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Library Business Assistance: Glossary

Glossary of Business Terms

All definitions are taken from Small Business Sourcebook,
Twentieth Edition, Thompson Gale, Detroit, 2005.

Business license - A legal authorization issued by municipal and state governments and required for business operations.

Business name - Enterprises must register their business names with local governments usually on a doing business as (DBA) form. (This name is sometimes referred to as a fictional name.) The procedure is part of the business licensing process and prevents any other business from using that same name for a similar business in the same locality.

Business plan - A document that spells out a company's expected course of action for a specified period usually including a detailed listing and analysis of risks and uncertainties. For the small business, it should examine the proposed products, the market, the industry, the management policies, the marketing policies, production needs, and financial needs. Frequently, it is used as a prospectus for potential investors and lenders.

Credit rating - A letter or number calculated by an organization (such as Dun & Bradstreet) to represent the ability and disposition of a business to meet its financial obligations.

Economic indicators – Statistics used to express the state of the economy. These include the length of the average work week, the rate of unemployment and stock prices.

Entrepreneur – A person who takes the risk of organizing and operating a new business venture.

Equity partnership - A limited partnership agreement for providing start-up and seed capital to businesses.

Feasibility study - A study to determine the likelihood that a proposed product or development will fulfill the objectives of a particular investor.

Financial analysis – The techniques used to determine money needs in a business. Techniques include ratio analysis, calculation of return on investment, guides for measuring profitability, and break-even analysis to determine ultimate success.

Franchising - A form of licensing by which the owner of the franchise distributes or markets a product, method, or service through affiliated dealers called franchisees. The product, method, or service being marketed is identified by a brand name, and the franchisor maintains control over the marketing methods employed. The franchisee is often given exclusive access to a defined geographic area.

Home-based business - A business with an operating address that is also a residential address (usually the residential address of the proprietor).

Incorporation - The filing of a certificate of incorporation with the secretary of state, thereby limiting the business owner's liability.

Industry financial ratios - Corporate financial ratios averaged for a specified industry. These are used for comparison purposes and reveal industry trends and identify differences between the performance of a specific company and the performance of its industry. Also known as industrial averages, industry ratios, financial averages, and business or industrial norms.

Marketing – Promotion of goods or services through various media.

NAICS Code - The North American Industry Classification System (NAICS) uses six-digit codes to identify an industry. The NAICS system is gradually replacing the SIC system. Many resources use these codes to identify a company’s activities, index companies by activity, and to define industry data and information. 

Partnership - Two or more parties who enter into a legal relationship to conduct business for profit. Defined by the U.S. Internal Revenue Code as joint ventures, syndicates, groups, pools, and other associations of two or more persons organized for profit that are not specifically classified in the IRS code as corporations or proprietorships.

Proprietorship - The most common legal form of business ownership; about 85 percent of all small businesses are proprietorships. The liability of the owner is unlimited in this form of ownership.

Service Corps of Retired Executives (SCORE) - Volunteers for the SBA Management Assistance Program who provide one-on-one counseling and teach workshops and seminars for small firms.

SIC Code - Standard Industrial Classification (SIC) codes are four-digit codes used to identify an industry. Many resources use these codes to identify a company’s activities, index companies by activity, and to define industry data and information.

Small business - An enterprise that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people. For SBA purposes, the U.S. Small Business Administration (SBA) considers other factors (such as gross annual sales) in determining size of a business.

Small Business Administration (SBA) - An independent federal agency that provides assistance with loans, management, and advocating interests before other federal agencies.

Small business development centers (SBDC) - Centers that provide support services to small businesses, such as individual counseling, SBA advice, seminars and conferences, and other learning center activities. Most services are free of charge or available at minimal cost.

Start-up financing - Financing provided to companies that have either completed product development and initial marketing or have been in business for less than one year but have not yet sold their product commercially.

Subsidiary – A company that is owned in whole or in part by another company. When researching a subsidiary, it is often advantageous to also research the owning company or the parent company.

Venture capital - Money used to support new or unusual business ventures that exhibit above-average growth rates, significant potential for market expansion, and are in need of additional financing to sustain growth or further research and development; equity or equity-type financing traditionally provided at the commercialization stage, increasingly available prior to commercialization.