25 Terms Business Consultants Need to Know
To be an effective business consultant, you have to understand business lingo. There are some general terms used in nearly every business (see below), but there is also jargon used by specific industries or even a specific business. It’s requisite for you to be knowledgeable about universal business terms in order to be taken seriously, and to quickly assimilate the common terms (jargon) used in the industries you are serving. Many of the terms below you will know, but we encourage you to review the list to make sure you are able to speak the language of business.
1. ROI (Return on Investment): The amount of money you make or lose on an investment. It is generally referred to as a percentage. I invested $100. I made $20 on my investment. I have a 20% return on investment.
2. Lead Magnet: A free product or resource in exchange for a potential customer’s email (or contact info).
3. Loss Leader: A product that loses money, but draws people in to the store (or website). The assumption is more money will be made on the total number of products purchased.
4. Minimum Viable Product: The simplest and roughest version of a product that can be sold. A minimum viable product doesn’t have any bells and whistles, and is often used to test the viability of a product.
5. Proof of Concept: A real world proof that a product has interest and viability. For example, a successful pilot project for a product (or business) could reinforce that the concept is feasible.
6. Net Profit (a.k.a. The Bottom Line): Profitability after all costs and taxes are deducted.
7. Gross Profit: Sales minus the cost of goods. It doesn’t deduct for taxes and other expenses.
8. Overhead: All expenses to run a business minus labor and materials used directly to create a product. Common examples include rent, utilities, insurance, etc.
9. Marketing Avatar: A made up ideal client. It’s used to focus marketing materials and messaging. For example, a business might have an Avatar named Dave, 34 years old, tech engineer, 2 kids, and a penchant for reading history. They would direct their marketing to “Dave.”
10. Primary Demographic: The specific characteristics of the most likely group of people to purchase a product or service. For example, caucasian women, 40-50 years old, frequent joggers, etc.
11. Equity: A share of the business. If you had 20% equity in a business, you own 20% of it.
12. Stock: A formal portion of a company. Stock is sold to raise capital for a business or for owners to capitalize on the value of their company.
13. Scaling: The ability to increase productivity to meet an increasing demand. If you sold 10 widgets in September, but you sold 500 in October, you would need to increase (scale) production to meet demand.
14. Sunk Costs: Expenses (costs) that have already occurred and cannot be recovered.
15. Mission Statement: A summary of the aims and values of an organization. Example, “Ted: Spread Ideas.”
16. Vision Statement: a statement declaring the long-term ambitions for an organization. For example, “Alzheimer’s Association: A World without Alzheimer’s Disease.”
17. Company Culture: The common relational dynamics and values of an organization.
18. Turnover Rate: How often a position, or positions, are being vacated and filled within an organization. “We can’t seem to keep people around, our turnover rate is terribly high.”
19. Business Verticals: Niches for businesses to focus their products and offerings. They can include industries (coal, sneakers, etc.) or they can include characteristics of people (vegans, athletes, etc.). Recognizing verticals help organizations focus on serving their most likely demographics.
20. Bootstrapping: Having founders spend their own money on starting and funding a business. This technique is in contrast to getting outside funding or support. Bootstrapping can be used to retain as much ownership control as possible, or when outside funding is unavailable.
21. Net Worth: The value of a company. The assets minus the liabilities.
22. Asset: Anything of value in a company. It can include physical properties, cash, intellectual property, etc.
23. Cash Flow: The fluid amount of cash coming into a company. Having healthy cash flow (bringing in enough money to cover expenses and make a profit) is necessary to maintaining a business.
24. Balance Sheet: A document that evaluates a company’s assets, liabilities, stock, etc. during a certain period of time. It can be used to evaluate a company’s financial health and valuation.
25. NDA (Non Disclosure Agreement): A formal agreement to not disclose any of the financial information, intellectual property, or research of an organization. An NDA is typically signed to protect an organization from having secrets or competitive advantages exploited.
26. OKRs (Objectives and Key Results): OKRs are made up of a defined goal and 3-5 key results. The key results are the measurements designed to track whether or not the goal is being achieved.
27. - Dividends: a portion of a business’s earnings distributed to stockholders of the organization. Dividends can be cash payments, stocks, etc. Most major companies pay dividends quarterly.
Bonus - B2B (Business to Business): When a business sells to another business (retailer, wholesaler, etc.). It is contrasted by B2C (Business to Consumer), in which a business sells to an individual.
Bonus #2 - SEO (Search Engine Optimization): the intentional attempt to have a website rank higher within search results on the internet. The more effective the SEO, the higher a website will rank in organic (non paid) searches.