Being an entrepreneur is one of the most rewarding experiences you can have. However, it's not all fun and games. If you want to be a successful entrepreneur, you need to understand common business terms. Here are a few of the most important ones the New Bern Chamber of Commerce thinks you should know about.
LLC
A limited liability company (LLC) is a business structure that offers personal liability protection and tax benefits. LLCs in North Carolina are easy to form and maintain, and they can be a great way to get your business off the ground. You can work with an attorney to establish an LLC, or you can save money and work with an online formation service. Right now, you can set up your LLC with ZenBusiness and pay nothing but North Carolina’s legally-required fees!
Cash Flow
Cash flow is the movement of money in and out of your business. Positive cash flow means that more money is coming into your business than going out; negative cash flow means the opposite. To ensure positive cash flow, you need to carefully track your expenses and make sure you bring in more money than you spend.
Profit Margin
Profit margin is a measure of how much profit your business is making relative to its revenue. To calculate it, simply divide your net profit (total revenue minus total expenses) by your total revenue. The higher your profit margin, the more profitable your business is.
Accounts Payable vs. Accounts Receivable
Accounts payable is money that your business owes to creditors; accounts receivable is money that is owed to your business by debtors. It's important to keep track of both so that you can manage your cash flow effectively.
Balance Sheet
A balance sheet is a financial statement that shows what your business owns (assets) and what it owes (liabilities). The difference between the two is your equity—in other words, how much ownership stake you have in the company.
Break-Even Point
The break-even point is the point at which your revenues equal your expenses. That is, it's the point at which you're neither making a profit nor incurring a loss. To calculate it, simply divide your total fixed costs by your price per unit minus your variable costs per unit.
B2B vs B2C
Business-to-business (B2B) businesses sell products or services to other businesses; business-to-consumer (B2C) businesses sell products or services directly to consumers. For example, a B2B business might sell office supplies to another business, while a B2C business might sell those same office supplies directly to consumers through its website or brick-and-mortar store.
SEO
SEO stands for Search Engine Optimization. It's the practice of optimizing websites for better visibility in search engine results pages (SERPs). By improving their SEO, businesses can increase their online traffic and visibility, which may lead to increased sales and profits.
Return on Investment (ROI)
ROI is a measure of how much profit you're making relative to your investment—for example, how much money you're making for every dollar you spend on marketing or advertising. To calculate it, simply divide your net profits by your total marketing expenses. The higher your ROI, the more efficient and effective your marketing efforts are.
Sales Funnel
The sales funnel is the process that businesses use to turn potential customers into paying customers. It typically consists of four stages: awareness, interest, decision, and action.
Start with a Strong Foundation
These are some of the common business terms that all entrepreneurs should know if they want to be successful in today's competitive landscape. While there are more, these will give you a great start as you set up and run your business. You now know whether an LLC is the right choice and that you need to look into SEO for your digital marketing, which is a great start! By understanding these terms and putting them into practice, you'll be well on your way to building a strong foundation for your new business!
