Glossary

Terms

4Ps

Product, price, place, promotion. Chapter 8

Affordable loss

The maximum money and time you accept losing in an experiment. Chapter 2

Brainstorming

Generating as many ideas as possible without immediate criticism. Chapter 3

Break-even point

The sales volume with neither profit nor loss. Chapter 9

Build–measure–learn

The testing loop of the lean startup method. Chapter 7

Business model

The logic of creating value, delivering it and earning from it. Chapter 6

CAC

The cost of acquiring one customer. Chapter 8

Calculated risk

Moving ahead after studying the possibilities and setting the acceptable loss. Chapter 2

Cash flow

The money actually coming in and going out over a period. Chapter 9

Commission model

Taking a share of each transaction between two sides through your platform. Chapter 6

Contribution margin

Selling price minus the variable cost per unit. Chapter 9

Creative destruction

New innovation replacing old products and methods (Schumpeter). Chapter 1

Creativity

Generating a new and useful idea. Chapter 4

Customer discovery

Testing a venture's hypotheses by talking directly with customers. Chapter 5

Design thinking

A human-centered problem-solving approach in five stages. Chapter 7

Dilution

The fall in the founders' ownership share as new investors join. Chapter 9

Disruptive innovation

A simple, cheap solution that starts in a neglected market and then displaces the major companies. Chapter 4

Early adopters

The group that tries new things early and influences others. Chapter 4

Early failure

Discovering an idea's flaw early and cheaply. Chapter 12

Effectuation

An approach that starts with the available means rather than a preset goal (Sarasvathy). Chapter 2

Elevator pitch

A pitch of under a minute that sums up the idea. Chapter 11

Entrepreneurship

Discovering an opportunity and turning it, through innovation, into value, by organizing resources and bearing calculated risk. Chapter 1

Founders' agreement

A written agreement setting out shares, roles and how disputes are resolved. Chapter 10

Franchising

Granting others the right to operate your model and brand for a fee. Chapter 12

Freelance document

A document that allows an individual to offer professional services legally. Chapter 10

Freemium

A free basic version and a premium paid version. Chapter 6

Growth mindset

The belief that abilities grow through effort and learning. Chapter 2

How might we…?

Framing the problem as an open question that invites solutions. Chapter 3

Hypothesis

A testable expectation about customer behavior. Chapter 7

Idle resource

An existing resource unused most of the time (a car, a room, equipment, free time), so it is cheap to put to use. Chapter 6

Innovation

Turning an idea into value that people actually use. Chapter 4

Intrapreneurship

Initiative and innovation from inside an organization, as an employee. Chapter 1

Job to be done

The goal for which the customer "hires" the product. Chapter 5

Limited liability company

A company in which the partners' liability is limited to their shares. Chapter 10

LTV

The value of what a customer pays over their whole relationship with the venture. Chapter 8

MVP

The simplest version that allows learning from real customers. Chapter 7

Net profit

What remains of revenue after deducting all costs and statutory obligations. Chapter 9

Opportunity

An idea with a real need, customers, the right timing and the ability to execute. Chapter 3

Persona

A description of a typical customer who represents the target segment. Chapter 5

Pitch

A short presentation aimed at persuading the listener to take a next step. Chapter 11

Pivot

A deliberate change in part of the model based on evidence. Chapter 7

Positioning

The image the customer holds of you compared with the alternatives. Chapter 8

Profit margin

Net profit ÷ revenue; it rises with sales because fixed costs are spread over more units. Chapter 9

Reckless growth

Expanding before the model is proven, or without a financial basis. Chapter 12

Scaling

Revenue growing faster than costs. Chapter 12

SCAMPER

A list of questions for developing ideas: substitute, combine, adapt, modify, put to another use, eliminate, reverse. Chapter 3

Small and medium enterprises

Businesses classified by number of employees or revenue; the backbone of the economy. Chapter 1

Social entrepreneurship

A venture whose first goal is solving a social problem while staying financially sustainable. Chapter 1

Start-up costs

Costs paid once when the venture begins. Chapter 9

STP

Segmentation, then targeting, then positioning. Chapter 8

SWOT

Analysis of strengths, weaknesses, opportunities and threats. Chapter 5

TAM / SAM / SOM

The total, serviceable and realistically obtainable market. Chapter 5

The 10/20/30 rule

Ten slides, twenty minutes, and type of at least 30 points. Chapter 11

Traction

What proves the idea works: interviews, trials, sales. Chapter 11

Trademark

The distinctive name or logo of a product, registered for protection. Chapter 10

Value pie

The difference between the most the customer will pay and the real cost of delivering the service, including time. Chapter 6

Value proposition

The reason the customer chooses you over the alternatives. Chapter 6

Win-win deal

A model from which the customer, entrepreneur, workers and partners all come away satisfied, with the customer paying an amount that rewards everyone. Chapter 6