E-commerce is a major part in the lives of many entrepreneurs, and almost everyone with internet access has at the very least visited an online shop once, if not purchased something from it. Thus there are a few basic terms that really everyone should know – especially existing and future online business owners. These 8 must-know terms are:
1. ROI (or Return on Investment): This is the concept by which one measures the efficiency or success of a venture. It is calculated by dividing the benefit (or return) of an investment by the total cost of the same, with the result being expressed either as a ratio or as a percentage. ROI is the very first thing any entrepreneur should consider before starting a business – if your (future) business’ ROI is not positive, it should not be undertaken.
2. Crowdfunding is another term everyone should know (and most probably already do). It is the name given to any method of capital collection from a large group of individuals who invest in a project simply because they trust the developer and wish to see the idea or product finalized. This is usually rewarded by early access, free copies of the product, and even meetings with the developers for particularly large donations.
3. Venture capital, on the other hand, is the name given to capital provided by investment firms to certain small businesses and ventures which have a significant long-term growth potential. This involves great risks for the investors (many start-up companies ultimately fail), but can also provide huge ROI and immense profits in some cases. Many of the most famous and successful internet-based companies around were started this way, and those who invested in them are now very rich men.
4. Private equity is quite simply equity capital which is not quoted on a public exchange. It involves investments made directly into private businesses.
5. Incubator is the name given to any form of sponsorship and mentorship program, usually offered both by private companies and by public entities to start-up ventures and small companies. Office space, capital, mentoring – all is provided at relatively low interest rates. There are a few of these around, many of them from universities and colleges.
6. Angel Investors are those individuals which invest in and support a certain project from their own personal savings. Despite their moniker, they are not truly angels: they request a certain interest rate just like any other investor.
7. B2B (or Business to Business) is quite simply the umbrella name given to all business conducted between companies – as opposed to that between a business and an individual consumer. A wholesaler selling products to a retail store chain is a great example of B2B.
8. B2C on the other hand is when a company deals with a private individual, an end-consumer. Online shops are the best example of such a business practice, since selling directly to your target consumer is a great way of minimizing costs.
These are but a few of the common terms any online entrepreneur should know. Browse our website to learn about other terms and concepts related to this world.