Understanding a few business definitions

 1. Presentation and hand in your new product from Indiegogo or Kickstarter

Purpose: to learn about new products, new businesses, how entrepreneurship works, understanding the pitch and how to find investments for your business. What works, what doesn't work in business

Here’s a list of terms/definitions that are frequently used on Shark Tank/Dragon's Den and in business. You should not memorize but attempt to understand them and how they apply to business.

Equity: when participants present their businesses to the sharks, they start by saying something like “I’m looking for $250,000 for a 25% stake in my business”. The 25% stake is the equity that the shark would get if they agreed to that deal. Equity represents ownership of the company. So in this example, 25% equity means that the shark would own 25% of the business, and the business owner would have 75% of the business.

• VALUATION: THE EQUITY STAKE HELPS TO FIND THE VALUATION OF THE COMPANY. THE VALUATION OF THE COMPANY TELLS YOU HOW MUCH THE COMPANY AS A WHOLE IS WORTH. YOU CAN FIND THIS VALUE BY DIVIDING THE INVESTMENT BY THE EQUITY STAKE. GOING ALONG WITH THE PREVIOUS EXAMPLE, DIVIDE $250,000 BY 25%. THIS WOULD GIVE THE COMPANY A $1 MILLION VALUATION (BECAUSE $250,000 DIVIDED BY 25% EQUALS $1 MILLION). IN OTHER WORDS, THIS MEANS THAT THE COMPANY IS WORTH $1 MILLION.
• GROSS SALES: THIS IS THE TOTAL AMOUNT OF MONEY EARNED FROM A COMPANY BY SELLING THEIR PRODUCT/SERVICE. FOR EXAMPLE, IF A COMPANY SELLS 1000 UNITS OF ITS PRODUCT AT $5 APIECE, THEIR GROSS SALES WOULD BE $5,000.
• NET SALES: THIS IS THE GROSS SALES MINUS RETURNS, ALLOWANCES, AND DISCOUNTS (SEE WHAT THESE DEDUCTIONS MEAN BELOW). NET SALES ARE USUALLY COMPARED TO GROSS SALES TO DETERMINE THE QUALITY OF THE PRODUCTS (I.E. A LARGE DIFFERENCE BETWEEN GROSS AND NET SALES COULD MEAN A QUALITY ISSUE SINCE MANY PEOPLE MAY BE RETURNING THE PRODUCT).
• ALLOWANCES: PRICE REDUCTIONS FOR DEFECTIVE/DAMAGED GOODS (PARTIAL REFUND)
• DISCOUNTS: A PRICE REDUCTION FOR CUSTOMERS 
• REVENUE: ANY INCOME SOURCE FROM A COMPANY’S BUSINESS.
• PRE-REVENUE: THIS IS A FANCY TERM THAT MEANS THAT A BUSINESS HASN’T STARTED SELLING OR HASN’T made any money in their  BUSINESS YET. 
• MARGIN: THIS IS A MEASURE OF HOW PROFITABLE A PRODUCT IS (IT’S ALSO REFERRED TO AS “PROFIT MARGIN”). IN OTHER WORDS, IT SHOWS HOW MUCH MONEY FROM EVERY SALE OF A PRODUCT THAT THE BUSINESS KEEPS. THE MARGIN IS EXPRESSED AS A PERCENTAGE. FOR EXAMPLE, IF A PRODUCT SELLS FOR $5 AND COSTS $1 TO MAKE, THE PROFIT MARGIN WOULD BE 80%. THIS IS FOUND BY SUBTRACTING $1 FROM $5, THEN DIVIDING BY $5. THIS MEANS THAT THE BUSINESS MAKES $4 FROM EACH SALE (SO 80% OF THE SALE GOES BACK TO THE COMPANY).
• OVERHEAD: THESE ARE COSTS THAT AREN’T DIRECTLY RELATED TO THE PRODUCTION OF THE PRODUCT (I.E. OVERHEAD DOESN’T INCLUDE LABOR, MATERIALS, ETC. RELATED TO THE PRODUCT). I SPECIFICALLY USED THE WORD “DIRECTLY” BECAUSE SOME OVERHEAD COSTS ARE ALSO REFERRED TO AS INDIRECT COSTS. EXAMPLES OF OVERHEAD COSTS INCLUDE RENT, UTILITIES, INSURANCE, LEGAL FEES, ETC.
• ROYALTY: PAYMENTS MADE TO AN INVESTOR/OWNER OF A PRODUCT OR PROPERTY IN ORDER FOR ANOTHER PARTY TO USE/SELL IT. THE PROPERTY COULD BE IN THE FORM OF A PATENT, COPYRIGHT, OR TRADEMARK. FOR EXAMPLE, THE INVESTOR MAY BE PAID A ROYALTY OF $2 PER PRODUCT SOLD. IF THE PRODUCT SELLS FOR $10, THEN THE INVESTOR WOULD RECEIVE $2 EACH TIME SOMEONE BUYS the product.
• CONTINGENCY: AN AGREEMENT TO DO SOMETHING AS LONG AS ANOTHER THING HAPPENS. FOR EXAMPLE, IT’S COMMON TO HEAR THAT A “DEAL IS CONTINGENT ON ABC HAPPENING”. THIS MEANS THAT THE DEAL WILL NOT HAPPEN UNLESS ABC HAPPENS. IF ABC DOES NOT WORK OUT, THE DEAL WILL FALL THROUGH.
• SCALABILITY: THE ABILITY FOR A COMPANY TO GROW. REFERS TO A BUSINESS’S ABILITY TO HANDLE INCREASING SALES VOLUMES, MAINTAINING PROFITABILITY, MEETING MARKET DEMANDS, ETC.
• PURCHASE ORDER (PO): A DOCUMENT FROM A BUYER AGREEING TO PURCHASE a certain NUMBER OF PRODUCTS FROM A SUPPLIER.
• PATENT: A FORM OF INTELLECTUAL PROPERTY ON AN INVENTION. THIS MEANS THAT THE OWNER OF THE PATENT CAN EXCLUDE ANYONE ELSE FROM MAKING, USING, SELLING, AND IMPORTING THAT INVENTION. if there is a patent on a product or graphic or design someone who uses it could be taken to court.
• TRADEMARK: ANOTHER FORM OF INTELLECTUAL PROPERTY BUT FOR A RECOGNIZABLE WORD, SYMBOL, SIGN, OR DESIGN THAT IDENTIFIES A PRODUCT OR SERVICE. THESE COULD BE A BRAND NAME LIKE APPLE OR MCDONALDS, A PRODUCT NAME LIKE IPOD OR BIG MAC, A COMPANY LOGO LIKE A BITTEN APPLE OR GOLDEN ARCHES, OR A SLOGAN LIKE “THINK DIFFERENT.” OR “I’M LOVIN’ IT”. WITH A TRADEMARK, NO OTHER COMPANY CAN USE YOUR BRAND NAME, LOGO, PRODUCT NAME, SLOGAN, ETC.
• COPYRIGHT: ANOTHER FORM OF INTELLECTUAL PROPERTY BUT FOR BOOKS, MOVIES, PICTURES, SONGS, WEBSITES, ETC.
• PROPRIETARY: A TERM REFERRING TO OWNERSHIP of AN IDEA AND THE FACT THAT NO ONE ELSE CAN COPY YOU. IF YOU HAVE A PATENT, TRADEMARK, OR SOME OTHER INTELLECTUAL PROPERTY, YOUR IDEA IS PROPRIETARY BECAUSE NO ONE ELSE CAN COPY YOU.