Small Business Glossary: A
3 Cs model: A strategic planning framework developed by business strategist Kenichi Ohmae that incorporates three factors for success: the corporation, the customer, and competitors.
360-degree evaluation: A review and feedback model used for human relations purposes that includes input from a wide range of sources, including direct supervisors, subordinates, peers, and customers, as well as a self-assessment by the person being reviewed.
401(k) plan: A plan sponsored by U.S. employers that allows eligible employees to defer receipt of a portion of their salaries and contribute the amount, which may be matched by the employer, into a retirement savings investment account that incurs no taxes until the funds are withdrawn.
403(b) plan: Similar to a 401(k) plan, but sponsored by educational institutions and nonprofit organizations to allow their eligible employees to defer a portion of their salaries and contribute the amount, which may be matched by the employer, into a retirement savings investment account that incurs no taxes until the funds are withdrawn.
501(c)(3): A section of the Internal Revenue Code that exempts organizations from federal taxes and allows them to receive tax-deductible contributions if none of their earnings benefit private interests; if their efforts do not attempt to influence legislation or political campaigns; and if they are organized and operated exclusively for approved purposes.
80/20 rule: First observed by Vilfredo Pareto and sometimes called Pareto’s Principle; the theory that in any group 80 percent of results come from 20 percent of participants. For example, 80 percent of sales come from 20 percent of customers, as do 80 percent of problems. Economists refer to this as the law of maldistribution.
above the fold: Prime media placement, originally referring to newspaper ads or articles placed on the top half of a page, and recently applying to Web copy that is visible on the screen without scrolling downward.
accelerated depreciation: An approach for recording the decreasing value of a fixed asset over its useful life by expensing or writing off greater amounts in early years and lower amounts in later years; used most often for items likely to become obsolete and therefore require replacement earlier than items written off by the straight-line depreciation approach.
accountant: A professional responsible for reporting financial results following government and regulatory rules.
accounting: Recording, reporting, and analyzing financial transactions and economic activity in order to monitor financial performance, usually following the standardized set of rules and regulations called Generally Accepted Accounting Principles (GAAP).
accounting audit: Examination and verification of the accuracy of accounting records by a professional such as a certified public accountant (CPA), often undertaken by businesses seeking investors, loans, or to sell their businesses.
accounts payable: Bills received but not yet paid, which are listed on financial statements as short-term liabilities.
accounts receivable: Money owed to a business for products and services delivered by not yet paid for, carried on the balance sheet as short-term assets.
accrual: The process of adding periodically to an asset or debt, usually as a percentage over time.
accrual accounting; accrual-basis accounting: An accounting method that uses double-entry bookkeeping to arrive at a snapshot of financial condition by combining current cash inflow and outflow with future cash inflow and outflow based on customer and business commitments, recording revenues when they’re earned and expenses when they’re incurred, and showing each transaction in two accounts. For example, a $100 purchase of inventory is recorded as an addition to the inventory account and a reduction to the cash account. Accrual accounting differs from cash accounting, which uses a single-entry bookkeeping approach. Considered the gold standard in financial record keeping.
accrued expenses payable: Obligations of a business that are unpaid at the time a balance sheet is prepared, including salaries, insurance premiums, loan interest, and taxes owed.
acquire: To purchase a corporation, through either the purchase of its shares or its assets.
action plan: A detailed list of steps that must be taken for a program to be implemented or a goal to be achieved, including tasks to be accomplished, responsible parties, timeline to be followed, and available funds and resources.
ad hoc committee: A short-term single-purpose committee assembled to address a specific issue or objective and dissolved immediately after task completion, unlike a standing or long-term committee.
adverse: An audit opinion (usually presented by a CPA) concerning financial statements that says the statements as a whole don't present results fairly or don't conform with the generally accepted accounting principles (GAAP) of the United States.
advertising: Purchased announcements in mass media outlets including newspapers, magazines, television stations, radio stations, and Internet Web sites as a means for businesses, organizations and individuals to inform and persuade the thinking and actions of potential and current customers.
advertising agency: A business that plans, creates, and manages communications programs primarily focusing on advertising, but also handling promotions, digital communications, public relations, and brand image development for clients that contract services in order to obtain outside perspective and a level of expertise not available within the client’s own firm.
advertising campaign: A program that projects a carefully coordinated series of marketing communications that share a common theme and are delivered over a finite period to prompt increased awareness, demand, and buying action from those in the advertiser’s target audience.
advertising copy: Text written to quickly seize attention, inspire interest, and prompt a desired consumer action, often based on the findings of research and typically employing a prominent motivating title statement, called the headline, followed by an easily understandable and often clever explanation of product benefits and purchase information.
advertising frequency: The number of times an average person in an advertiser’s target audience is exposed to an ad over the period of an advertiser’s media schedule.
advertising reach: The estimated total number of target audience individuals or homes exposed to an ad at least once over the period of an advertiser’s media schedule.
advertising specialties; specialty media; SWAG: Inexpensive items that carry an advertiser’s name and logo, often accompanied by contact information and a promotional message, given free to customers and prospective customers as a way to gain and maintain awareness.
advocacy group: An association of individuals or organizations who unite to actively support or defend an idea, usually to influence policies or resource allocations through media campaigns, public presentations, publicity, and legislative lobbying efforts.
AdWords: Brand name for the highly targeted pay-per-click advertising program offered by Google through which an advertiser’s text-only message and Web site link appear on the same page as search results that contain the advertiser’s selected keywords. Every time a Web user clicks an AdWords ad, Google charges a predetermined amount up to a daily advertiser-determined maximum daily budget.
affiliate marketing: An Internet-based pay-for-performance or finders’-fee program through which a business rewards other businesses for referrals based on click-throughs, site registrations, sales, or other predetermined performance outcomes.
affiliate program: An agreement by which you contract to place ads on another business's Web site and pay that business when a visitor to the business's site clicks through to or purchases something from your site.
agent: In business, a person authorized to represent a client, called the principal, in purchase or sale transactions for which the agent is typically compensated through a commission covering a portion of the transaction value.
aging report: An analysis of invoices that shows how long each has been outstanding.
allocate: To set aside for a specific purpose.
Alternative Minimum Tax (AMT): A tax calculation devised by the Internal Revenue service to prevent wealthy and upper-middle income taxpayers from claiming so many deductions, credits, and exemptions that they avoid paying at least a minimum amount of tax.
American cut: A style of men's suit that has two or three buttons, a center-vented jacket with natural shoulders, and pants with a straight line.
Americans with Disabilities Act (ADA): A U.S. law enacted in 1990 that makes it unlawful for an employer to discriminate against a qualified individual with a disability, and that also prohibits discrimination against individuals with disabilities in government services, public accommodations, transportation, and telecommunications.
amortization: 1. Gradual elimination of a liability, such as a loan, through installment payments. 2. An accounting process that decreases the value of an intangible asset over the period of its projected useful life through charges that are reflected as operational costs on financial statements. Amortization of tangible or fixed assets is called depreciation.
angel investor: A wealthy individual willing to invest money, contacts, and expertise in startup businesses that are generally smaller than those seeking venture capital, often in exchange for an ownership stake in the business.
applicant: A person who applies for employment in a particular job.
aptitude: A natural ability or talent.
arbitration: A method for settling a noncriminal disagreement between two or more parties legally but outside the court system by employing an impartial referee, called an arbitrator, agreed to by all parties.
arbitrator: An impartial individual chosen by all parties involved in a noncriminal disagreement to referee and attempt to settle the dispute outside a court of law.
architecture: The relationship between your business and your brand that forms a single, understandable entity.
Area of Dominant Influence (ADI): The geographic area that an American broadcast station’s signal covers, based on research by the Arbitron Company and used by marketers in the planning and buying of ad placements.
asset: An item of economic value, listed on financial statements in categories that include current assets, which can be quickly liquidated for cash, and fixed or long-term assets, which may take a longer time to liquidate for cash. Intangible assets of value, such as contracts, exclusive licenses or permits, intellectual property, and the goodwill of a business, are not listed on financial statements unless the business paid to acquire them.
asset sale: The most common form of small business sale, in which the seller keeps the legal business structure, called the business entity, and instead sells tangible and intangible assets of the business, which the buyer then transfers into a newly formed business entity. The alternative to an asset sale is an entity sale, which is also known as a stock sale.
at-will employment: The employment arrangement that U.S. law presumes applies to all employees who aren’t protected by employment contracts, giving employees the right to quit at any time or the employer the right to terminate the employment at any time for either no cause or for any reason that isn’t illegal.
audience: 1. The group of individuals targeted by an advertiser’s message or advertising campaign. 2. The total number of individuals reached by media communications.
audio and video news releases: Professionally produced, broadcast-ready material supplied by businesses and other marketers to radio, television, and Internet outlets for inclusion in full or in part in news programming.
audit: A formal, often periodic examination and checking of accounts or financial records to verify their correctness.
auditory-verbal: A method of learning in which an instructor talks and the instructed passively listen.
avatar: A graphic representation of a person that’s presented in three-dimensional form in computer games, and either as a two-dimensional photo or one-dimensional graphic symbol on Web sites and throughout social media networks.