Learn the Lingo Used in Business Planning

Here are some terms that are good to know the meaning of when creating your business plan.

Business Plan

This document outlines the future goals for your business. The plan should explain the details of the what, why, who, and how of the proposed business opportunity. It should include a financial projection that shows the amount of money required to carry out the plan, the probable sources of the required

Break-Even Analysis

This calculation shows the amount of sales revenue required to earn zero profit. That amount of sales is also called the break-even point. A higher level of sales will lead to a profit for the business.

Payback Period

This is the amount of time it takes for an investment in the business to be repaid. It’s considered the break-even point of an investment. While the payback period can be quick to calculate, it disregards the time value of money, unlike the return on investment. A shorter payback period represents a better deal for the investor.

Return on Investment

The ROI measures the profitability of the business in relation to the investment of both equity and debt required to earn it. It’s calculated by dividing the annual income of the business by the investment. The higher the ROI the better.

Marketing Plan