Formulas & Definitions

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  • Formulas & Definitions
    • Opportunity Costs: The cost of missing out on the next best alternative
    • Patent: When new innovative idea is given protection (20 yrs) against competitors copying
    • Trademark: Something that identifies a product (USP) i.e. name, logo, symbol
    • Copyright: Important source of protection for any startup, protection granted automatically and lasts 70 years after authors death
    • Added Value: The difference between the price of a finished product and cost of inputs used in making it
    • Niche Market: Small, specialist part of a larger market where customers have particular needs and wants
    • Franchise: The business format which a franchisor allows a franchisee to use, under license
    • Market Research: information that helps explain the size, structure and nature of a market
    • Primary Reseach: Info collected first hand for a specific research purpose (field research
    • Secondary Reseach: Info that already exists, collected for a different use (desk research)
    • Qualitative Reseach: Based on opinions, attitudes, beliefs and intentions, very specific
    • Quantitative Reseach: Based on proper samples and provides insights based on numerical data or surveys
    • Random Sample: Gives each member of population equal chance of being chosen
    • Quota Sample: Population segmented into groups with similar characteristics
    • Stratified Sample: Sample chosen (at random) just from a specific section of the population
    • Market: Any location where buyers and sellers come together to transact with each other
    • Demand: How much customers are prepared and willing to buy at a given price
    • Market Size: Measured in value and volume
    • Market Share: proportion (or %) of a market owned by each competitor or product
    • Market growth: The percentage of growth in the size of a market over a period of time
    • Sole Trader: Business owned by a single individual
    • Partnership: Where a business is owned by two or more people
    • Limited Company: A separate corporation owned by the shareholders
    • Unlimited Liabilty: The owner is liable for all the debts of the business
    • Limited liability: The liability of the owners is limited to the amount they invested
    • Social Enterprise: A business with a primary social objective whose surplus is reinvested for that purpose in the business/ community
    • Internal sources of finance: Personal sources (savings) or retained profit or sale of assets
    • External sources of finance: Share capital from outside investors, friends and fan, bank overdraft, loan, grants
    • Location: The physical place from which a business is operated and controlled
    • Quantitative Factors: Based on measurable information such as cost of premises, wage rates etc
    • Qualitative Factors: Based on personal opinions and preferences of the entrepreneur i.e. quality of life, local environment, prox to fam and friends
    • Full time employee: more than 30 hours a week
    • Part-time employee: works less than 30 hours a week
    • Permanent employee: Employed by business for a non-specified, open ended period of time
    • Temporary Employee: Employment for a specific period (i.e. 3 months) after which employment is terminated or renewed
    • Consultant: Individuals and businesses external to the business that provide specific services/ advice
    • Flexi time: Employees chosse the hours they work outside a standard set of hours set by the employer
    • Job sharing: Two workers share a full time job (i.e. 2 part timers)
    • Term time working: Normal permanent contract, but the employee can take unpaid time off in school holidays
    • Zero hour Contract: Staff work only the hours they are needed
    • Cots: Incurred in the marking and delivery of products/ services
    • Revenue: Amounts earned by a business by selling products/ services PRICE x QUANTITY
    • Profit: Difference between total revenue and total cots
    • Variable Costs: Costs which change as a result of changes in output
    • Fixed Costs: Costs which do not change in relation to changes in output
    • Breakeven point: The output at which total revenues equal total costs
    • Contribution: The difference between revenues and variable costs
    • Contribution per unit: Selling price per unit less variable cost per unit
    • Margin of Safety: The difference between actual output and break-even point
    • Cash Inflows: Receipts from customers, investments in the business, other receipts (sale of assets)
    • Cash Outflows: Payment to suppliers/ employees, finance costs, rental and lease payments
    • Income Budget: A difficult budget for a startup, sales budget needs to take into account factors such as the size of the market, existing competitors and their response and the capacity of a business
    • Expenditure Budget: What it will cost to deliver the planned product and support the business. Important that the expenditure budget is as detailed as poss
    • Profit Budget: The profit budget is simply the difference between the sales budget and the expenditure budget

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