Friday, July 15, 2016

Starting a Start Up? Make Sure You Know These Terms

When you’re starting a start-up, that usually indicates that you’re new to the business world, or at least to actually working and dealing in it. Being new, however, is not an excuse for not being knowledgeable and for not making every effort you can to educate yourself on common business, investing, and accounting terms that you need to know in order to have success.

We’ll help you out by teaching you a few basic, need-to-know terms right now, but remember, the more you educate yourself and the more you learn, the better.

Assets:

An asset is something that has financial value that your business owns outright. It is also something that you could lean on for financial benefit, if needed, in the future. It might be something you could sell off, like expensive equipment, or it could be plain cash, real estate, or investments. Essentially anything your business has of value is an asset and should be counted as such.

Equity

Equity is another important term you need to know. It is basically the ownership of your business and the value of that ownership. You use your equity and sell pieces of it off to get things you need to get the wheels turning on your project. You might sell off equity to obtain equipment, to rent a business space, or anything in between; equity is your value, so make the most of it!

Gross Margin

If you aren’t familiar with “gross margin,” then you need to be. This term refers to the percentage of your sales revenue that you earn AFTER you have deducted costs and expenses involved in providing your service or making your products. Obviously, the higher your gross margin, the better because it means you’re actually making money instead of just breaking even.

Depreciation

When something depreciates, that means that it goes down in value. And, unfortunately, many of your assets are likely depreciating with each passing day. That brand new printer, for example, is becoming less “new” by the minute. When assets depreciate, it is important to factor that into your accounting and your taxes; some items can even be taken off of your assets lists once they reach a certain level of depreciation.

Accounts Payable/Receivable

This is another important term and one that you’ll hear referred to a LOT, so it’s smart to go ahead and familiarize yourself with it now.

Accounts payable are accounts or money that you need to pay out for bills, operating costs, and more. Accounts receivable are accounts that you are waiting to receive money on, such as unpaid client or commercial accounts.


Obviously, there are a lot of terms to keep track of, and really, this list just begins to scratch the surface. However, the more you work to educate yourself and to learn all you can, the faster you’ll pick up new terms and, even more importantly, more business knowledge that will help you to make your start-up a smashing success.

No comments:

Post a Comment

I welcome your comments here :)