This page will contain some terms that I’ll use in my posts and videos.
This page covers the Financial Terms that I’ll mention from time to time. I will use these terms as I talk about Financial related topics in the future.
- Revenue / Income: The money you make for selling products and services.
- Costs of Goods Sold (COGS): The direct costs incurred to deliver the revenue to the business.
- For example:
- If you sell a laptop to a client, the price you paid to your distributor to be able to resell the laptop are your COGS.
- On the service side, COGS are your tools + your technician salaries (fully burdened — include all taxes and benefits)
- For example:
- Gross Margin Dollars (aka Gross Profit): Revenue – COGS = Gross Profit. This is the dollars of margin generated.
- Gross Margin Percent (aka Gross Margin): Gross Profit $$$ / Revenue = Gross Margin Percent. This is the ratio of Margin Dollars to Revenue. Monitoring this allows you to understand if you’re making more profit dollars efficiently or not. It’s possible to make more dollars but work harder to do so. If Gross Margin Dollars goes up and Gross Margin Percent goes down you’re working representatively harder to earn the additional margin dollars.
- The Line: Another word for Gross Profit / Gross Margin. Everything “above the line” refers to revenue and COGS and everything “below the line” refers to expenses or SG&A.
- Expenses: Additional expenditures that impact your bottom line profit (EBITDA). Things like rent, insurance, sales and marketing expenses, bookkeeping, and other expenses that aren’t directly related to generating revenue.
- Sales General and Administrative Expenses (SG&A): Same thing as Expenses.
- Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): This is basically your bottom line profit before your CPA does their magic and files taxes and all of that stuff. This is a great number to use to understand the overall profitability of your company.
- Net Income: In Quickbooks, Net Income is the same as EBITDA. In my world Net Income is the dollar figure after your accountant does their thing.
Sales and Marketing Terms
This section covers the Sales and Marketing Terms that I’ll mention from time to time. I will use these terms as I talk about Sales and Marketing related topics in the future.
This page covers the Sales and Marketing Terms that I’ll mention from time to time. I will use these terms as I talk about Sales and Marketing related topics in the future.
- Marketing: Your actions to drive prospects to agree to have a meeting with you. Basically, Marketing is everything you do to get a prospect to say “yes” to a meeting with you (or engaging with you deliberately).
- Lead: Once you get a prospect to say “yes” they become a Lead. More Leads = more closed deals.
- Prospect: Once that Lead really enters your Sales Funnel and you start meeting with them they shift from a Lead to a Prospect.
- Sales Funnel: The Sales steps that you work each of your prospects through. Usually you have a few stages that are similar to the following:
- Discovery meeting