Starting a Small Business Key Terms

Understand terms you will encounter while starting your small business

By Casey Holley

Starting a new business is a major milestone in a person's life. As with most major decisions in life, there are certain things to consider when opening a business. Throughout the course of your research, you may come across some terms that you aren't familiar with or terms that you would like to know a little more about. Knowing what these terms mean will help you to get a smooth start with your business.

Business plan

A business plan is an outline of goals for your business and methods to reach those goals. An up-to-date business plan is a must for every business. At a minimum, it should include a summary, business description, market analysis, marketing plan, funding requests and an organizational guide.
Try: The U.S. Small Business Administration offers in-depth information about writing a business plan. The information includes a list of items your plan should include.

Employer ID Number (EIN)

The Internal Revenue Service tracks businesses through Employer ID Numbers. When you start a business, you must get an EIN. Once your business is up and running, you will have to get a new EIN if the ownership structure of your business changes, such as going from a LLC to a corporation.
Try: The U.S. Internal Revenue Service offers comprehensive information about EINs. You can even apply for your EIN on this website.

Franchise

A franchise is a business that allows the franchisee to use a system, marketing materials and other rights from a franchiser. There is almost always an initial investment, regular franchise fees and a franchise agreement associated with opening a franchise.
Try: The Federal Trade Commission offers information to help you determine if a franchise is right for you.

Business structure

A business structure is the way you organize your business and report it to the government. Structures include sole proprietorship, limited partnership, limited liability company and corporation. Each of these has significant tax effects and owner duties.
Try: Alco Corporate Services offers a look into the various business structures you should consider when you start your small business. The information includes considerations and benefits of each type.

Angel investor

An angel investor is a person who is willing to help new or start up businesses. In some cases, these investors don't ask for any control in the business. However, most will require you to provide a comprehensive business plan.
Try: Inc.com offers information to help you understand the function of angel investors, including a list of places to find them.

Bandwagon marketing

Bandwagon marketing is a way that you can advertise your business for free. It uses the ripple effect, which is when one person has a good experience with you and tells another person. You can help your marketing campaign be more successful by asking your customers how to make their experience better during each visit.
Try: Foothill Technology offers an explanation of some basic marketing techniques, including bandwagon marketing.