38 terms every beginning entrepreneur should know
Every community has its own web of shorthand and secret code, and online business is no different. But hidden behind all the lingo and jargon is a treasure trove of concepts and principles that will make what you need to do to get your business off the ground kind of make sense.
Ever wondered how to tell if your emails are any good? Your click-to-open rate is one way to tell.
Not sure how to get people to sign up for an email list in the first place? Allow us to introduce you to the carrot.
Don’t know what an “email list” is or why on earth you should have one? Email marketing is a form of direct marketing, and in our experience, it’s one of the best ways to build and sustain a relationship with your customers. (90% of our revenue at GrowthLab comes from emails that we send to our list.)
You can learn to “speak” online business. And the more you do, the more the steps to start and grow your own online business will start to come into focus.
To help you get started, here’s a list of common terms that tend to trip beginning entrepreneurs up. Give it a read, and don’t worry: you’ll be lamenting your abysmal conversion rates and scratching your head over how to get your LTV up in no time.
- A/B testing
- Affiliate marketing
- B2B / B2C
- Beta test
- Bounce rate
- Carrot (or lead magnet)
- Cart abandonment
- Convert / conversion
- CRM (customer relationship management)
- CTA (call to action)
- Customer avatar
- Direct vs. indirect marketing
- Growth hacking
- Idea validation / immersion
- Inbound vs. outbound
- Information product
- IP (intellectual property)
- MVP (minimum viable product)
- Pay certainty
- Profit margin
- ROI (return on investment)
- Sweat equity
- Target market
- Tracking link
- Venture capital
An A/B test is a way of figuring out which version of something is going to be most effective.
You can A/B test all kinds of things: landing page designs, website headlines, email subject lines, Facebook ads. Put two versions of what you want to test out there — an A version and a B version.
If option A performs better than option B (for example, if subject line A gets more people to open the email than subject line B), that’s the one you go with.
Useful tip: When running an A/B test, make sure you limit the number of things you change in each option. Otherwise, it will be hard to figure out what exactly it was that made one option perform better than the other!
Affiliate marketing is when you get other people (such as other entrepreneurs, or people in your industry with large followings) to sell your product in exchange for a percentage of the sales that they make. When people are marketing your products to their audience on your behalf, they are your affiliates.
In addition to getting other people to market your product to their audiences, you can also become affiliates for other businesses, and market their products to your audience as a way to make some extra money (potentially quite a bit of money, if your audience is big enough).
B2B / B2C
B2B and B2C are ways of describing companies and who they are selling to.
B2B stands for business-to-business. It describes businesses whose customers are other businesses.
B2C stands for business-to-consumer. It describes businesses whose customers are consumers — regular people living their regular lives.
Honestly, though, knowing whether your business is B2B or B2C is not nearly as important as knowing who your customers are, what they need, and how you can give it to them.
Want to build a business that enables you to live YOUR Rich Life? Get my FREE guide on finding your first profitable idea.
A beta test is when you invite a small group of people to buy and use your product before you’re ready to sell it to a general audience.
The idea is to have the small group “test drive” your product and give feedback. Then you can make any changes based on that feedback before you start selling to everybody.
Useful tip: Since it’s not a finished product, and you want users to help you out by giving feedback, it’s typical to offer the beta version of a product at a discount of the full price. You should still plan to charge something, though — a beta test doubles as a handy opportunity to test pay certainty for your idea.
Helpful link: How one GrowthLab student beta tested his online course
Bootstrapping is when you starting a business without any outside money from investors or lenders. The name comes from the saying “to pull yourself up by the bootstraps.”
The astute observer may note that it’s not actually physically possible to pull yourself up by your bootstraps. It is, however, very possible to bootstrap your business idea. This is especially true of information products (online courses, e-books, etc.), which cost very little in terms of the materials you need to get started.
A website’s bounce rate is the percentage of visitors who come to the site and then leave after only viewing one page.
Whether a high bounce rate is a bad thing or not depends on the site and your goals for it. For example, if your site is just a landing page with an email capture form, the bounce rate really doesn’t tell you much.
But if your site has a homepage and a product page, and your goal is to get people to read the information on the homepage and then go to the product page to learn more about your online course, a high bounce rate on your homepage is a problem because it suggests that visitors aren’t finding what they’re looking for — or that they just don’t find what’s on your homepage that interesting.
Helpful link: The Ultimate Guide to Digital Marketing
Carrot (or lead magnet)
A carrot is a delicious gift that you give your soon-to-be subscribers in exchange for their email address. Another word you might hear is “lead magnet,” the idea being that whatever you’re offering is so compelling and interesting, it pulls leads (potential customers) in.
Checklists, templates, e-books, ultimate guides, and video content are all examples of carrots. Ultimately, the format your carrot comes in is less important than it being something soooo irresistibly juicy to your potential customer they won’t be able to enter their contact information and get to the prize fast enough.
Helpful link: How to get 10,000 email subscribers (and beyond)
Cart abandonment is when people make an initial decision to buy a product and put it in their shopping cart, and then change their mind before they actually buy it, leaving it “abandoned” in the cart.
Cart abandonment is a problem, because it means the customer cleared the initial hurdle of deciding to make the purchase at first — but then some doubt or objection stopped them before they made the final buy.
Two things that you want to do with cart abandonment:
- Send a friendly reminder to the customer reminding them that they have a product in their cart (in case they were planning on buying but just forgot or had something come up).
- For those a friendly reminder email doesn’t budge, send a survey to try to understand what their final reason for not buying was, so you can try to address that concern in the future.
Helpful link: The 8 types of people who will never buy your product
Churn is the rate at which a business loses customers and has to get new ones. High churn is a problem, because the higher the churn, the harder it is to grow – every new customer you’re bringing in is just replacing one you’ve lost. It’s one step forward, two steps back.
You often hear “churn” talked about in reference to businesses with recurring revenue streams (like membership sites where people pay a monthly subscription for access to new content), where the goal is to keep customers for as long as possible.
However, you can also have high churn in other areas. Take your email list: if you have a high number of unsubscribes, then what you’re dealing with is churn.
Helpful link: Why your best customers leave you
Click-to-open rate (CTOR)
Click-to-open rate (CTOR) is one of the metrics used to measure the effectiveness of an individual email. It’s calculated by taking the total number of times readers clicked on something in the email (the clicks) — like a link — and dividing it by the total number of people who opened the email (the opens).
Total unique clicks / total unique opens = Click-to-open rate
This gives you a good indication of how interesting the content in the email is to your subscribers. If the click-to-open rate is high, it means that the people who read the email were interested in what it had to say and wanted to know more (which is why they clicked).
If the click-to-open rate is low, it means that the email content was less interesting, or not what the reader was expecting when they opened the email.
Convert / conversion
“Conversion” is fancy business-speak for “getting people to do what you want them to do.” Sometimes, it’s buy your product, but you can also want people to convert into an email subscriber, or convert from your business’s social media profile to your website.
Your “conversion rate” is the percentage of people who actually do the thing you want them to do. So if you have an email list of 1,000 and you send them a link to your sales page, and 200 people click on that link and go to your sales page, you have a conversion rate of 20%.
CRM (customer relationship management)
A CRM (customer relationship management) tool is a technology that helps you keep track of who your customers are and what you know about them. Popular examples of CRM software include Salesforce, Freshworks, and Infusionsoft.
CRM software can store all kinds of details about your customers and soon-to-be customers, like their contact information, their birthday, what they’ve purchased from you, and any communication you’ve had with them (including any questions, concerns, complaints).
Basically, buying CRM software is hiring a robot to remember details about your customers so you don’t have to rely on your faulty (and very, very limited) memory. That way, whenever you’re communicating with them, you can focus on giving them the best and most personal experience possible.
Helpful link: Simple tools to earn your first $10,000 online
CTA (call to action)
A call to action (commonly abbreviated as CTA) is when you tell your audience what you want them to do, and then, if it’s a good CTA, they do it. Basically, it’s the copywriting version of a magic spell. (It’s also the name of a GrowthLab course on kickass copywriting, but you didn’t hear that from us.)
You tend to see calls to action at the bottom of emails and sales pages, on landing pages — sometimes even spoken out loud in Instagram stories or YouTube videos. Any time you want your audience to “click here,” “like and subscribe,” or “enter your email to get the free download” — that’s your call to action.
Helpful link: 30 ways to improve your copywriting
A customer avatar (also called a customer persona) is a fictional character that some marketers create to represent the “ideal customer” for their business. A customer avatar answers basic but important-to-know questions about the customer, like:
- Are they male or female?
- How old are they?
- How much money do they make?
- Where do they like to spend time online?
- What’s important to them when it comes to how they spend their money?
The idea is that once you have these avatars created, you’ll have a clear idea of who your customers are, what they want, and how you should talk to them.
But you know what’s wayyyy better than creating made-up customers for answering those questions? Talking to your actual customers and letting them tell you who they are, what matters to them, and how you can help.
Our preferred tool for doing this: the Customer Desire Map.
Helpful link: Market analysis template: 5 questions to ask for profit
Direct marketing (vs. indirect marketing)
Direct marketing and indirect marketing refer to two different strategies for letting customers know about your company and your product.
With direct marketing, customers are learning about your product directly from you and your company. Examples of direct marketing include sales emails, Facebook ads, and those telemarketing calls we all love so much.
With indirect marketing, customers are hearing about you from another source, like an affiliate partner, a social media influencer, a blog they read, or a YouTube channel they watch.
Whether direct or indirect marketing is better is a question some marketers will still be fighting about when the robot uprising finally comes. It is also, all told, a fairly useless question, because different strategies work for different businesses and different industries, and the best strategy for your business may be either — or a healthy combination of both.
(And, P.S.: You can do direct marketing or indirect marketing without coming off as sleazy.)
Something that’s evergreen is not sensitive to seasonalities or trends. This term is typically used for pieces of content. For example, an evergreen topic or article would continually be relevant and sought after on search engines or by readers, and these are typically “how-to” articles (e.g., “how to start a business”), product reviews, or perennial tips.
Plus, certain aspects of your business can be evergreen, such as an “evergreen funnel,” where you can automate your sales and make money more passively.
A funnel is the sales journey of your customers or a series of steps that you want them to take, with the ultimate goal of getting them to do something — buy something, get on a call, or fill out some form. It’s so named for its likeness to the shape of an actual funnel, like so:
Notice how it narrows as you move further down, where it gets harder and harder to persuade prospects to take your desired action (but those who do likely become customers for life).
Growth hacking is a term that describes unorthodox, out-of-the-box-thinking techniques and strategies to accelerate growth. A growth hacker, then, is someone whose singular goal is growth, and they will employ whatever initiative, tactic, or strategy necessary to grow their business.
Growth hacks can be big strategies, like using “gamification” to incentivize users to take certain actions, or making small, simple tweaks. While smart growth hacking can be wildly successful, the methods are sometimes not sustainable or scalable.
Idea validation / immersion
The first step to a profitable business is finding a profitable idea, and the way to know if an idea is profitable is to … validate it with your customers.
That means idea validation is the (emotionally painful) process of confirming that there’s a paying market for your idea. At GrowthLab we call this process immersion because you must immerse yourself with your potential customers — wherever they are — and talk to them and get in their head to learn about their problems, hopes, and dreams, and how you can solve them.
We’re not going to sugarcoat it: Immersion can be full of heartbreak and disappointment, and is often a huge barrier for plucky beginners. However, stick through this — and we promise you — it will be worth it.
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Inbound vs. outbound
Inbound and outbound marketing refer to two different strategies to acquire new customers.
Inbound marketing is a strategy that draws customers to your business. This could be done via social media marketing, paid ads, SEO, and branding and reputation. Outbound marketing, on the other hand, is your business going to your customers through cold-calling or being at trade shows, for example.
In an ideal world, we’d all focus on inbound marketing and “being found” by our customers and attracting the right kind of customers.
Information products, or info-products, are those products that convey an expertise of some sort of — duh — information. Popular examples of info-products include e-books and online courses.
They’re typically the bread and butter of online businesses because of their relative low-cost, ease of maintenance, and ability to earn you a lot of money (assuming you have the right product and idea).
Helpful link: A beginner’s guide to information product ideas
IP (intellectual property)
Intellectual property, or IP for short, is the ownership of intangible assets, like business ideas or concepts. An IP can include logo designs and symbols, books and anything literary, artistic works like video games, music, info-products, and even names. You can protect your IPs via copyrights (for written works), patents (for specific products), and trademarks (for names and designs).
Helpful link: Resources about intellectual property (AllLaw.com)
Launch is industry jargon that’s used to describe getting something — like a business or product — off the ground and into the marketplace for customers to buy. In the online business space, a launch can be the actual selling process of an information product (see definition above). Example of usage: “I’m in the middle of my course launch, so I won’t make happy hour this week.”
Launching an information product like an online course can happen infrequently, once, or a few times during the year — the frequency is a matter of preference or strategy.
A lead is a potential customer who’s found you and likely given you contact information through inbound (like landing pages) or outbound (like cold calls) marketing channels. Leads therefore lead to a potential sale as they go further down your funnel.
Getting as many “leads” as possible for more sales, therefore, is one of the main goals of any business, so you’ll hear terms like lead generation or lead magnets that are designed for this very purpose.
LTV/CLV (lifetime value/customer lifetime value)
When someone makes a purchase for the first time, we expect them to be more likely to make repeat purchases over the lifetime of the relationship with this customer. This expected “customer value” is called customer lifetime value (CLV or CLTV) because marketers like to have creepy quantitative data for almost everything.
Joking aside, the CLV is important to help you determine your marketing and sales strategy and things like how much to spend on marketing efforts to acquire or retain new customers.
Helpful link: Calculate your customer lifetime value (Customerlifetimevalue.co)
A mastermind is a group of like-minded entrepreneurs who act as a brain trust for you and your ideas. It’s not a one-way street either. The goal of masterminds is to promote mutual improvement for everyone involved.
Imagine all those times you wanted someone to bounce ideas off of. Or help you answer some questions you were afraid to ask because they might make you look dumb. A mastermind can help you with all that and more. This is a group of people who can recognize areas where you can grow and help foster that growth.
Helpful link: You don’t need a mentor. You need friends.
Minimum viable product (MVP)
A minimum viable product (MVP) is a product with the minimum features required to satisfy early customers. There are a few good reasons to do this:
- Captures the attention of potential customers and investors
- Helps test and validate your ideas with minimal risk
- Allows you to gain feedback to improve your product before an actual launch
When creating your MVP, you need just enough features and value for people to purchase. Think of it like a prototype. Check out this MVP example:
Can you guess what it is? (HINT: It may have made your childhood awesome.)
That’s right. The above was an MVP for the Super Soaker. Our point: Your MVP doesn’t have to be perfect. It just has to be good enough to validate your product.
A niche is a specific market that you’re targeting.
It’s the paradox of successful entrepreneurship. By limiting your market, you’re actually opening yourself up to more profits and clients.
Imagine there are two social media consultants. Which one do you think gets more business?
- The consultant who will show any business how to get on social media
- The consultant who is a Facebook algorithm expert who helps restaurants build a successful platform on the social media site
The second one of course. That’s because they niched down their market and focused their services.
The pay certainty is when you know your customers will pay for a product. It’s the alternative to spending countless hours and sleepless nights building a product, and when it comes time to launch you get … crickets. No one buys. And you’re not sure what went wrong.
Luckily, you can avoid all that with the Pay Certainty Technique. This is a simple framework that’ll show you whether or not your service is something people will pay for.
Learn more about it in the video below:
Pivot or pivoting is when you change your strategy or approach in order to attract customers. It is not to be confused with what you scream when moving a couch up your apartment stairwell.
For example, imagine you’ve come up with a product idea that you’re really excited about. You want to test this product to see how it’ll perform. However, you’ve found that during validation, people aren’t really taking to it. In fact, all signs are pointing to the fact that this product won’t do very well at all.
You might have already started developing this product and spent time and energy on it. However, if it’s not going to do well, it might be time to pivot.
Maybe during validation you heard your potential customers speak to a different kind of product they’d like to see. To pivot well, you need to recognize those opportunities — and most importantly — seize upon them.
Pivoting is typically a tough process. Entrepreneurs shouldn’t come to it lightly, and should be honest with themselves when it’s time to do so.
Profit margin refers to a measure of profitability that’s calculated by dividing your net income by your revenue:
Net income (or net profit) / revenue = Profit margin
Not to be confused with revenue, which is the total amount of money you get from sales, net profit or income is the money that is leftover after you subtract all the business costs, including operating costs, employees (if any), materials, taxes, and so on. A 10% profit margin, for example, means your business has a net income of $0.10 for each dollar of revenue you get.
Return on investment (ROI)
Your return on investment (ROI) is the ratio between your net profits and your investment into a product, business, or venture.
Your ROI can be calculated by subtracting the cost of investment from net profits, and dividing that number by the cost of investment. Then multiply the number by 100, and you have your ROI percentage.
(Net profits – cost of investment) / cost of investment x 100 = Return on investment
For example, if you spent $200 developing a piece of software that made $1,000, your ROI would be:
(1,000 – 200) / 200 = 4
4 x 100 = 400%
Your ROI would be 400% — which is dope. Great job! Of course, not all ROIs can be summed up in neat dollar amounts. Things like time, energy, tears, and lost sleep cannot be accounted for.
Helpful link: Confessions of a CEO: Why I killed a $2mm product
Software as a service (SaaS)
Software as a service (SaaS) is a software delivery model in which the software is available to customers online, typically characterized by a subscription payment service.
This means clients don’t have to host the software onsite and that most technical issues that might arise will be handled by the SaaS vendor, which keeps the clients happy (mostly).
Some good examples of SaaS businesses include:
- Google Suite
Helpful link: How Zapier helped increase our revenue by $350,000
A solopreneur is someone who creates a business by themselves. This means no partners and no employees. No one to manage besides yourself.
Some people thrive working by themselves, especially in the beginning stages. You’re held accountable to yourself and retain full creative control over your work. However, it also means that the entire business rests upon your shoulders — which can be stressful to say the least.
As a solopreneur’s business grows, they’ll inevitably have to scale if they want to grow more. This means taking on some employees or outsourcing work to other people.
For more, check out our video below on three things Han Solo can teach you about being a SOLOpreneur. (Yes, thank you. We know. We’re very clever.)
Ahhh sweat equity. The life blood of any successful business (and also a lot of unsuccessful businesses). Sweat equity describes investments into a business, products, or ventures that can’t be summed up in clean numerical amounts.
When we describe putting our time and energy into something, we’re talking about sweat equity. As such, a lot of entrepreneurs can factor sweat equity into things like a product’s pricing and even its ROI.
Helpful link: How I doubled my revenue by doing less
Your target market is the specific group of customers to whom you want to sell. Much like your niche, the target market determines what kind of products you create, the demographics you’ll attract, and how you position yourself. Defining your target market is key in most all stages of your business, from what type of business you create to the services you provide.
Helpful link: I don’t just launch and pray. Here’s what I do.
A tracking link is a URL used to determine where a business is getting their traffic. It is incredibly important to determine where a business should invest their time and money for marketing purposes, and it shows the success (or lack thereof) of marketing campaigns.
Tracking links work by adding a tracking code to your website URL. If someone uses this specific code to get onto your website, the data is tracked and you know exactly how many people clicked through using that code.
For example, you might have a tracking link in an email newsletter that linked to an article you wrote. If 100 people clicked on that link, you’ll have data that reflects that the tracking link got you 100 extra visitors on your article.
Venture capital is funding invested into a business during its early stages. It’s typically provided by venture capital firms to help develop businesses that have a lot of potential for growth and profits.
In return, the people funding these businesses via venture capital are given a percentage of the profits gained, a partnership with the business, as well as the ability to influence the business.
Helpful link: “How do I get an angel investor?”
So now you know everything there is to know about online business and are basically an entrepreneurship genius.
Just kidding. But you do know enough that you’re ready to take that knowledge and turn it into action. Don’t worry if some concepts are still fuzzy — they’ll become clearer along the way, the more you actually work with them.
Ready to get to work but need help finding your idea?
Get started with our checklist for finding a profitable business idea, including a video on our signature idea-finding method Idea Mapping, from our online course, Zero to Launch.
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