Do you have an idea that you think could make a viable business? If so, you can make it a reality — at least, there isn’t anything major stopping you from making a serious attempt. We can take the internet for granted, using it for entertainment and forgetting that it’s the greatest resource humanity has ever developed.
As it happens, all the guides you can read and all the tools you’ll need are out there just waiting for you to get started. Though there’s little in your way practically, though, you don’t want to go into that process with no knowledge of what you can expect. You don’t have to get your first startup attempt right, but you should at least give it your best effort.
Since you’re on this site, you’re on the right path: read as much as you can, and you’ll learn all about top business models, how to make money, and how to build a compelling brand. In this piece specifically, we’re going to run through 10 startups terms that are absolutely worth knowing for anyone in the entrepreneurial world. Let’s begin:
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable businessmodel. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
You can have an idea that’s perfectly viable in the long term with limited growth, and can sustain a small business indefinitely — and if you’re not aspiring to great things, that can be enough. The issue, though, is that reaching a high level of success requires scalability.
Depending on the context, this can refer to one of two things: the potential of your business concept to be expanded steadily, or the room for growth in your operational infrastructure. If you want your startup to eventually reach a reasonable size, it needs scalability.
A business incubator is an organization that helps start-up companies or entrepreneurs develop their businesses. Assistance usually takes the form of dedicated office space, management training, and venture capital funding. According to the National Business Incubation Association, there are more than 1,400 incubators in the United States.
In the era of remote working, the notion of shared working spaces has really caught fire. Professionals who aren’t tied down to particular locations like getting to work alongside people from other companies and fields: it helps to expand their horizons, and provides them with varied support.
An incubator is somewhat akin to shared working space in that it’s a facility designed to house and support startups. If there are a great idea and solid talent but the plan is lacking, joining an incubator is often the way to go.
Pivot
What happens when you’ve built a great team and happened upon some interesting ideas in the process of discovering that your primary idea is practically untenable? Well, if you have the necessary determination and presence of mind, you pivot.
Pivoting involves swapping out the core of your startup while retaining as much of everything else as possible. Some of the biggest companies in the world are the products of timely pivots.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A popular choice in the time of SaaS, the Freemium model offers a great middle-ground between free services supported by ads and/or donations and paid services that might be somewhat too expensive for the target audience to consider.
Freemium software comes in two forms: some tools have free tiers with restrictions that encourage users to pay to upgrade (e.g. Dropbox), while others essentially have free modules that have specific limitations but make it more likely that their users will choose to pay for some of the paid modules that natively integrate with them (for example, it’s free to use Wave for startup invoicing, and if you do so then you might decide to pay for the linked payroll service).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
Seed
For a start-up, pre-seed funding an initial round of development funding designed to help the business grow. Pre-seed funding tends to be in amounts between $10,000 and $250,000, and usually, these funds come primarily from family, friends, or the own funders, as this can help them develop a first MVP and access to the seed funding.
Seed, or seed money, is the initial round of investment in a fresh startup — so named because it’s intended (and expected) to grow into something exponentially larger. This type of investment isn’t usually that substantial and might have much harsher terms than later investments.
It’s all due to the likelihood that any given startup will fail. Investors who wait to pitch in until a startup has shown some real-world promise will get a safer prospect but worse terms.
Cash flow
The cash flow statement is the third main financial statement, together with income statement and the balance sheet. It helps to assess the liquidity of an organization by showing the cash balances coming from operations, investing and financing. The cash flow statement can be prepared with two separate methods: direct or indirect.
Consider your business activities for a given period — typically a week or a month — and compare two things: the money you received during that time, and the money you paid. The ratio of the former to the latter is your cash flow, and it can be positive or negative. If it’s negative, then your liquidity is suffering, which can cause massive problems.
Note that it isn’t about deals made or money owed, just money actually sent and received. Cash flow is fully distinct from profitability(and profitable business can collapse if it has a negative cash flow).
Accessibility
Very important these days, accessibility is largely about the design approach of everything from software to instructional manuals. When you receive a booklet for a purchased product and find that it contains setup details in numerous languages, that’s the result of accessibility being a priority. In the digital realm, it pushes companies to create layouts that visually-impaired people can clearly parse, and support screen readers designed for blind users.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Churn is a word that sparks fear in the hearts of small business owners everywhere. It refers to the rate at which customers are lost, requiring you to source new customers to maintain your level of business.
Given that it’s typically markedly more expensive to win over a new customer than it is to keep an existing one (plus long-term customers tend to spend more and be more enthusiastic), keeping the churn rate down is a vital priority — particularly for SaaS companies.
Evangelist
Every business needs backers and not just of the financial kind. An evangelist is someone happy to sing the praises of a particular startup to anyone who’ll listen: they’re incredibly excited about what it brings to the table, and want to get everyone they meet involved.
Sometimes an evangelist is an investor in a startup, but sometimes they’re simply a customer so happy with the results that they want to play a part in the company’s growth.
The growth hackingcanvas is a tool and framework to have a set of processes that allow you to ask the right questions to generate growth ideas, consistently.
As pointed out by Eric Ries, a minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort through a cycle of build, measure, learn; that is the foundation of the lean startup methodology.
In the context of business, MVP stands for a minimum viable product, and it’s a term that the average startup owner needs to understand well. Here’s why: a startup (even in good shape) won’t have a remarkable budget, and will be pressed for time, meaning that it can’t realistically overdeliver on its targets.
Instead, it must determine the necessary components of its intended product or service. Additional features can be added later, but for the company to endure, it needs to have something tangible to offer. That’s the MVP.
Marc Andreessen defined Product/market fit as “being in a good market with a product that can satisfy that market.” According to Andreessen, that is a moment when a product or service has its place in the market, thus enabling traction for the company offering that product or service.
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
Key Highlights
Scalability:
The ability of a business to expand and grow without proportional increases in resources or costs.
Incubator:
An organization that supports startups by providing resources such as office space, management training, and funding.
Pivot:
Changing the core strategy or focus of a startup when the initial idea proves unworkable or requires adjustment.
Freemium:
A business model offering a free basic version of a product or service, with paid upgrades for additional features.
Open Source:
Software or products developed collaboratively by a community, with the source code available to the public.
Seed (Funding):
Initial investment in a startup to help it develop a Minimum Viable Product (MVP) and access further funding rounds.
Cash Flow:
The movement of money into and out of a business, impacting its financial health and liquidity.
Accessibility:
Designing products and services to be usable and inclusive for people with disabilities.
Blue Ocean:
Creating uncontested markets and valueinnovation that sets a company apart from competition.
Churn:
The rate at which customers stop using a product or service, which can impact business growth.
Evangelist:
A passionate advocate of a startup who spreads the word about the company’s offerings.
Growth Hacking:
Strategies and techniques focused on rapid business growth through creative and often unconventional methods.
MVP (Minimum Viable Product):
The simplest version of a product with just enough features to gather feedback and validate the concept.
Leaner MVP:
An MVP approach that validates market demand before significant investment in development.
Product-Market Fit:
When a product meets a significant demand in the market, resulting in customer satisfaction and growth.
Business Engineering:
Designing and optimizing business processes, models, and strategies for efficiency and success.
Asymmetric Business Models:
Models that leverage data and technology, relying on a small percentage of paying customers.
Business Competition:
Analyzing overlaps and intersections among industries to identify potential competition and innovation.
Technological Modeling:
Balancing continuous innovation with bets on breakthrough technologies for long-term success.
Transitional Business Models:
Models used to enter a market, gain traction, and shape the long-term vision for scalability.
Minimum Viable Audience (MVA):
The smallest audience that can sustain a startup from a niche, helping to uncover unmet needs.
Market Expansion Theory:
Expanding product or service offerings within an existing market, or creating new markets.
Speed-Reversibility:
Quickly reversing decisions and strategies if they are not yielding the desired results.
Asymmetric Betting:
Making bets that leverage existing strengths and data to drive growth and innovation.
Growth Matrix:
Applying growth strategies for existing and new customers through problem-solving approaches.
Revenue Streams Matrix:
Classifying revenue streams based on customer interactions and ownership of those interactions.
Revenue Modeling:
Developing revenue strategies and patterns that sustain business growth and innovation.
Pricing Strategies:
Formulating pricing models that align with customer needs and the company’s financial sustainability.
