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13 Key Financial Terms Every Business Owner Should Know

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13 Key Financial Terms Every Business Owner Should Know

In the business world, there are lots of terms, acronyms and jargon that get thrown around on a daily basis. In particular, there are lots of financial phrases that you probably hear a lot.

But no matter how big or small your business and no matter your key role within the business, it is always important to have a good understanding of these basic financial terms.

Despite this, plenty of professionals hear and even use lots of financial terms without really knowing what they mean, and this can be detrimental to financial planning and the overall success of your business.

That’s where this guide comes in.

Below, we’ve pulled together a list of 13 key financial terms that every business owner should know. Although some of these might seem obvious at first, you’d be surprised how often these key terms are misused or misunderstood.

Read on to find out more.

1. Revenue

A very common term we hear used a lot in business is revenue. Revenue refers to any money coming into the business as a result of sales of your goods or services. This is typically used to describe the amount made without taking into account expenses. This should not be confused with income.

2. Income

Although income and revenue both speak to the financial position of your business, they should not be used interchangeably. The income of your business is the total revenue minus the cost of expenses such as materials, taxes, etc.

3. Turnover

A very popular word in the business lexicon is turnover. In a nutshell, this means the total value of sales you have made, typically in a year but it can be over a different period (say quarterly). It is essentially another way of saying revenue.

4. Net profit  

The net profit of a business, sometimes used in place of the term income, refers to your turnover/revenue once you have deducted expenses.

5. Expenses/expenditures

Expenses, sometimes referred to as expenditures are the costs incurred by a business. When talking about expenses, this might include rent, payroll, insurance, supplies, technology, travel, subscriptions, maintenance fees, etc., any money that you are paying out for business purposes.

6. Return on investment

Return on investment, often abbreviated to ROI, is used across a number of business functions. However, in terms of finances, ROI means the financial rewards your business gains from the things it invests in.

For example, if you invest in advertising, your return on investment is the number of sales and therefore money that you generate as a result of these advertising campaigns.

7. Balance Sheet

In the introduction, we mentioned the importance of key terms for financial planning, and when it comes to preparing your business for the coming months, you’re going to need to understand the term balance sheet.

This is a financial statement that shows your business’s assets (more on this next), expenses, profits and losses. A balance sheet is often used to check the financial standing of a business and to make predictions and plans for the year ahead.

8. Assets

You might not be convinced that assets are strictly a financial thing, but in this case, it refers to any items of value that are owned by your business. These can be both tangible and intangible things such as premises, machinery, tools, vehicles, or intellectual property, branding, customer base etc.

All of these assets are considered important when valuing your business. Plus, some of these may contribute to your expenses throughout the year.

9. Payroll

Whether you need payroll or not in your business will depend on whether you have employees or you’re a one-man band. That being said, it always helps to understand terms like this as you might need them in the future.

Payroll is a list or database of your employees that are entitled to payments and benefits from your company, and it outlines what everyone is entitled to receive each month/year.

10. Cash flow

Cash flow is a term used to refer to cash entering and leaving a business (almost as if it were flowing like water, hence the name). Cash flow can be positive or negative depending on whether you’ve got more money coming in than going out, or vice versa.

11. Accounting period

You might have heard the term accounting period, and this refers to a pre-arranged period of time during which all important accounting functions take place. This is typically 12 months, but it doesn’t have to be; it can be any given period of time.

This should not be confused with a financial year, which we will look at next.

12. Financial year

When talking about a financial year, this term is typically used for tax and accounting purposes, and unlike an accounting period, this never changes. In the UK the financial year runs from 6th April each year.

13. Fixed costs/overheads

We’ve touched on expenses above, but your fixed costs sometimes referred to as your overheads, are slightly different. This term refers to the day-to-day running costs of your business, such as rent, electricity, etc.

These are called fixed costs as they don’t vary based on the number of sales made (or not made as the case may be). In contrast, expenses may change if you require more or fewer materials or other resources to meet demand.

Are you clued up on these key financial phrases?

Although 13 may be unlucky for some, understanding these 13 key financial phrases is going to mean good things for your business. Whether they are all relevant to you right now or not doesn’t matter.

The more you know about your finances, and the better you understand these terms, the better prepared you are to assess your own financial standing, make plans for the future and generally feel more confident in your own abilities.

This is the key to success, especially if you run a small business.

So go on, get reading and make sure you are familiar with all of the above!


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The Future of Content Success Is Social

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The Future of Content Success Is Social

Here’s a challenge: search “SEO RFP” on Google. Click on the results, and tell me how similar they are.

We did the same thing every other SEO does: We asked, “What words are thematically relevant?” Which themes have my competitors missed?” How can I put them in?” AND “How can I do everything just slightly better than they can?”

Then they do the same, and it becomes a cycle of beating mediocre content with slightly less mediocre content.

When I looked at our high-ranking content, I felt uncomfortable. Yes, it ranked, but it wasn’t overly helpful compared to everything else that ranked.

Ranking isn’t the job to be done; it is just a proxy.

Why would a high-ranking keyword make me feel uncomfortable? Isn’t that the whole freaking job to be done? Not for me. The job to be done is to help educate people, and ranking is a byproduct of doing that well.

I looked at our own content, and I put myself in the seat of a searcher, not an SEO; I looked at the top four rankings and decided that our content felt easy, almost ChatGPT-ish. It was predictable, it was repeatable, and it lacked hot takes and spicy punches.

So, I removed 80% of the content and replaced it with the 38 questions I would ask if I was hiring an SEO. I’m a 25-year SME, and I know what I would be looking for in these turbulent times. I wanted to write the questions that didn’t exist on anything ranking in the top ten. This was a risk, why? Because, semantically, I was going against what Google was likely expecting to see on this topic. This is when Mike King told me about information gain. Google will give you a boost in ranking signals if you bring it new info. Maybe breaking out of the sea of sameness + some social signals could be a key factor in improving rankings on top of doing the traditional SEO work.

What’s worth more?

Ten visits to my SEO RFP post from people to my content via a private procurement WhatsApp group or LinkedIn group?

One hundred people to the same content from search?

I had to make a call, and I was willing to lose rankings (that were getting low traffic but highly valued traffic) to write something that when people read it, they thought enough about it to share it in emails, groups, etc.

SME as the unlock to standout content?

I literally just asked myself, “Wil, what would you ask yourself if you were hiring an SEO company? Then I riffed for 6—8 hours and had tons of chats with ChatGPT. I was asking ChatGPT to get me thinking differently. Things like, “what would create the most value?” I never constrained myself to “what is the search volume,” I started with the riffs.

If I was going to lose my rankings, I had to socially promote it so people knew it existed. That was an unlock, too, if you go this route. It’s work, you are now going to rely on spikes from social, so having a reason to update it and put it back in social is very important.

Most of my “followers” aren’t looking for SEO services as they are digital marketers themselves. So I didn’t expect this post to take off HUGLEY, but given the content, I was shocked at how well it did and how much engagement it got from real actual people.

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7 Things Creators Should Know About Marketing Their Book

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7 Things Creators Should Know About Marketing Their Book

Writing a book is a gargantuan task, and reaching the finish line is a feat equal to summiting a mountain.

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Being position-less secures a marketer’s position for a lifetime

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Optimove Positionless Marketer Optimove

On March 20, 2024, the Position-less Marketer was introduced on MarTech.org and my keynote address at Optimove’s user conference.

Since that initial announcement, we have introduced the term “Position-less Marketer” to hundreds of leading marketing executives and learned that readers and the audience interpreted it in several ways. This article will document a few of those interpretations and clarify what “position-less” means regarding marketing prowess.

As a reminder, data analytics and AI, integrated marketing platforms, automation and more make the Position-less Marketer possible. Plus, new generative AI tools like ChatGPT, Canna-GPT, Github, Copilot and DALL-E offer human access to powerful new capabilities that generate computer code, images, songs and videos, respectively, with human guidance.

Position-less Marketer does not mean a marketer without a role; quite the opposite

Speaking with a senior-level marketer at a global retailer, their first interpretation may be a marketer without a role/position. This was a first-glance definition from more than 60% of the marketers who first heard the term. But on hearing the story and relating it to “be position-less” in other professions, including music and sports, most understood it as a multidimensional marketer — or, as we noted, realizing your multipotentiality. 

One executive said, phrasing position-less in a way that clarified it for me was “unlocking your multidimensionality.” She said, “I like this phrase immensely.” In reality, the word we used was “multipotentiality,” and the fact that she landed on multidimensionality is correct. As we noted, you can do more than one thing.

The other 40% of marketing executives did think of the “Position-less Marketer” as a marketing professional who is not confined or defined by traditional marketing roles or boundaries. In that sense, they are not focused only on branding or digital marketing; instead, they are versatile and agile enough to adjust to the new conditions created by the tools that new technology has to offer. As a result, the Position-less Marketer should be comfortable working across channels, platforms and strategies, integrating different approaches to achieve marketing goals effectively.

Navigating the spectrum: Balancing specialization and Position-less Marketing

Some of the most in-depth feedback came from data analytic experts from consulting firms and Chief Marketing Officers who took a more holistic view.

Most discussions of the “Position-less Marketer” concept began with a nuanced perspective on the dichotomy between entrepreneurial companies and large enterprises.

They noted that entrepreneurial companies are agile and innovative, but lack scalability and efficiency. Conversely, large enterprises excel at execution but struggle with innovation due to rigid processes.

Drawing parallels, many related this to marketing functionality, with specialists excelling in their domain, but needing a more holistic perspective and Position-less Marketers having a broader understanding but needing deep expertise.

Some argued that neither extreme is ideal and emphasized the importance of balancing specialization and generalization based on the company’s growth stage and competitive landscape.

They highlight the need for leaders to protect processes while fostering innovation, citing Steve Jobs’ approach of creating separate teams to drive innovation within Apple. They stress the significance of breaking down silos and encouraging collaboration across functions, even if it means challenging existing paradigms.

Ultimately, these experts recommended adopting a Position-less Marketing approach as a competitive advantage in today’s landscape, where tight specialization is common. They suggest that by connecting dots across different functions, companies can offer unique value to customers. However, they caution against viewing generalization as an absolute solution, emphasizing the importance of context and competitive positioning.

These marketing leaders advocate for a balanced marketing approach that leverages specialization and generalization to drive innovation and competitive advantage while acknowledging the need to adapt strategies based on industry dynamics and competitive positioning.

Be position-less, but not too position-less — realize your multipotentiality

This supports what was noted in the March 20th article: to be position-less, but not too position-less. When we realize our multipotentiality and multidimensionality, we excel as humans. AI becomes an augmentation.

But just because you can individually execute on all cylinders in marketing and perform data analytics, writing, graphics and more from your desktop does not mean you should.

Learn when being position-less is best for the organization and when it isn’t. Just because you can write copy with ChatGPT does not mean you will write with the same skill and finesse as a professional copywriter. So be position-less, but not too position-less.

Position-less vs. being pigeonholed

At the same time, if you are a manager, do not pigeonhole people. Let them spread their wings using today’s latest AI tools for human augmentation.

For managers, finding the right balance between guiding marketing pros to be position-less and, at other times, holding their position as specialists and bringing in specialists from different marketing disciplines will take a lot of work. We are at the beginning of this new era. However, working toward the right balance is a step forward in a new world where humans and AI work hand-in-hand to optimize marketing teams.

We are at a pivot point for the marketing profession. Those who can be position-less and managers who can optimize teams with flawless position-less execution will secure their position for a lifetime.

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