Maybe you’re writing up a business plan or budget for your very first entrepreneurial endeavor – but you’re confused about some of the vocabulary you’ve encountered. Here’s a breakdown of some common financial and marketing terms that all new entrepreneurs learn, including “limited liability company,” “content marketing,” and more.
Limited Liability Company (LLC)
While exploring different business structure options for your company, you’ve probably come across the term “limited liability company”, often abbreviated to LLC. With LLC status, your personal financial assets won’t be affected should you run into liability issues in your business. Furthermore, you’ll benefit from tax breaks.
Although you could budget for a lawyer’s help with filing for an LLC in Texas, or simply file by yourself, it’s often easiest to handle this process through an online formation service. Take some time to read reviews first and evaluate different services.
Content Marketing
“Content marketing” is an umbrella term that can refer to many different types of print or digital marketing materials – but generally, this term describes blog posts, white papers, social media posts, emails, or even videos that are designed to spark interest in a brand. Content marketing materials must be educational and engaging to build authority and trust within a brand’s audience, with the goal of ultimately boosting sales.
Cash Flow
Your business’s “cash flow” is the movement of money into and out of your company – essentially, it’s the balance of your income and expenses. If your business is “cash flow positive,” you’re in a good position, as you have more money incoming than outgoing. But if your business is “cash flow negative,” you’re running on a deficit, which could put you at risk of losing your company.
Profit Margin
Understanding your “profit margin” is crucial to operating a successful business. According to Robinhood, your profit margin is the figure you get when you divide your company’s net profit, or total income minus total expenses, with your total revenue. This will show you exactly how profitable your company was over a given stretch of time.
Return on Investment (ROI)
While you can launch and run a business with minimal startup costs and overhead expenses, you’ll need to spend some money to operate your company. You want to ensure that your spending goes towards services, tools, and initiatives that boost sales. WallStreetMojo states that understanding your “return on investment,” or ROI, helps you see exactly how profitable a particular investment was.
Credit Score
One of the primary requirements for getting a business loan is having a good credit score. Banks and lenders use your credit score as an indicator of your ability to repay the loan on time, so having a good credit score can improve your chances of being approved for the loan. Having a good credit score also allows you to qualify for better interest rates and repayment terms, allowing you to save more money over the life of the loan.
Assets
In business, your “assets” can be anything with monetary value that you own or lease. Assets can include your inventory of raw materials and goods, your tools and equipment, your cash reserves, and even buildings and land.
Liabilities
“Liabilities” refer to your company’s legal obligations or responsibilities. The word can sound alarming – but all businesses have some standard liabilities, like accounts, interest, income taxes, notes, and wages or salaries payable. However, this term can be used in a different context. If a business is liable for failing to uphold certain legal or financial obligations, they may face litigation. Entrepreneurs in this situation will need to consult a lawyer.
When you become an entrepreneur, it can feel like you have to learn an entirely new language. As you come to understand terms regarding LLC formation, content marketing, or return on investment, communicating your ideas will be easier. With this guide, you’ll gain a better grasp on crucial business terminology!
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