WTF?37 TERMS
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Part 1 The Hustle
- 1.2MarkupMarkup is how much you add to what an item cost you, expressed as a percentage of your cost.
- 1.3Markup vs marginMarkup is measured against your cost. Margin is measured against your selling price. The same dollar of profit produces a bigger markup number than margin number.
- 1.4RevenueRevenue is the total money your business brought in from sales before any costs come out.
- 1.5ProfitProfit is what is left from revenue after every cost of running the business is paid.
- 1.6Resale businessA resale business buys finished goods from suppliers and sells them to end customers or other businesses without manufacturing them.
Part 2 Make It Real
- 2.2EINAn EIN (Employer Identification Number) is your business's federal tax ID number, issued by the IRS.
- 2.3LLCAn LLC (limited liability company) is a business entity registered with a state that exists separately from its owners.
- 2.4EIN vs resale certificateAn EIN is a federal tax ID for your business. A resale certificate is a state-level document used when buying qualifying inventory for resale.
- 2.5Resale certificateA resale certificate is documentation used under applicable state rules when buying qualifying inventory for resale, so the supplier does not collect sales tax on that purchase.
- 2.6Sales tax nexusNexus is the connection between your business and a state that creates an obligation to register for and collect that state's sales tax.
- 2.7Business bank accountA business bank account is an account in the company's legal name, and it is where the business's provable financial history comes from.
- 2.8S corporationAn S corporation is a federal tax status, not a kind of company you form with your state. An eligible corporation, or an eligible LLC, elects it with IRS Form 2553, and its income then generally passes through to the owners' personal returns.
- 2.9C corporationA C corporation is a corporation taxed as a separate taxpayer under the regular corporate rules, which is how a corporation is taxed unless it elects S status. The corporation pays federal income tax on its profit, and shareholders may pay tax again on dividends.
Part 3 Know Your Numbers
- 3.4COGSCOGS (cost of goods sold) is what the items you actually sold cost you, not what you spent on inventory during the period.
- 3.5Gross marginGross margin is revenue minus COGS, usually shown as a percentage of revenue. It is what is left to cover everything else.
- 3.6P&LA profit and loss statement shows whether your business made money over a period of time, revenue at the top, costs beneath it, profit at the bottom.
- 3.7Balance sheetA balance sheet shows what your business owns, what it owes, and what is left over, at a single point in time.
- 3.8Cash flowCash flow is where the cash actually went, money in and money out, in the order it happened.
- 3.9Working capitalWorking capital is the money available to run day-to-day operations: current assets minus current liabilities.
Part 4 Build Buying Power
- 4.3Net 30Net 30 means the full invoice is due within 30 days of the invoice date. The supplier gives you the goods now and takes payment later.
- 4.4Vendor termsVendor terms are an agreement that lets you receive inventory now and pay the supplier later, up to an approved limit.
- 4.5Business creditBusiness credit is your company's own borrowing history and reputation, separate from your personal credit file.
- 4.6Trade referenceA trade reference is a supplier who will confirm how you have paid them: how long the account has been open, the limit, and your payment record.
- 4.7Personal guaranteeA personal guarantee is a promise that you, personally, will repay a business debt if the business does not.
- 4.8UCC lienA UCC filing is a public notice that a lender has a security interest in some or all of your business assets as collateral.
- 4.9Business line of creditA line of credit is a revolving amount a bank lets you draw from, repay and draw again, paying interest only on what is drawn.
Part 5 Master Inventory
- 5.5TruckloadA truckload is a full trailer of inventory, typically customer returns, overstock or open-box goods, sold as one lot at a per-load or per-unit price.
- 5.6ManifestA manifest is the supplier's list of what is on the load, typically model, quantity, condition and a retail reference value.
- 5.7Landed costLanded cost is what a unit really costs you once it is in your building and ready to sell, purchase price plus freight, handling, parts and the cost of what could not be sold.
- 5.8Inventory turnInventory turn is how many times you sell through your average inventory in a period, COGS divided by average inventory value.
- 5.9Inventory agingAging groups your unsold inventory by how long it has been in the building, typically 0–30, 31–60, 61–90 and 90+ days.
- 5.10Scratch and dentScratch-and-dent goods are new or nearly new items with cosmetic damage that does not affect function, sold at a discount.
Part 6 Scale
- 6.2SOPA standard operating procedure is a written, repeatable description of how a specific job in your business gets done.
- 6.3Break-evenBreak-even is the sales level where gross profit exactly covers fixed costs, the point where the business stops losing money.
- 6.4Commercial leaseA commercial lease is a multi-year contract for business space, usually with a personal guarantee and costs beyond the base rent.
- 6.5Enterprise valueEnterprise value is what the whole business is worth to a buyer, independent of who owns it or how it is financed.
- 6.6Write-offA write-off is an ordinary and necessary business expense deducted from income, which reduces taxable profit. It does not make the purchase free.