Navigating the world of social entrepreneurship and small business can feel overwhelming, especially when faced with specialized terms like amortization, cap table, bootstrapping, and liquidity. This glossary aims to help you bridge the jargon gap, so you’re better equipped to talk finance with your colleagues, peers, advisors and most importantly, bankers and potential investors. Understanding these concepts is essential – not just for financial literacy but for making informed decisions that balance profit with purpose, empowering you to confidently grow your venture and create meaningful impact.
Amortization: Spreading the cost of intangible assets over their useful life.
Angel Investors: Wealthy individuals investing in startups in exchange for equity.
Bootstrapping: Funding a business using personal savings or revenue from early customers.
Break-Even Point: The sales level at which total revenue equals total costs, resulting in no profit or loss.
Burn Rate: The rate at which a company spends its cash reserves.
Cap Table: A table showing ownership stakes in a company.
Cash Flow Statement: A report showing cash inflows and outflows over a period of time
Customer Acquisition Cost (CAC): The cost of acquiring a new customer.
Customer Lifetime Value (CLV): The total value of a customer over their lifetime.
Debt Financing: Borrowing money to be repaid with interest.
Depreciation: Reduction in asset value over time due to usage or obsolescence.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of cash flow generation capability.
Equity Financing: Funding by issuing shares of stock to investors.
Equity: Ownership in a business, representing a share of its value after liabilities are deducted.
Fee-for-Service: Income earned by delivering specific services or products.
Fixed Costs: Expenses such as facilities and equipment that the company must continue to pay for, even if it sells no products or services.
Hybrid Business Model: Combining nonprofit and for-profit strategies to achieve both mission and revenue goals.
Indirect Costs: Hidden costs like overheads or administrative expenses allocated to specific projects.
IPO (Initial Public Offering): The first public sale of a company’s stock.
Key Performance Indicators (KPIs): Metrics used to evaluate success in achieving business objectives.
Liquidity: The ability of a business to meet short-term financial obligations by converting assets into cash.
Patient Capital: Long-term investments without the expectation of quick profits, often used to support social enterprises.
Profitability: Revenue exceeding expenses, essential for long-term viability.
Recurring Revenue Model: Predictable income streams from repeat customers or long-term contracts.
Return on Investment (ROI): A measure of profitability relative to the investment cost.
Seed Funding: Initial investments to support early-stage business development.
Self-Sufficiency: Funding all operations through earned income alone.
Series Funding: Rounds of venture capital funding (e.g., Series A, B, C) used to scale a business.
Social Finance Intermediary (SFI): Entities facilitating investments in social purpose organizations (SPOs).
Social Purpose Organization (SPO): Organizations dedicated to achieving social missions while being financially viable.
Social Venture or Enterprise: A business model that uses market-driven strategies to address social or environmental issues while reinvesting profits into its mission.
Standby Credit Facility: A loan allowing funds to be drawn as needed, similar to an overdraft.
Triple Bottom Line: Measuring success on financial performance, social impact, and environmental sustainability.
Variable Costs: Expenses that are incurred only during the production or delivery of products and services.
Venture Capital (VC): Investments in startups with high growth potential, typically in exchange for equity.
What have we missed?
If there are terms, acronyms, or phrases you think it would be helpful for your fellow social entrepreneurs to understand, please let us know!
Social Venture Institute (SVI)
Empower your entrepreneurship and master your financials.
