Definitions of Business Terms for Budding Leaders

In order to be a successful, young company leader, you don’t necessarily have to know each and every new business term out there, as long as you know your business well enough.
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In order to be a successful, young company leader, you don’t necessarily have to know each and every new business term out there, as long as you know your business well enough. However, there is another perspective to consider here, and we will discuss that first.

The Importance of Learning New Business Terms

The world of business is a constantly changing and ever-expanding thing that in many ways, resembles the constant evolution of life itself. In order to stay relevant, every field of trade and the businesses in it must upgrade or evolve themselves to fit in better with the changing times or perish somewhere down the line.

The most important terms in modern business are not as much about important-sounding abbreviations and phrases as they are representative of new ideas. Therefore, by keeping his/her knowledge base updated with these terms, a budding leader can prepare better for what’s going on and what is about to come soon. With that perspective in mind, let us now briefly go over a few of them.

Inbound Marketing

Inbound marketing refers to a marketing principle that puts the customer first and does not resort to bothering them repeatedly in the hopes of making a sale. Powered mainly by content, social media and search engine optimization (SEO), the data-driven marketing strategy aims to create brand awareness and demand within the target customer group.

Spamming a customer’s email inbox or putting up a bunch of persistent popup ads on a site does not work anymore, not even in the B2C segment. Most customers are more aware than that, and even the ones that fall for push marketing have a very low retention rate. With superior results to back inbound marketing in every aspect, its customer-first approach is the only feasible model to follow, since outbound marketing is outdated.

Flywheel

The flywheel first came into light in 2018 as a possible alternative to the marketing/sales funnel. Instead of leading customers through the proverbial funnel or pipe, the flywheel model builds its brand, services and/or products around the target customer itself. It’s a model that focuses more on building and maintaining long term customer relationships to ensure ongoing business transactions between the two parties.

Flywheels hold the most relevance within the B2B segment, where many believe them to be a replacement for the classic sales funnel. While there isn’t enough data to support the notion that well-constructed sales funnels are invalid, flywheels do present a more customer-oriented and dynamic approach to marketing and sales in B2B. It can prove to be more effective for companies that depend on a few particularly important and crucial clients. Corporate law firms, accountancy firms, and other similar service based B2B segments often find themselves doing the same thing, but in a less organized manner.

PEO

PEO stands for Professional Employer Organization and it’s a term that every business leader with intranational and/or international expansion plans should know well. A PEO is a partner organization that helps businesses handle all aspects of employee management in a new jurisdiction that they are expanding to. Be it a new city, a new state or an entirely new nation altogether, common services provided by a PEO include but are not limited to: 

  • Payroll, compensation and benefits management
  • Handling recruitment and onboarding duties
  • Managing HR and all other necessary administrative services

It should be noted that if an organization has plans for international expansion, then they will have to seek out a Global PEO like New Horizons, given that it would not be possible for smaller, domestic PEOs to support an international expansion properly. Visit the New Horizons Global Partners website to know everything that you will need to know in order to create a sustainable, successful global expansion plan and execute it with their expertise, resources and help.

Channel Conflicts

Channel conflicts are detrimental to productivity, as they can hamper or even completely put a section of your business operation on hold. Keeping the definition simple is almost impossible as the variability factors here are far too many for that!

Nevertheless, the concept at its most basic form can be defined as conflicts arising in between two or more channel members because one or both parties are of the opinion that the other channel member is taking actions against its business interests and goals. Almost exclusively, channel conflicts are a result of a poor pricing strategy and inefficient maintenance of the same. Channel conflicts are most likely to arise if:

  • The business is not keeping direct and indirect sales restricted or adequately separated
  • The pricing strategy is not controlled strictly by the OEM
  • Aversion to dynamic changes in policy by local channel members
  • The number of channel partners is far too high in comparison with the number of available customers
  • Faulty onboarding process while training channel partners

Debt Service Coverage Ratio (DSCR)

In business, loans are a regular part of running a smooth business operation, and the debt service coverage ratio (DSCR) is a very important term that anyone in a decision-making position should be quite familiar with. By definition, corporate DSCR is the ratio calculated on comparing a company’s total existing debt amount to its total cashflow, which it can, in theory, use to pay off those debts at that time. DSCR is of particular interest to lenders and investors, as it shows them how well the company is doing, or if the business is on the verge of going bankrupt!

In developing economies with good potential, you are more likely to find investors that do not mind a comparatively lower DSCR, but the cut off ratio begins to get more serious once you move towards the more developed areas with relative saturation.

Tax Lien

Tax lien is an emergency term, which is why it is one that a budding leader should be well familiar with. If a business fails to pay its due taxes to the Internal Revenue System (IRS) within the specified deadline, there will be an extension given to pay the taxes with a heavy, late fee, that will keep growing the longer it takes for a business to pay the IRS.

On failing to pay the dues even after the extension period, the IRS will not only cease your business assets and operations, but they will also freeze all your bank accounts and credit lines as well. That would be a tax lien, one of the most dreaded business terms to be aware of in the United States. If negotiations fail and payment plans cannot be worked out, the IRS will eventually liquidate the ceased assets in order to receive the amount which the business owes them in taxes. Fortunately, proper communication and cooperation with the IRS can prevent a tax lien to begin with.

Not that all of these buzzwords, abbreviations and defining phrases are new, but each one on this list holds immense importance in 2020 and beyond. Some of these are words that represent ideas that are valid as you read this and have a high chance of becoming even more potent in the near future. Others are more about getting to know the harsher ramifications of making big mistakes early on. Knowledge about them is the first step towards growing your personal knowledge base, as well as for leading your company through the present and towards the future successfully.

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