When you first start out in any kind of business, the important things are to keep on top of the money coming and but more importantly, on the money going out. It’s amazing how many start up newbies seem to have no grasp on that critical side. However, just as important is knowing even the most basic business terminology. when they need to go out into the market place to seek additional funding or investment, it always shows when someone is inexperienced and doesn’t know their way around the financial systems. this leaves them wiee open to wolves and cut throats!
Take Venture capital – this is capital invested into projects with longer term potential but this comes with much higher risk and a start up business venture definitely comes under this heading. Whereas Working capital is the every day funding available to meet all current obligations such as salaries, working outgoings such as insurances and taxes etc. It is the sign of a company in full liquidity. Overheads – another every day business phrase which are costs that do not change, regardless of the type and scope of the production but are not usually involved with the cost of production – such as rental of the property. Other terms such as Nominal interest rate – this is the interest rate that is not adjusted to account for inflation. Now, how about Operating expenditure or OPEX, these are the everyday continuous costs for running a business operation or service that includes day to day expenditure. Another important subject that so often gets overlooked is Patents – these are official documents that absolutely prove that a company has the sole right to make, use or sell a particular invention. When a company or designer has applied to the patent office for official recognition that a patent is to be awarded, the item will be described as ‘patents-pending’. A Profit and loss account is also an absolutely essential piece of knowledge for the business owner. This is a financial statement that shows the income and outgoings of a company – usually over a set period of time, clearly showing the net profit (hopefully) or loss, for that period.
Photo by Austin Distel.
