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.
Money that you or your business owes to others.
Money owed to you or your business.
An accounting term for the increase over time of expenses incurred by your business. They are accrued up until the time they are paid.
A measurement of how well a business can meet its short-term financial obligations without selling any inventory.
The takeover of a business by another company.
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.
Attention, Interest, Desire, Action.
A major retailer chosen for its ability to drive traffic to the mall or shopping center in which it's located.
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.
A sales organization whose primary effort is selling to and doing business with other businesses.
A sales organization whose primary effort is selling to and doing business with consumers or with individual users.
The guaranteed portion of a salesperson's monetary compensation. Base salaries reward salespeople for their accumulated experience and overall selling efforts.
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.
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.
The gestures, body movements, and mannerisms by which a person communicates his outlook or frame of mind.
In sales compensation, this refers to a type of incentive payment, typically awarded when the salesperson or sales team achieves predetermined financial objectives.
A name, term, or symbol used to identify the products and services of the selling organization and to differentiate them from those of competitors.
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.
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.
A sequence of economic activities typically characterized by recessions, recovery, growth, and at times, decline.
A detailed document describing the past, present, and future financial and operational objectives of a company.
The person who purchases or procures the product or service you are selling. This person may also be the decision maker, but not necessarily.
The steps a customer organization or a buyer actually takes in making a purchase for a product or service.
A statement or indication from a prospect or customer that suggests he is considering making a purchase.
Long-term assets used to produce income, such as buildings and equipment.
A percentage reduction in price for payment within a specified period of time.
The movement of money in and out of a business and the resulting availability of cash.
One of a number of retail stores under the same ownership and dealing in the same merchandise.
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.
An executive in the organization whose title is often preceded by the word Chief, such as CEO, COO, CIO, CFO.
The point at which the salesperson asks for a commitment to purchase the product or service being evaluated.
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.
Competing products or services that bear the same or similar characteristics.
Those areas deemed to have preferential value to a customer versus a similar competitive product.
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.
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.
Merchandise that is purchased frequently, without advance planning, including staples, impulse items, and emergency items.
The methodology used to convert a customer's use of one product or supplier to another.
A group in which several retailers pool their resources to buy products at a discount from manufacturers; also called group buying.
A legal entity that can buy, sell, and enter into contracts as if it were a person.
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.
A document that outlines the critical information about a particular customer.
Customer relationship management (CRM)
The process used internally to manage customer relationships.
Characteristics of a specific group of people, such as potential customers.
A longing, a wish. Strong desire drives ambition and performance.
Retailer to which customers will make a special trip, even if it entails going out of their way.
The process of distinguishing services or products through design.
The process of marketing directly to an end user. The most known form of direct marketing is direct mail.
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.
A self-service retail store with low markups. Example: Wal-Mart, Kmart.
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.
An accounting system that requires two balancing entries, a debit and a credit, to be made for each transaction.
In sales compensation, this refers to a cash advance, in anticipation of future sales performance.
Products that can be used frequently and have a long life expectancy, such as furniture, jewelry, and major appliances.
The term used to refer to conducting business via the Internet.
The financial value of your product or service. This is tied closely to the term ROI, or return on investment.
Shopping over the Internet or through a TV cable channel.
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.
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.
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.
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.
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.
Store that's not part of a shopping center or a mall.
Describes department stores that carry a full line of merchandise, from appliances and hardware to clothing and jewelry.
Tangible products for sale that can be held or touched.
Total income derived from a business.
The difference between what an item costs and for what it sells.
Profit calculated after deducting all costs of merchandise, labor, and overhead.
A store department or product line primarily consisting of merchandise such as hardware, housewares, automotive, electronics, sporting goods, health and beauty aids, or toys.
The impression customers have of a company or service.
Products that people purchase without planning for it, such as magazines or candy bars.
The number of times during a given period that the average inventory on hand is sold and replaced.
A term often used to denote the availability of goods and services when needed.
A method of marking merchandise for resell to an amount that is double the wholesale price.
Amounts that a business owes to suppliers and other creditors.
Merchandise sold below cost by a retailer in an effort to attract new customers or stimulate other profitable sales.
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.
The difference between the cost of a product and its selling price, expressed as a percentage or dollars-per-unit.
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.
Geographic area from which a store draws its customers.
Your ability to enter and gain share in a specified market, generally measured in percentage terms.
An organization's portion of the total market, typically expressed as a percentage.
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.
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.
A percentage added to the cost to get the retail selling price.
The breadth and depth of the products carried by retailers. Also known as product assortment.
An organization's purpose for being. Mission statements typically communicate what an organization values.
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.
The process of formally evaluating a customer's needs and requirements.
Lease in which the tenant pays the base rent plus property taxes. Also known as a single-net lease.
Lease in which the tenant pays the base rent plus property taxes and building insurance. Also known as a double-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.
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.
Products that are purchased frequently and used in a short period of time, such as beauty supplies and cosmetics.
Original equipment manufacturer.
The sum of all expenses associated with the normal course of running a business.
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.
An electronic machine at a checkout station that feeds information from product tags directly into a computer.
The monetary value placed on a product or service.
Products that are generally manufactured or provided by one company under another company's brand.
A series of steps bringing about a desired result.
The variety of product lines offered by a retailer.
The number of each item or particular style of a product on the shelves. Also known as product assortment or merchandise depth.
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.
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.
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.
The sale of small quantities of goods directly to the user.
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.
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.
A product/service mix that offers only a service, with no accompanying product needed or wanted, such as an insurance policy.
Retail shrinkage is a reduction or loss in inventory due to shoplifting, employee theft, paperwork errors, and supplier fraud.
A store department or product line primarily consisting of merchandise such as clothing, footwear, jewelry, linens, and towels.
One person (or a married couple) who owns a business.
Products that solve a specific want or need for specific customers, often expensive products with special characteristics or brand identity.
Standard industrial classification 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.
Free services offered to customers to increase convenience, make shopping easier, and entice customers to buy more.
The set of customers or organizations that you deem most viable for your product or service.
An open account with suppliers of goods and services.
A discount on the list price given by a manufacturer or wholesaler to a retailer.
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.
The relative worth, utility, importance, or financial benefit that is assigned by a buyer to the product or service an organization sells.
The resale of large quantities of goods to a retailer.
Sales channel typically engaged in the sale of goods in large quantities for resale.
An unnamed article or gadget used as a hypothetical example.
Word of mouth
Verbal recommendation and positive approval by a satisfied customer.