8.4 Key Terms
absolute capacity
highest volume of units that a machine can produce within a specified time period
baselining
internal comparison of actual outcomes with expected outcomes
benchmarking
comparing one’s own company’s performance with an industry average, a leader within the industry, or a market segment
business accelerator
organization formed by an alliance of business professionals who assist entrepreneurs in their startup or early stage businesses in exchange for an equity investment in the entrepreneur’s company
business incubator
organization formed by a consortium of established professionals or organizations assisting startup or early stage businesses that provides office space, financial support, technical support, or advisors whose specialized skills in management and marketing complement the technical talents of the entrepreneur
capital expense
major purchase of a functional asset that is expected to last longer than three years or that still has financial value after being fully depreciated
capital improvements
major repairs or improvements that add to the life of an asset by improving its longevity, increasing its value or productivity, or extending its usefulness
cash flow
money collected by the business through revenue and funding versus money disbursed by the business through expenses
closed group
formal, structured group of individuals who have a strict process or specific criteria that applicants must meet before being accepted as members
creditworthiness
lender’s assessment of how reliable a company is in repaying a debt
debt service
repayment of a loan, including principal and interest
down time
time when production is not occurring due to repair, restocking inventory, or unscheduled work
ergonomics
study of how work is performed
flat organization
organizational structure where owners, executives, or key decision makers interact directly with staff at all levels, with very few if any mid-level managers
hybrid group
group of individuals who have a loose and flexible set of criteria for membership and function within a very broad set of guidelines; certain criteria may be required of regular members, but guests are frequently accepted with no long-term commitment expected
inventory management
business operations that include managing the quantity of inventory units in stock, scheduling and cataloguing replacement inventory, organizing shelf location for unit storage, paying for inventory received, and processing, fulfilling, packaging, and shipping customer orders
line of credit (LOC)
agreement between a bank and a depositor in which the bank makes available a maximum amount of money the depositor can borrow at any time during the term of the loan; the borrower pays a fee during the term, whether or not there is an outstanding balance, and also pays interest when there is a balance on the loan
liquidity
measure of a company’s ability to cover its immediate and short-term (i.e., due within one year) debts and obligations
nepotism
hiring family and close friends because of personal relationships rather than for their skill sets
networking
process of establishing and maintaining bilateral relationship with other people to exchange information, ideas, products or services, and money
North American Industry Classification System (NAICS)
standard used by US federal agencies to collect, analyze, and report statistical information about businesses
open group
informal, loosely organized group of individuals who have no formal process for joining or leaving the group, and who focus on a specific activity or social cause
operational capacity
number of units that can reasonably be expected to be produced within a specified time period
operational expenses
expenses associated with daily, ongoing activities of the business, such as inventory, office supplies, wages, insurance, and utilities
operational reserve
difference in unit capacity between absolute capacity and operational capacity
outsourcing
hiring an outside company or third party to perform a specific task, job, or process, or to manufacture goods
pro forma
financial statement that shows how much and where monies will be collected and spent in the early stages of business creation
production time
amount of time that a machine is actually producing products that are to be sold; also called up time
self-performing
when employees do most of the work in a business
total cost of ownership
comprehensive cost of owning large capital items, including initial direct costs, operating direct costs, and indirect costs
trade association
group of companies or employees of companies in a specific industry, business structure, or social cause