the liability side of the Balance Sheet.
equity investor Equity Investor is a person who invests money in a business and in return receives part ownership of the business. An Equity Investor would be compensated in the form of Dividends and/or when he later sells his ownership stake at a profit.
exclusive distribution Exclusive distribution is a distribution strategy whereby a producer sells its products or services in only one retail outlet in a specific geographical area.
executive summary An executive summary is a synopsis of the key points of a business plan. The executive summary is not simply a background statement, nor is it an introduction. Executive summary is in a sense the business plan in miniature. Because many business plan revi
experience curve Experience curve is a visual representation, often based on a function of time, from exposure to a process that offers greater information and results in enhanced efficiency and operations advantage.
factoring Factoring is the process of purchasing commercial accounts receivable (invoices) from a business at a discount.
fatal 2% rule Fatal 2% Rule is concept according to which if a venture can just get "2%" of total market share it will be successful. This percentage can be unattainable based on the approach, limited resources, and/or structure of the industry.
first mover advantage First mover advantage means having a leadership position in a market by virtue of having been one of the first companies in the sector. Key first mover advantages includes reputation effect, experience curve and customer commitment and loyalty.
first mover disadvantage First mover disadvantage arise when costs of pioneering are sizable and loyalty of first time buyers is weak. First mover disadvantages includes resolution of technological uncertainty, resolution of strategic uncertainty, Free-rider effect - others dupli
fiscal year Fiscal year is a period of 12 consecutive months without regard to the calendar year. The fiscal year is designated by the calendar year in which it ends. The federal government's fiscal year begins October 1 and ends September 30. The fiscal year carries
five forces model Five forces model or Porter's model is an analytical approach use to analyze a firm's industry environment. Factors that are considered in five force analysis are 1. Risk of entry by potential competitors 2. Bargaining power of suppliers 3. Bargaining pow
fixed assets Fixed assets are assets of a long-term character which are intended to continue to be held or used, such as land, buildings, machinery, furniture, and other equipment. Fixed assets are normally represented on the balance sheet at their netdepreciated valu
fixed costs Fixed costs are the running costs that take time to wind down: usually rent, overhead, some salaries. Technically, fixed costs are those that the business would continue to pay even if it went bankrupt. In practice, fixed costs are usually considered the
full-cost price strategies Full-cost price strategies are meant for the costs that consider variable and fixed cost (total cost) in the pricing of a product of service.
future value projections Future Value Projections is the process of projecting the future value of a venture and/or an investment in the venture. Future value projections typically considers an expected rate of return, inflation, and the period of time to assess future value.
goodwill In accounting, goodwill is any advantage, such as a well-regarded brand name or symbol, that enables a business to earn better profits than its competitors. Goodwill generally is calculated as the purchase price for a company over the fair market value of
gross profit Gross Profit is revenue minus the cost of raw materials used to manufacture the items that were sold; or Revenue minus the cost of buying items for re-sale. Gross Profit is calculated for each individual item sold and for the business as a whole.
gross profit margin Gross profit margin is a measurement of a company's manufacturing and distribution efficiency during the production process. Gross Profit Margin can be calculated by dividing gross profit by total revenue.
guerrilla marketing Guerrilla Marketing refers to the unconventional marketing techniques for achieving maximum results from minimal resources or budgets.
harvesting Harvesting refers to the selling a business or product line, as when a company sells a product line or division or a family sells a business. Harvesting is also occasionally used to refer to sales of a product or product line towards the end of a product
ideas versus opportunities Ideas versus Opportunities means that the ideas are the basis of potential business opportunities. Good ideas do not necessarily represent good opportunities.
income from operations Income from Operations can be calculated as gross profit minus operating expenses such as labor, rent, utilities, etc.
income statement Income Statement, also called Profit and Loss statement, is a financial statement that shows sales, cost of sales, gross margin, operating expenses, and profits or losses.
indirect costs Indirect costs are costs related to expenses incurred in conducting or supporting research or other externally-funded activities but not directly attributable to a specific project.
interest payable Interest Payable is the portion of Loan Interest that is due within the next year. Interest Payable is a Current Liability.
inventory Inventory is a company's merchandise, raw materials and finished and unfinished products which have not yet been sold.
inventory turnover Inventory turnover is total cost of sales divided by inventory. Inventory turnover is usually calculated using the average inventory over an accounting period, not an ending-inventory value.
jobber Jobber is an intermediary that buys from producers to sell to retailers and offers various services with that function.
liability Liability is a financial obligation, debt, claim or potential loss. Usually debt on terms of less than five years is called short-term liabilities, and debt for longer than five years in long-term liabilities.
liquidity Liquidity is a company's ability to meet current obligations with cash or other assets that can be quickly converted to cash. Liquidity is one of the most important characteristics of a good market. Liquidity also refers to how easily investors can conver
loan interest Loan Interest is the expense of borrowing money. A total loan payment would consist of Loan Interest plus the repayment of Loan Principal.
loan principal Loan Principal is the original amount of money borrowed
long term assets Long term assets are assets like plant and equipment that are depreciated over terms of more than five years, and are likely to last that long, too.
long term liabilities Long term liabilities is the amount owed for leases, bond repayment and other items due after 1 year.
loss Loss is an accounting concept, the exact opposite of profit, normally the bottom line of the Income Statement, which is also called Profit or Loss statement. Start with sales, subtract all costs of sales and all expenses, and that produces profit before t
market segmentation Market segmentation is the categorization of potential buyers into groups based on common characteristics such as age, gender, income, and geography or other attributes relating to purchase or consumption behavior.
market share Market share is the total sales of an organization divided by the sales of the market they serve.
marketing plan Marketing plan is a written document containing description and guidelines for an organization's or a product's marketing strategies, tactics and programs for offering their products and services over the defined planning period, often one year.
marketing-cost analysis Marketing-cost analysis is assigning or allocating costs to a specified marketing activity or entity in a manner that accurately captures the financial contribution of activities or entities to the organization.
mission statement Mission statement is a statement that captures an organization's purpose, customer orientation and business philosophy.
net profit Net profit is the operating income less taxes and interest. Net profit is same as earnings or net income.
net profit margin Net profit margin is a ratio comparing net profit after taxes to revenue. Investorscan calculate the net profit margin by using the income statement. Net profit margin is calculated by dividing income before extraordinary items by total revenue and multi
net worth net worth is the amount by which total assets exceed total liabilities. Also known as shareholder's equity or book value, net worth is what would be left over for shareholders if the company were sold and its debt retired.
opening balance Opening Balance is the amount of cash on-hand at the start of each month before any sales have occurred or any other inflow of cash on a Cash Flow Statement. The Opening Balance is always equal to the previous month's Ending Balance.
operating expenses Operating Expenses are the expenses incurred by the business that are not directly related to production such as utilities, salaries, office supplies, etc. Operating Expenses do not change when the business' level of production rises or falls. Operating e
operating income Operating Income is the profit realized from the day-to-day operations of the business. Operating income is net sales less direct and indirect operating costs and before deducting cost of capital, extraordinary items and taxes.
opportunity analysis Opportunity analysis is the process of identifying and exploring revenue enhancement or expense reduction situations to better position the organization to realize increased profitability, efficiencies, market potential or other desirable objectives.
outsourcing Outsourcing is the process of subcontracting operations and support to an organization outside the company to replace performance of the task with an organization's internal operations.
PEST analysis PEST Analysis is a technique for identifying and listing the political-legal, economic, socio-cultural and technological factors in the general environment most relevant to an organisation at that time. PEST analyzing is often used for generating marketin
positioning Positioning is devising an organization's offering and image to occupy a unique and valued place in the customer's mind relative to competitive offerings. A product or service can be positioned on the basis of an attribute or benefit, use or application,
premiums Premium is a product-oriented promotion that offers some free or reduced-price item contingent on the purchase of advertised or featured merchandise or service. The term Premium is also used for the amount payable for an insurance policy.
price elasticity Price Elasticity is the measure of how price sensitive demand for a product is. If demand is elastic, unit sales fall sharply as the price of the item is increased, leading to an overall decrease in sales revenue. If demand is inelastic, unit sales may st
pro forma income statement Pro forma Income Statement is a projected Income Statement. Pro forma in this context means projected. An income statement is the same as a profit and loss statement, a financial statement that shows sales, cost of sales, gross margin, operating expenses,
pro forma statements Pro Forma Statements are the financial statements that project the results of future business operations. Examples include a pro forma balance sheet, a pro forma income statement, and a pro forma cash flow statement.
product line Product Line is a group of products marketed by an organization to one general market. The products have some characteristics, customers and uses in common and may also share technologies, distribution channels, prices, services and other elements of the
profit Profit is an accounting concept, normally the bottom l;ine of the Income Statement, which is also called Profit or Loss statement. Start with sales, subtract all costs of sales and all expenses, and that produces profit before tax. Subtract tax to get net
quick ratio Quick Ratio is a measure of a company's liquidity, used to evaluate creditworthiness. Quich ratio is calculated as quick assets divided by current liabilities. also called acid-test ratio.
raw materials Raw Materials are unprocessed natural resources or products used in manufacturing.
retained earnings Retained Earnings are the profit made by the business that has not been paid out to the owners as Dividends. Retained Earnings are available for reinvestment into the business. On the balance Sheet, Retained Earnings is listed as a Liability.
return on investment (ROI) Return on Investment or ROI is a return ratio that compares the net benefits of a project, verses its total costs. ROI is a measure of operating performance and efficiency in utilizing assets by a company.
revenue Revenue is the total flow of funds into a company, mostly for sales of its goods or services. Revenue is the earnings of a company before any costs or expenses are deducted. Revenue includes all net sales of the company plus any other revenue associated w
salvage value Salvage value is the value of a capital asset at end of a specified period. Salvage value is also know as scrap value, trade-in value, and residual value. Salvage value is the current market price of an asset being considered for replacement in capital bu
sole proprietorship Sole Proprietorship is a business owned and managed by one person, who is personally liable for all business debts and obligations. For tax purposes, the owner and his or her business are one entity, meaning that business profits are reported and taxed on
straight-line depreciation Straight-Line Depreciation is a method for calculating the yearly amount of Depreciation for an item. Yearly Straight-Line Depreciation is the original purchase price of the item divided by the number of years that the business expects to use the item; ac
sunk cost Sunk cost are the past expenditures for a given activity that are typically irrelevant in whole or in part to future decisions. The "sunk cost fallacy" is an attempt to recoup spent dollars by spending still more dollars in the future.
switching costs Switching Costs are the costs incurred in changing from one provider of a product or service to another. Switching costs may be tangible or intangible costs incurred due to the change of this source.
SWOT analysis SWOT analysis is a formal framework of identifying and framing organizational growth opportunities. SWOT is an acronym for an organization's internal Strengths and Weaknesses and external Opportunities and Threats.
target market Target Market is a defined segment of the market that is the strategic focus of a business or a marketing plan. Normally the members of this segment possess common characteristics and a relative high propensity to purchase a particular product or service.
taxes incurred Taxes incurred is the term used for all the taxes owed but not yet paid.
total assets Total Assets is the total sum of all property owned by the business including permanent assets such as buildings, machinery, etc. Total Assests is calculated as Long-Term Assets plus Current Assets.
total costs Total Costs is the total sum of all money owed by the business and calculated as fixed Costs plus direct costs.
trade credit Trade Credit is a business has received Trade Credit when it buys goods from a vendor who does not expect immediate payment.
unit variable cost Unit variable cost is the specific labor and materials associated with a single unit of goods sold. Unit variable cost does not include general overhead.
valuation Valuation is the term used for estimating the value of a piece of property usually by considering its replacement cost or its actual cash value.
variable costs Variable Cost are the costs that fluctuate in direct proportion to the volume of units produced. The best and most obvious example are physical costs of goods sold, direct costs, such as materials, products purchased for resale, production costs and overh
venture capital company Venture Capital Company is an investment company that invests its shareholders' money in startups and other risky but potentially very profitable ventures. Venture capita companies focus on businesses that are likely to experience very rapid growth and ar
working capital Working capital includes the accessible resources needed to support the day-to-day operations of an organization. Working capital is commonly in the form of cash and short-term assets including accounts receivable, prepaid expenses, and short-term account


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Business Plan Dictionary

HJ Ventures International, Inc. specializes in: business plan consulting for startup companies, strategic business development, and introduction to capital. The company has raised millions of dollars in capital on behalf of its early stage clients.

Glossary of Business Plan Definitions

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Glossary - Business Plan 2001-2003 HJ Ventures International, Inc.