The domain of business and entrepreneurship is huge. It is laden with all sorts of industries worth varying amounts. Yesterday I was watching a YouTube video where it was mentioned that the art industry alone is worth over US$1.7 trillion. Suffice to say there are plenty of opportunities in business and entrepreneurship. Given how big this domain is it is not surprising that there are key or common terms used therein. Some terms are misused whilst others are misunderstood. I am explaining some common terms in business and entrepreneurship in this article.

Acquisition

You probably have heard the term mergers and acquisitions. An acquisition refers to the process of acquiring another business or startup. It in essence means someone or some other entity will be taking ownership of another business or startup.

Angel Investors

They are investors who avail capital for starting or growing a business or startup. They also provide it with advisory services and help it network strategically. They tend to play an indirect role in doing the aforementioned things. This is why the ‘angel’ aspect is there to denote their relaxed and warm approach when dealing with investees.

Business

Business is the activity of providing goods and services involving financial, commercial and industrial aspects. It can also be defined as an organized rollout of activities especially aimed at selling products or services for profit-making. The distinguishing element about a business is that it is organized (typically registered), that is one. Secondly, it is majorly concerned with profit-making. It is usually long term, involves well laid out strategic plans, structured standard operating procedures, and involves the pursuance of an unoriginal idea.

Consumer Direct Marketing

This is one approach of networking marketing that you can use – it is quite common nowadays. What happens here is that those doing the distribution are consumers themselves. This means they get to purchase the products or services for personal consumption as well.

Debt Financing

This is a financing option where a startup or business receives capital that it will pay back later. The payback will involve an interest rate that would have been agreed on. Plus the money will have to be paid back within a stipulated period.

Downline

If you have ever heard about network marketing or multilevel marketing then you could have heard this term mentioned. When you join a multilevel marketing network the thrust is normally for you to sign up others. The catch is that you will earn commissions from subsequent sales made by those signed up under you. The chain of people signed up under you is what is referred to as the, or you’re downline.

Entrepreneurship

There are various definitions, so much that I had to put together an all-encompassing one. Entrepreneurship is the addressing of a common, widespread problem using a novel or disruptive solution, often tech-based that is monetizable. There are four unique identifiers for entrepreneurship namely, there is a significant amount of innovation, an overwhelming thrust to revolutionize how things are done, a strong aim to create employment or contribute to the economy, and altruistic efforts (e.g. philanthropy).

Equity Financing

This is when a business or startup receives capital from a financier but will not be required to pay it back. Rather they will get the money in exchange for the financier getting a stake in the business or startup. Let us suppose a startup venture is worth US$45 million. The startup owner can decide to say that US$13.5 million (which is 30 per cent) will be bankrolled by equity financing. This means if they find that equity financier they (the equity financier) will effectively own 30 per cent of the business or startup.

Independent Contractor

Most people are independent contractors and do not even know they are. An independent contractor is someone who provides an independent business service or practices an independent trade. They offer their services to the public and have overall control over how they produce the intended result or outcome.

Joint Venture

You might have seen me using this term at times. A joint venture is usually a temporary or short term arrangement between two or more entities meant to achieve specific objectives of a partnership. Joint ventures are instrumental in market penetration and also for pooling resources together.

Limited Liability Company

This is an option in company registration where your business or startup will be a legal entity that is not taxable itself. The profits and tax benefits are split any way the shareholders decide. A limited liability company (LLC) protects personal assets from business debt.

Line Of Credit

This term is mentioned a lot in economic issues if you have noticed. A line of credit is like a loan given out but it is not your typical loan. Generally, when a loan is given out it is meant to be paid back in full and with interest. For a line of credit, interest is only paid on the actual amount used. Thus payments will be done periodically instead of the outstanding balance.

Merger

This is when two entities that were standalone prior are joined together. The real essence of a merger is that the entities first of all dissolve. After that, they then combine their assets and liabilities into a whole new entity.

Outsourcing

This is also another term I have mentioned a lot in my articles. Outsourcing is the contracting or subcontracting of non-core activities in a business or startup. The goal behind this is to free up cash, staff, time, and infrastructure for core activities. The core activities are those that constitute the entity’s competitive advantage. Examples of areas that can be outsourced are accounting, marketing, and manufacturing.

Strategic Alliance

This is a relationship struck between two businesses or startups. The aim will be to collaborate or put their hands together for a specific purpose. Here there is no need to form a new entity in pursuance of that specific purpose (as is the case for a joint venture). Rather the two entities remain separate and distinct.

These are some of the common terms used in business and entrepreneurship. Make an effort to be acquainted with these terms as knowing them can be useful critical scenarios you might come across.