An Entrepreneur’s Primer on Business Jargon
Entrepreneurship is an exciting way to take control of one’s destiny and bring novel products or processes to customers in need. Just like any professional arena, the world of entrepreneurship comes with its unique language. Mastery of business jargon can pay enormous dividends for an emerging entrepreneurial endeavor, while a lack of linguistic skill can impede or slow success through misunderstanding.
According to Bersin & Associates, the greatest barriers to effective business communication include a lack of fluency, a lack of proficient vocabulary, and improper or ineffective word choice. This primer can serve as an introduction to entrepreneurship and business jargon. The terms listed here will give emerging entrepreneurs the basic language they need to start successfully communicating about their emerging companies.
What Makes the Business Unique?
The following business words and expressions are often used when entrepreneurs describe what makes their company different from all those that already exist.
Disruptive technology
If a product or service is going to change the entire way an established industry, community, or society operates, then it can be described as disruptive.
First-mover advantage (FMA)
FMA is when a company brings a novel product or service to market, which can be a significant advantage as there is little or no competition for the product. Of course, being the first to launch a product or service can also be a disadvantage; the creation of an entire market for a novel product takes more time, investment, and energy than improving on existing products.
Minimum viable product (MVP)
The MVP is a product or service that will please early adopters. It includes just the basics of the product’s uniqueness to attract early customers so that those customers can provide feedback to improve the product.
Pain point
This refers to a customer’s issue—real or imagined—that an entrepreneur aims to solve through an innovative service or product.
Return on investment (ROI)
This term has deep roots in the venture capital (VC) world; it means the gain or loss that investors will receive as a result of the money they put in. While it was first used in direct correlation with financial investments on behalf of VCs, the term is frequently used to refer to any other type of investment (e.g., time) on behalf of founders, employees, or customers.
Value proposition (value prop)
A value proposition is a statement that lets people know the specific reasons why a product, service, or company is going to be attractive to customers.
Who is the Customer?
Being able to define the intended customer for a product clearly is key to success in business. Here is some common customer-focused jargon used in the world of entrepreneurship.
Business to business (B2B)
If a product or service’s target customer is a company or organization, then the company is a B2B.
Business to consumer (B2C)
If the customer for the product is an individual, then the company is a B2C.
Customer profile
Customer profiles help entrepreneurs clarify who their product is created for. These profiles define aspects of the customer like age, geographic region, beliefs, occupation, buying habits, buying motivation, income, and more. Customer profiles help businesses engage in targeted, effective, and efficient marketing.
What is the Legal Structure for the Business?
There are five different ways that a business can be structured in the United States. The following jargon goes over these five different legal structures.
Corporation
Through the formation of a board of directors, an incorporated business exists as legally separate from the people who own and operate it. A corporation is, legally, considered similar to an individual, with all its own rights and privileges. Personal assets of shareholders in the company are protected in times of loss.
Limited liability company (LLC)
An LLC is a blend of a corporation and partnership. Like a partnership, the company entity is not taxable; like a corporation, partners’ personal assets are protected from business debt.
Partnership
In a partnership, two or more people own and operate the business. In a general partnership, all partners assume equal liability for the business, similar to that of a sole proprietorship. In a limited partnership, there are general partners who have clear roles and liabilities as well as limited partners. Limited partners have no control over the company and are considered investors. As a result, they have different liabilities than general partners. In a partnership, the corporation itself is not taxable.
S corporation
An S corporation blends the legal structure of a corporation with the tax requirements of a partnership. Income and losses in an S corporation are divided between and declared on the individual tax returns of each shareholder, much like a partnership. Like corporations, stockholder personal assets are protected in times of loss.
Sole proprietorship
A sole proprietorship is a business structure where there is no legal separation between the owner and the business, and the business owner claims all income and losses on their personal tax return. It is the simplest, easiest, and cheapest business structure.
How is the Business Being Financed?
The following jargon describes how entrepreneurs get early funding to make their business fly before they enter into an established profit cycle.
Angel investors
Angel investors are individuals who invest their own money in entrepreneurial ventures—usually smaller amounts than traditional VCs. They also often do not expect control over the business in return. Because angel investors are individuals, their motivation to invest varies but can include wanting to get better ROI than they would from traditional forms of investment, wanting to help move a company from self-funding to venture capital, or simply out of a desire to see a fellow entrepreneur succeed.
Line of credit
Like a credit card, but for business, a line of credit refers to when an entrepreneur borrows capital and only pays interest against the borrowed amount. Paying back the credit line can be done in small increments over time.
Venture capital
Venture capitalists (VCs) are individuals or groups who invest large sums of money for a limited period into high-growth businesses in exchange for partial ownership and high rates of return. When a company seeks to secure venture capital or when venture capitalists invest in companies, it is often when there is anticipation that the company will be sold to the public or larger companies in the future.
How is the Business Being Pitched?
Entrepreneurs need a pitch for every situation, and each kind of business pitch has its own jargon.
Cocktail Pitch
As the name implies, a cocktail pitch is how an entrepreneur catches someone’s attention when attention is very short—like when drinking cocktails. It should be a concise one-liner that encapsulates the concept while leaving the audience curious.
Elevator pitch
A bit longer than the cocktail pitch, the elevator pitch is how an entrepreneur catches someone’s attention when they have 20 to 60 seconds. In addition to being concise and powerful, the elevator pitch should be ideated ahead of time and well-practiced.
Pitch deck
A pitch deck is a short set of PowerPoint or Google slides that encapsulates the entirety of the business or entrepreneurial venture. A pitch deck explains the company in a brief yet compelling way and is designed as a complement to an in-person or online meeting. Pitch decks can be designed for potential investors, customers, or partners.
How Will a Business be Successful?
Investors and customers want to be involved with successful entrepreneurial endeavors. Using the following jargon about strategy can inspire confidence in stakeholders.
Exit strategy
An exit strategy is how an entrepreneur plans to exit the startup they created. Having an exit strategy for the company inspires confidence in investors and shows them that an entrepreneur has good business sense. Other exit strategies include creating contingencies for closing the company, or for merging the business with other existing companies.
Iteration
Iteration is a buzzword for those committed to continual growth. A product or service that is regularly iterated is released in new and improved versions. The lifecycle goes like this: a product is released (iteration one); the product improves, the business improves the product, and the product is released again in this improved state (iteration two). Continue repeating according to the changing times and customer needs.
Pivot
A pivot is when a company changes direction; this can be when a company fails or is struggling, or as it finds a better fit for its value proposition. For example, when Plan A isn’t working, a company can pivot into Plan B. Alternatively, because of a new partnership, a business can pivot into a new shared plan that wasn’t possible before the partnership.
More Jargon Resources
Although these terms can definitely help an entrepreneur start their linguistic journey through the world of business, there are many more terms worth learning. The following three sites are great resources for increasing your entrepreneurial vocabulary:
