Business Definitions – V

valuation – Used as a noun, Valuation is what a business is worth, as in “this company’s valuation is $10 million.” This would mean that a company is valued at $10 million, or worth $10 million. The term is used most often for discussions of sale or purchase of a company; it’s valuation is the price of a share times the number of shares outstanding, and the price of a share is the total valuation divided by the number of shares outstanding. For more business valuation, read more about Business Valuation.

value – The ratio of perceived benefits compared to price for a product or service.

variable cost – Costs that fluctuate in direct proportion to the volume of units produced. The best and most obvious example are physical costs of goods sold, direct costs, such as materials, products purchased for resale, production costs and overhead, etc. The concept of variable cost is an important component of risk in a company, because generally variable costs are less risky than fixed costs, because variable costs are not incurred unless there are sales and production. See also break-even analysis, fixed costs, contribution.

variance – A calculation of the difference between plan and actual results, used by analysts to manage and track the impact of planning and budgeting.

venture capitalists (VC) – Venture capitalists are thought of in two ways, first, some people think of any wealthy individual who invests in young companies as a venture capitalist. Second, within the more informed investors, analysts, and entrepreneurs, a venture capitalist is a manager of a mainstream venture capital fund.

venture capital – Venture capital nowadays is used two ways, first, people often take venture capital as any investment capital obtained through private investment or public investment funds directed to high-risk and high-potential enterprises. Second, within the more informed and sophisticated business circles, venture capital is defined more narrowly as investment money coming from the mainstream venture capital firms, a few hundred major firms, different from investment money from other private investors, angels, etc. For example, the www.bplans.com web tool that recommends investment strategies treats venture capital in this second way, mainstream venture capital investors, as opposed to angel investors, SBIC companies, banks, or friends and family. A venture capitalist is a professional manager of a venture capital fund.