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Glossary

Accrual accounting. An accounting system that recognizes revenue when earned and expenses when incurred; income and expenses are recorded at the end of an accounting period even though cash has not been received or paid.

Break-even. The point where expenses and income are equal.

Business plan. A written summary of how a business intends to organize an entrepreneurial endeavor and implement activities and procedures necessary and sufficient for the business to succeed.

Cash accounting. An accounting method that recognizes revenue and expenses when cash is actually received or disbursed rather than when earned or incurred.

Cash flow. An accounting term that refers to the amount of cash that is received and spent by a business; it is not a measure of profitability; a profitable company can fail because of problems with cash flow.

Contribution margin. The amount of revenue available to pay fixed costs and profits after paying direct costs and variable costs.

Debt financing. A method of financing a business that relies on borrowing to fund the initial activities of the business.

Demographics. The statistical characteristics of a population typically utilized in business to establish a defined customer base to which to market goods and/or services.

Design/build. Generally, a contracting company that provides both professional design services and construction services; most often these are bundled into one package.

Direct costs. Expenses directly related to specific jobs or projects; usually includes materials, labor, and labor burden and may include the cost of equipment rental and subcontractors.

Employee handbook. A guide detailing the rules, regulations, guidelines, and acceptable manner of conduct within a company as well as the penalties for failure to comply.

Equity financing. A method of financing an enterprise in which a company sells stock; individuals who purchase the stock have ownership interest in the company.

Fixed costs. An expense that remains constant regardless of a change in the level of a company’s business or income.

General contractor. A contractor who does construction on a building or works on other home or property improvements for clients; may have his or her own work force or may hire independent subcontractors.

Labor burden. Costs of labor in addition to wage or salary; includes payroll taxes, insurance, and other associated expenses.

Lien. A legal claim on a piece of property used to ensure payment of a debt or obligation.

Marginalism. An economic concept used to determine if an additional expense will result in a benefit greater than the additional cost.

Marketing. The action or business of promoting products or services to a mass or specific audience. Market research and advertising are included.

Mission statement. A written statement that summarizes the purpose of a business.

SDS (Safety Data Sheets) or MSDS (Material Safety Data Sheet). Both are important features of workplace safety. Both sheets provide information on dealing with toxic or hazardous materials. Businesses are required to maintain a current file of these sheets as applicable to their enterprise.

OJT (On the Job Training). Learning a trade or job without formal education by hands-on involvement.

OSHA (Occupational Health and Safety Administration). A branch of the federal government responsible for establishing and enforcing procedures to prevent workplace injuries.

Overhead. Fixed costs plus variable costs.

PBX (Private Branch Exchange). A computerized telephone system that can handle many calls, both incoming and outgoing, at the same time; voice mail and call forwarding are popular additional features.

Social Media. The use of websites and applications for users to connect with one another to network and share content and information.

Subcontractor: An independent contractor who takes jobs from the principal contractor or from another subcontractor.

TQM (Total Quality Management). A management strategy aimed at creating awareness of quality in all organizational processes; provides a system under which everyone in the organization can strive for customer satisfaction.

Workers’ compensation insurance. Insurance that is designed to protect the earnings of employees who are injured or become ill as a result of their work; premium costs are based on payroll.