Dissecting Business Lingo

In the startup world, an angel isn’t a divine being from the heavens, but a possible savior for your business. And your margins aren’t the white spaces at the edge of a document, but—if you’re lucky—an expanse of green.

For the uninitiated, navigating the business world can be baffling—even the terminology presents a steep learning curve. For someone who’s been drilled in the precise language of the sciences throughout their education and career, it can be doubly difficult.

On Wednesday, Alla Corey McCoy, director of startup support at UM Ventures, hosted the workshop “Business Lingo for Scientists” in the new Diamondback Garage. It was one in a series of workshops in collaboration with UM Ventures, Mtech and the Dingman Center for Entrepreneurship to help faculty and graduate students become more business-savvy.

“There’s a knowledge gap between being a great scientist and running a business,” McCoy said before it started. “All of the concepts we’ll be covering are needed for anyone to have a conversation with an investor or any other funding organization.”

Among the terms McCoy says researchers need to be familiar with when they enter the entrepreneurial realm:

Business Model: Defines how your business idea delivers products or services to customers, finances itself and creates profit. For example, will you sell to other companies, directly to consumers or a subscription service?

Margin: Your profit margin, also known as your profit minus the cost of producing your product.

Operating Income: Your revenue minus the cost of goods sold (how much it takes to make your product), the wages for your full-time employees, depreciation (spreading out and expensing the cost of large company purchases over a period of time) and amortization (spreading out repayments over time on a fixed schedule, e.g. mortgage, car lease).

Product/Market Fit: Where and how your product fits in the market. Does it satisfy a continually strong demand and are customers willing to pay enough to keep the business profitable?

Sales Projection: The amount of revenue you expect to earn in a certain amount of time.

Sunk Cost: An investment or cost that cannot be recovered. These usually shouldn’t be taken into consideration when making a decision on your future strategy.

Switching Cost: How much it would cost a customer to switch to your product from a competitor’s product. Is your product valuable enough to your consumers that they’re willing to pay?

Total Addressable Market: The number of customers who have a need for your specific product, who you can reasonably market and sell to. Knowing the specifics about your customer (age, gender, geographic location, income level, etc.), also known as your customer segment, is an important aspect of this.

Value Proposition: A statement explaining why consumers would choose your product or service over the competition, i.e. is it better, cheaper, faster?