As you take steps to start your home-based venture, it doesn’t take long to discover that starting a business requires learning an entire new language and set of abbreviated terms, such as SWOT (a planning method outlining strengths, weaknesses, opportunities, and threats) and LLC (limited liability company). It can be overwhelming to decipher new concepts, but in most cases home business terms aren’t that complicated. Below are a few terms you should become familiar with as you launch your home business.
Business Structure: The legal configuration of your business. Most home business owners choose either a “sole proprietorship” or “limited liability company” (LLC), both of which allow for single person ownership. A sole proprietorship structures the business so that it and the owner are viewed as a single entity. It’s popular because it doesn’t require any special paperwork or additional expenses. However, because the owner and business are one entity, personal assets, such as your house, can be at risk if you are sued or go into debt. An LLC is a type of corporation that is its own entity, thereby protecting the owner’s personal assets. It requires paperwork and a filing fee to create.
Doing Business As: In some localities, “doing business as” may be called “assumed name” or “fictitious name statement,” all of which refer to the business owner’s requirement to file a notice with the local clerk’s office if the business’ name is different from the owner’s name.
Intellectual Property: Anything you create you own as a form of intellectual property that you can protect from use by other people or businesses. Written items, such as books, are protected through copyright. If you develop a tagline or logo, you can protect it through a registered trademark. Patents protect a new or unique process or machine that you invent.
Accounts Payable: Money you owe to others for materials or services you’ve received.
Accounts Receivable: Money owed to you for materials or services you’ve given.
Balance Sheet: A financial statement listing the business’ assets and liabilities.
Profit and Loss Statement: A summary of the business’ income, expenses and loss during a specified time, usually quarterly or yearly.
Brand: While brand may be viewed as a logo or mark that represents your business, when used in the concept of branding, it represents the promise your business makes to consumers. Disneyland brands itself as “The Happiest Place on Earth,” but it’s only successful in that brand if consumers experience Disneyland as being a happy place.
Niche: In marketing, a niche is a narrowly defined topic or target market (see target market below). For example, "weight loss" is a general topic, whereas "weight loss for teenage boys" is a niche.
SWOT: The section of your business plan that outlines your strengths, weaknesses, opportunities and threats. It offers a good overview of what you do well and not so well, as well as opportunities to increase business and obstacles to success.
Target Market: The demographics and characteristics of the people most likely to buy your product or service. For example, WAHM's target market is moms who want to work from home. Moms aren’t the only group of people who want to work at home, but WAHM focuses on moms and delivers information and resources with moms in mind.