Beachhead: An initial market segment that you will aim to serve. Establishing a beachhead marker can help you to gain a foothold in other markets--and, importantly, it can also teach you about the effectiveness of your offering.
Business Model: An overview of what an organization does, including the customers you serve, key products or services, revenue sources, operations, expenses, marketing, and strategy. You can communicate your business models in a variety of forms, ranging from formal narrative business plans to a diagram captured by a business model canvas.
Burn Rate: How much money a new business needs to continue operating on a monthly basis. See also: runway.
Capital, or Capital Raise: Another term for money or fixed resources that businesses need to operate. All businesses must have capital in order to purchase assets, maintain their operations and grow. Often, entrepreneurs will talk about 'raising capital' when finding additional investors.
Customer Discovery: The process of identifying and understanding your first customers.
Cost of Goods Sold (COGS): How much it costs you to make each individual product that you sell. Example: You sell phone cases, and it costs you $0.50 in materials and $2.00 in labor costs for each case, for a total COGS of $2.50.
Horizontal Scaling: Extending your volume by bringing your products or services to a new market.
Input Efficiency: A measure of the materials, labor, and other contributions relative to the output you create. Greater input efficiency means that you produce greater impact using the same amount of money or materials.
Intellectual Property (IP): IP refers to protections for your ideas, often in the form of legal barriers to who can use them without your permission. Examples of IP include patents, copyright, trademarks, and trade secrets.
Market Opportunity: The potential customers and/or revenue that a given product or service might be able to target. Often a new or different area that is not addressed by competitors.
Product-Market Fit: An initial match between a product you can sell and a well-defined set of customers that are interested in paying you for it. Generally seen as evidence for a good value proposition. "It took us 2 years, but we've finally found product-market fit, and our monthly revenue and recurring customers have both tripled in the past six months."
Revenue Model: The approach to bringing in money for covering expenses such as staff, raw materials, operating costs, marketing, etc. This is how you generate the funds needed to create and deliver your offering. (Sometimes people use the term “business model” to refer to revenue generation method, but we reserve business model to cover the more general picture of your organization’s strategy, structure, operations, revenue, marketing, and how they all fit together.) You may generate revenue from sales, services, partnerships, or other methods (see https://www.cmu.edu/swartz-center-for-entrepreneurship/assets/revenue-models.march-2015.pdf)
Runway: The ratio between cash reserves and burn rate, giving the number of months that a business can continue to operate at current levels without increases in revenue or raising more capital.
Social Business Model: A type of business model in which an entrepreneur aims to create social or environmental impact along with making money.
Subsidy Model: An approach to funding your work that relies on support from different sources. In a cross-subsidy approach, for example, sales revenue from one product or service offset the cost of offering the same product to a different market segment or allow you to offer a different product to the market. This cost offset can make the cross-subsidized product free or low-cost for customers who otherwise would not purchase it.
Target Reach: The width and depth of your intended customer base.
Value Proposition: A statement of the benefits and value of a product or service to the target customer. It consists of several key components:
- What is offered and how it is offered to target customers.
- What type of value or benefit is associated with the offering (for example, cost savings, time savings, revenue increase, customer/employee satisfaction), and how much of it the customer can expect.
- How the value is generated.
- Why it differs from anything else on the market.
Vertical Scaling: Extending your offering by adding additional products or services to the customers you already served in your existing market.