Glossary

Comparable company analysis, commonly referred to as 'comps', is a valuation method that compares a company's financial metrics, such as revenue, profit, and multiples, to those of similar companies in the market. It helps determine a company's relative value and assess its competitiveness within the industry.

Compound annual growth rate (CAGR), is a measure of the average annual growth rate of an investment or business over a specific period, assuming steady growth. It provides a smoothed annual growth rate by accounting for compounding effects. CAGR is often used to assess investment performance, evaluate business growth, or project future growth potential. It helps to provide a clear picture of the overall growth rate, taking into account the compounding effect over multiple periods, rather than considering simple arithmetic averages.

A confidential information memorandum (CIM) is a document that provides detailed information about a business to potential buyers or investors. It includes financial data, operational insights, market analysis, and other confidential information to facilitate due diligence and decision-making.

Consignment stock refers to inventory that's held by a retailer but is still owned by the supplier until it's sold to the end customer. The supplier retains ownership until the retailer sells the goods, allowing for better inventory management and risk allocation.

CM1, CM2, and CM3 are contribution margin levels used to assess the profitability of a product or service. CM1 represents the gross profit after deducting the variable costs directly associated with production, while CM2 incorporates additional variable costs, such as shipping, transaction fees, and and CM3 incorporates customer acquisition costs.

The conversion rate is the percentage of visitors to a website or users of a service who take a desired action. It's a crucial metric in digital marketing used to measure success.

Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors. It's often conducted online using crowdfunding platforms, such as Crowdcube and Seedrs.

Customer acquisition cost (CAC) is the average cost a company incurs to acquire a new customer. It includes various expenses associated with marketing, sales, advertising, and other activities aimed at acquiring and converting prospects into paying customers.

CRM is a technology for managing all of a company's relationships and interactions with customers and potential customers. It helps improve profitability, primarily by improving customer retention and driving sales growth.

Customer retention refers to strategies and tactics businesses use to encourage customers to continue using or buying their products or services. High retention rates contribute to business growth and profitability.

A data room is a secure virtual space used to store and share confidential documents during due diligence processes, such as mergers and acquisitions or fundraising. It allows authorised parties to access and review sensitive information in a controlled and protected environment.

Deferred revenue, also known as unearned revenue, refers to the situation where a company receives payment from a customer for goods or services that have not yet been delivered or earned. Instead of recognising the revenue immediately, it's recorded as a liability on the balance sheet until the company fulfils its obligations. Once fulfilled, the deferred revenue is recognised as revenue.

Direct-to-consumer (D2C) refers to the business model in which companies sell their products or services directly to consumers without involving intermediaries or retailers. It allows brands to establish a direct relationship with customers, control their distribution, and gather valuable consumer data.

Drop-shipping is a retail fulfilment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product using the drop-shipping model, it purchases the item from a third party and has it shipped directly to the customer.

Due diligence is a comprehensive investigation and analysis conducted by a potential investor or buyer to assess the financial, legal, and operational aspects of a business. It involves reviewing financial statements, contracts, intellectual property, customer data, and other relevant information to evaluate the risks and potential value of an investment or acquisition.

E-commerce metrics are quantitative measurements used to evaluate the performance, effectiveness, and success of an e-commerce business. These metrics provide insights into various aspects of online sales, customer behaviour, marketing efforts, and overall business operations. Common e-commerce metrics include conversion rate, average order value (AOV), customer acquisition cost (CAC), customer lifetime value (CLTV), repeat purchase rate, cart abandonment rate, website traffic, and revenue.

An EMI is an approved employee share scheme that is available to most trading companies, allowing employers to grant share options to key employees as a reward for their efforts within the business.

Earn-out is a financial arrangement in which the seller of a business may receive additional payments based on the future performance of the sold entity. It bridges valuation gaps between a buyer and seller, aligning both parties' interests post-acquisition.

EBITDA is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. It can be helpful in comparing profitability between companies and industries. EBITDA is typically used in M&A or investment transactions.

ESG stands for Environmental, Social, and Governance. It refers to the criteria used to evaluate a company's environmental impact, social responsibility, and corporate governance practices. ESG factors are increasingly considered by investors and stakeholders to assess a company's sustainability and long-term performance.

Equity refers to the ownership interest or stake that individuals or entities hold in a company. It represents the residual value of assets after deducting liabilities and is typically represented by shares or stock. Equity provides ownership rights and the potential to share in the company's profits and value appreciation. It can be obtained through various means, such as investments, stock options, or contributions made by founders or shareholders.

An exit strategy is a planned approach to selling a company or an owner's stake in a business. It's typically used by start-ups and investors to realise their investment's capital gains.

FOMO is a psychological phenomenon where people fear missing out on experiences others are having. Marketers leverage this to create a sense of urgency or exclusivity around their products or services.

Fast moving consumer goods (FMCG) are consumer products with a high turnover rate and relatively low cost, such as food, drink, toiletries, and household goods. FMCG companies often focus on high-volume sales, frequent purchases, and wide distribution networks.

In the context of growth, the flywheel represents how customer-centric actions and positive customer experiences can create a self-sustaining cycle of business growth. It emphasises that customer satisfaction, referrals, and repeat purchases can act as driving forces for accelerating business growth and momentum. By focusing on customer delight and creating positive feedback loops, companies can build a flywheel effect that drives sustainable growth.