27/04/2024
UNDERSTANDING BUSINESS TERMS
If you’re trying to apply for any kind of business funding you will meet a lot of business terminologies which often make the application process feel tougher than it should be. Therefore, it is important that you familiarize yourself with these terms and see how you can explain your own business using them.
🔹 Business model. The business model answers the question, how will your business operate in order to make money? So you have to talk about the products or services you will offer, highlight your target customers, expected running costs and revenue to be generated. This shows the potential investor that your business is indeed profitable.
🔹Value proposition. The value proposition answers the question, why should the customer give you their money? So it highlights the customer’s problem and how your product/service is the solution.
🔹USP. This stands for unique selling point (or unique selling proposition). What is unique or different about your business, product or service? The USP communicates a specific benefit which your competitors don't offer. This is what makes you stand out in the market place. You could be the cheapest, the fastest, the only ones offering after sales service, the most durable etc.
🔹 Revenue model. While the Business Model describes the general operation of the business, the Revenue Model specifically describes how your business generates revenue. It simply answers the question, what are the revenue streams for your business?
🔹Break even. What will it take for the business to recover its capital? How many units do you have to sell? How many customers do you need to have? This helps in your strategy formulation because any number below this would mean the company is failing or has failed to get back the money it invested.
Next time we will look at cash flow, gross profit margin, elevator pitch, business mission, business vision. Until then familiarize yourself with these terms so that you can learn to raise capital for your business. I wish you all the success in the world.
Milambo Mizinga –Business & Personal Finance Coach
