APPENDIX DBusiness Plan Glossary
Business has a unique language. This glossary of business terms can help you understand and be understood in the world of business planning.
Accounts payable
Money that you or your business owes to others.
Accounts receivable
Money owed to you or your business.
Accrual
An accounting term for the increase over time of expenses incurred by your business. They are accrued up until the time they are paid.
Acid-test ratio
A measurement of how well a business can meet its short-term financial obligations without selling any inventory.
Acquisition
The takeover of a business by another company.
Added value
The process of going the extra mile with a customer. Added value is also used to describe when products and services include additional features beyond what is generally desired by the customer, at no additional cost.
AIDA
Attention, Interest, Desire, Action.
Anchor store
A major retailer chosen for its ability to drive traffic to the mall or shopping center in which it's located.
Asset
Things of value. Tangible assets include cash, receivables, inventory, and buildings. Intangible assets include goodwill.
Automatic reordering system
Program that reorders merchandise when in-store supplies fall below a predetermined level.
Average inventory cost
Average inventory cost is found by adding the beginning cost inventory for each month plus the ending cost inventory for the last month in the period. If calculating for a season, divide by 7. If calculating for a year, divide by 13.
B2B
A sales organization whose primary effort is selling to and doing business with other businesses.
B2C
A sales organization whose primary effort is selling to and doing business with consumers or with individual users.
Base salary
The guaranteed portion of a salesperson's monetary compensation. Base salaries reward salespeople for their accumulated experience and overall selling efforts.
Benefit
The value experienced by the customer as a result of the purchase of a product or service. Salespeople who focus on communicating benefits and aligning those benefits to a customer's business objectives increase the likelihood of gaining a sale.
Big-box store
Large standalone store specializing in one category of merchandise (e.g., Home Depot).
Bill of lading
A contract between a freight company and a shipper regarding transportation, which includes the exact contents of the delivery.
Body language
The gestures, body movements, and mannerisms by which a person communicates his outlook or frame of mind.
Bonus
In sales compensation, this refers to a type of incentive payment, typically awarded when the salesperson or sales team achieves predetermined financial objectives.
Brand
A name, term, or symbol used to identify the products and services of the selling organization and to differentiate them from those of competitors.
Brand awareness
A gauge of marketing effectiveness measured by the ability of a customer to recognize and or recall a name, image, or other mark associated with a particular brand.
Break-even point
The point in business where the sales equal the expenses. There is no profit and no loss.
Brick and mortar
Brick-and-mortar store refers to retail shops that are located in a building as opposed to an online shopping destination, door-to-door sales, kiosk, or other similar site not housed within a structure.
Business cycle
A sequence of economic activities typically characterized by recessions, recovery, growth, and at times, decline.
Business plan
A detailed document describing the past, present, and future financial and operational objectives of a company.
Buyer
The person who purchases or procures the product or service you are selling. This person may also be the decision maker, but not necessarily.
Buying process
The steps a customer organization or a buyer actually takes in making a purchase for a product or service.
Buying signal
A statement or indication from a prospect or customer that suggests he is considering making a purchase.
Capital assets
Long-term assets used to produce income, such as buildings and equipment.
Cash discount
A percentage reduction in price for payment within a specified period of time.
Cash flow
The movement of money in and out of a business and the resulting availability of cash.
Chain store
One of a number of retail stores under the same ownership and dealing in the same merchandise.
Channel
The means by which an organization sells their products. A company who uses their own sales force is said to have a direct channel. Other channels include distributors, wholesalers, retailers, and agencies.
C-level executive
An executive in the organization whose title is often preceded by the word Chief, such as CEO, COO, CIO, CFO.
Close
The point at which the salesperson asks for a commitment to purchase the product or service being evaluated.
Commission
In sales compensation, this refers to a type of payment or revenue sharing resulting from achieving a sale or attaining a given sales level. Commissions are typically expressed as a percentage of the selling price for the product sold.
Commodity
Competing products or services that bear the same or similar characteristics.
Competitive advantage
Those areas deemed to have preferential value to a customer versus a similar competitive product.
Confidentiality agreements
Agreements between two parties affirming that the information exchanged during a relationship is maintained within the confines of the agreement and not shared beyond the agreement.
Contribution margin
The difference between total sales revenue and total variable costs. The term is applied to a product line and is generally expressed as a percentage.
Convenience products
Merchandise that is purchased frequently, without advance planning, including staples, impulse items, and emergency items.
Conversion
The methodology used to convert a customer's use of one product or supplier to another.
Cooperative
A group in which several retailers pool their resources to buy products at a discount from manufacturers; also called group buying.
Corporation
A legal entity that can buy, sell, and enter into contracts as if it were a person.
Cost-benefit analysis
The method a customer (or sales organization) follows to assess the viability of a recommendation, by examining the total amount of money, time, and resources used relative to the value being received.
Cost of goods sold (COGS)
The price paid for the product, plus any additional costs necessary to get the merchandise into inventory and ready for sale, including shipping and handling.
Customer profile
A document that outlines the critical information about a particular customer.
Customer relationship management (CRM)
The process used internally to manage customer relationships.
Demographics
Characteristics of a specific group of people, such as potential customers.
Desire
A longing, a wish. Strong desire drives ambition and performance.
Destination retailer
Retailer to which customers will make a special trip, even if it entails going out of their way.
Differentiation
The process of distinguishing services or products through design.
Direct marketing
The process of marketing directly to an end user. The most known form of direct marketing is direct mail.
Discount
A reduced amount (typically from list price) that is offered by the seller or the selling organization to encourage purchase of a product being offered.
Discount store
A self-service retail store with low markups. Example: Wal-Mart, Kmart.
Distributor
An indirect sales channel that markets or sells a product or service. Distributors are used by selling organizations to capitalize on the distributor's local presence and capacity to support the manufacturer.
Double entry
An accounting system that requires two balancing entries, a debit and a credit, to be made for each transaction.
Draw
In sales compensation, this refers to a cash advance, in anticipation of future sales performance.
Durable goods
Products that can be used frequently and have a long life expectancy, such as furniture, jewelry, and major appliances.
E-business
The term used to refer to conducting business via the Internet.
Economic benefit
The financial value of your product or service. This is tied closely to the term ROI, or return on investment.
Electronic shopping
Shopping over the Internet or through a TV cable channel.
Elevator speech
Sales slang for a short, thirty-second overview of who your company is, what it does, and what you do, with the intent of gaining an individual's interest to learn more and seek further discussion.
Empathy
The ability to communicate and understand someone else's situation and feelings.
Employer identification number (EIN)
Also known as a Federal Tax Identification Number, is used to identify a business entity. Most businesses need an EIN. You may apply for an EIN in various ways, including online.
Executive summary
Often considered the first page or first several pages in a business plan, summarizing the key issues, solution, and value a customer will receive by implementing the recommendation.
Feature
A characteristic of your product or service. The distinct parts of your product or service that can be described.
First in, first out (FIFO)
A method of stock rotation where goods that are received first are sold first. Newly received product is stocked behind the older merchandise.
Forecast
A salesperson or a sales manager's prediction of sales results as a result of analyzing where opportunities are in the sales cycle.
Free on board (FOB)
Shipping term used to indicate who is responsible for paying transportation charges. FOB factory means the buyer must pay shipping from the factory.
Free-standing store
Store that's not part of a shopping center or a mall.
Full line
Describes department stores that carry a full line of merchandise, from appliances and hardware to clothing and jewelry.
Goods
Tangible products for sale that can be held or touched.
Gross income
Total income derived from a business.
Gross margin
The difference between what an item costs and for what it sells.
Gross profit
Profit calculated after deducting all costs of merchandise, labor, and overhead.
Hard lines
A store department or product line primarily consisting of merchandise such as hardware, housewares, automotive, electronics, sporting goods, health and beauty aids, or toys.
Image
The impression customers have of a company or service.
Impulse items
Products that people purchase without planning for it, such as magazines or candy bars.
Inventory turnover
The number of times during a given period that the average inventory on hand is sold and replaced.
Just-in-time (JIT)
A term often used to denote the availability of goods and services when needed.
Keystone pricing
A method of marking merchandise for resell to an amount that is double the wholesale price.
Liabilities
Amounts that a business owes to suppliers and other creditors.
Loss leader
Merchandise sold below cost by a retailer in an effort to attract new customers or stimulate other profitable sales.
Loss prevention
The act of reducing the amount of theft and shrinkage within a business.
Manufacturer's representative (rep)
An independent salesperson that represents your organization and noncompeting products.
Margin
The difference between the cost of a product and its selling price, expressed as a percentage or dollars-per-unit.
Markdown
Planned reduction in the selling price of an item, usually to take effect either within a certain number of days after seasonal merchandise is received or at a specific date.
Market area
Geographic area from which a store draws its customers.
Market penetration
Your ability to enter and gain share in a specified market, generally measured in percentage terms.
Market share
An organization's portion of the total market, typically expressed as a percentage.
Marketing
The process followed by organizations to satisfy the needs, wants, and demands of their customers through the application and promotion of products and services that satisfy those customer requirements.
Marketing calendar
A tool used by retailers to show what marketing events, media campaigns, and merchandising efforts are happening when and where, as well as the results.
Markup
A percentage added to the cost to get the retail selling price.
Merchandise mix
The breadth and depth of the products carried by retailers. Also known as product assortment.
Mission statement
An organization's purpose for being. Mission statements typically communicate what an organization values.
Needs
That which is required or wanted by a customer. The ability of a sales professional to surface viable “must-address” needs (versus wants) leads to greater sales success.
Needs analysis
The process of formally evaluating a customer's needs and requirements.
Net lease
Lease in which the tenant pays the base rent plus property taxes. Also known as a single-net lease.
Net-net lease
Lease in which the tenant pays the base rent plus property taxes and building insurance. Also known as a double-net lease.
Net-net-net lease
Lease in which the tenant pays the base rent plus property taxes, building insurance, and maintenance. Also known as a triple-net lease.
Niche market
A unique segment of the market a selling organization is targeted toward. This unique segment, if served well, can provide areas of distinctive competitive value.
Nondurable goods
Products that are purchased frequently and used in a short period of time, such as beauty supplies and cosmetics.
OEM
Original equipment manufacturer.
Operating expenses
The sum of all expenses associated with the normal course of running a business.
Partnership
An entity where two or more people own a business.
Point-of-purchase display (POP display)
Marketing materials or advertising placed next to the merchandise it is promoting. These items are generally located at the checkout area or other location where the purchase decision is made. For example, the checkout counters of many convenience stores have numerous cigarette and candy POP displays.
Point-of-sale (POS) system
Combination of hardware and software that records customers’ purchases, accepts payments, and adjusts inventory levels.
Point-of-sale terminal
An electronic machine at a checkout station that feeds information from product tags directly into a computer.
Price
The monetary value placed on a product or service.
Private label
Products that are generally manufactured or provided by one company under another company's brand.
Process
A series of steps bringing about a desired result.
Product breadth
The variety of product lines offered by a retailer.
Product depth
The number of each item or particular style of a product on the shelves. Also known as product assortment or merchandise depth.
Profit margin
A ratio of profitability calculated as earnings divided by revenues. It measures how much out of every dollar of sales a retail business actually keeps in earnings.
Pro forma
Refers to the process of preparing a hypothetical income statement for a customer, based on a given set of assumptions.
Purchase order (PO)
A written sales contract between buyer and seller detailing the exact merchandise or services to be rendered from a single vendor.
Quantity discount
A reduction in price based on the amount purchased. May be offered in addition to any trade discount.
Request for proposal (RFP)
Used by customers to assess who will respond and evaluate solutions being posed.
Retail
The sale of small quantities of goods directly to the user.
Retailers
Businesses that buy goods from wholesalers or manufacturers and resell them to customers.
Return on investment (ROI)
The amount, expressed as a percentage, earned by an investment.
Sales floor
The location of a retail store where goods are displayed and sales transactions take place. For example, the receiving of merchandise takes place in the stock room, but all direct sales and customer interactions are done on the sales floor.
Service
A product/service mix that offers only a service, with no accompanying product needed or wanted, such as an insurance policy.
Shrinkage
Retail shrinkage is a reduction or loss in inventory due to shoplifting, employee theft, paperwork errors, and supplier fraud.
Softlines
A store department or product line primarily consisting of merchandise such as clothing, footwear, jewelry, linens, and towels.
Sole proprietor
One person (or a married couple) who owns a business.
Specialty products
Products that solve a specific want or need for specific customers, often expensive products with special characteristics or brand identity.
Standard industrial classification code
(SIC Code)
A coding system using four digits to identify specific industrial sectors within the federal government. The first two digits identify the broad industrial sector and the last two digits represent a facility's specialty within this broad sector.
Stock-keeping unit (SKU)
A number assigned to a product by a retail store to identify the price, product options, and manufacturer.
Supportive services
Free services offered to customers to increase convenience, make shopping easier, and entice customers to buy more.
Target market
The set of customers or organizations that you deem most viable for your product or service.
Trade credit
An open account with suppliers of goods and services.
Trade discount
A discount on the list price given by a manufacturer or wholesaler to a retailer.
Turnover
The number of times during a given period that the average inventory on hand is sold and replaced.
Universal product code (UPC)
Bar code used for electronic entry.
Value
The relative worth, utility, importance, or financial benefit that is assigned by a buyer to the product or service an organization sells.
Wholesale
The resale of large quantities of goods to a retailer.
Wholesaler
Sales channel typically engaged in the sale of goods in large quantities for resale.
Widget
An unnamed article or gadget used as a hypothetical example.
Word of mouth
Verbal recommendation and positive approval by a satisfied customer.
