Business Definitions – B

back end (websites) – Front end and back end describe program interfaces relative to the user. The front end, here, is the appearance of your website. It is the graphic design and HTML portion — some people call this the user interface or UI. In contrast, the portion of the application you or your developers work with is the back-end. The back end handles the dynamic parts of the site, such as a newsletter, an administration page, a registration database, a contact page or more complicated Web applications. Your back end interfaces with your UI and makes your website work.

benchmark – A benchmark is a standard or guideline used to compare some aspect of a business to some objective or external standard measure. For example, when a banker compares a business’ profitability to standard financial ratios for that type of business, the process is sometimes referred to as “benchmarking.” Liveplan creates a chart that it calls “Business Benchmarks,” which it uses to compare five standard business measures (sales, gross margin, net profits, collection days, and inventory turnover) as they change over time. In this case the benchmark is the business itself, so it compares past results to planned future results.

brand – A name, term, sign, symbol, design, or a combination of all used to uniquely identify a producer’s goods and services and differentiate them from competitors.

brand equity – The added value a brand name identity brings to a product or service beyond the functional benefits provided.

brand extension strategy – The practice of using a current brand name to enter a new or different product class.

brand recognition – Positions customer’s relative perceptions of one brand to other competitive alternatives.

break-even analysis – A technique commonly used to assess expected profitability of a company or a single product. The process determines at what point revenues equal expenditures based on fixed and variable. Breakeven is usually expressed in terms of the number of units sold or in total revenue. The break-even analysis is a standard financial analysis that measures general risk for a company by showing the sales level needed to cover both fixed and variable costs. That level of sales is called the break-even point, which can be stated as either unit sales volume or sales as dollar (or other currency) sales. The break-even analysis uses three assumptions to determine a break-even point: fixed costs, variable costs, and unit price. Fixed costs and variable costs are both included in this glossary, and unit price is the average revenue per unit of sales. The formula for break-even point in sales amount is: =fixed costs/(1-(Unit Variable Cost/Unit Price)) The break-even analysis is often confused with payback period (also in this glossary), because many people interpret breaking even as paying back the initial investment. However, this is not what the break-even analysis actually does. Despite the common and more general use of the term “break even,” the financial analysis has an exact definition as explained above. One important disadvantage of the break-even analysis is that it requires estimating a single per-unit variable cost, and a single per-unit price or revenue, for the entire business. That is a hard concept to estimate in a normal business that has a collection of products or services to sell. Another problem that comes up with break-even is its preference for talking about sales and variable cost of sales in units. Many businesses, especially service businesses, don’t think of sales in unit, but rather as sales in money. In those cases, the break-even analysis should think of the dollar as the unit, and state variable costs per unit as variable costs per dollar of sales.

break-even point – The output of the standard break-even analysis. The unit sales volumes or actual sales amounts that a company needs to equal its running expense rate and not lose or make money in a given month. The formula for break-even point in units is: The formula for break-even point in sales amount is: =Regular running costs/(1-(Unit Variable Cost/Unit Price)) This should not be confused with the recovering initial investment through the regular operation of a business. That concept, often confused with break-even, is called the payback period. see break-even analysis for more background.

broker – An intermediary that serves as a go-between for the buyer or seller.

bundling – The practice of marketing two or more product or service items in a single package with one price.

burden rate – Refers to personnel burden, the sum of employer costs over and above salaries (including employer taxes, benefits, etc.). Business Plan Pro uses an assumed burden rate to calculate these extra personnel costs. The rate assumption is in the general assumptions table, as a percentage. Business Plan Pro applies this percentage to the straight wages and salaries. For example, if wages and salaries amount to $10,000 and the burden rate is 15%, then the personnel burden is $1,500, which is 15% of $10,000. The personnel burden is an operating expense, so it belongs with other expenses in the Profit and Loss table. It is also a personnel cost, so it also shows in the Personnel Plan table.

business mission – A brief description of an organization’s purpose with reference to its customers, products or services, markets, philosophy, and technology.

business plan – The written document that details a proposed or existing venture. It seeks to capture the vision, current status, expected needs, defined markets, and projected results of the business. A business plan “tells the entrepreneur’s story” by describing the purpose, basis, reason and future of the venture.

buy-sell agreement – An agreement designed to address situations in which one or more of the entrepreneurs wants to sell their interest in the venture.

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