What These 8 Business Terms Really Mean

Breaking down oft-used business jargon in dance terms—with help from an award-winning dance entrepreneur

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As dancers-turned-entrepreneurs know, training and performing teach many skills that become useful when opening one’s own business. But just as every dancer has to take the time to learn what “tendu” and “baby freeze” and “cramp roll” mean, so every dance entrepreneur could stand to brush up on some business vocabulary.

Dance Business Weekly enlisted award-winning entrepreneur and founder of the Dance Studio Owners Association Clint Salter to make this vocab review as painless as possible.

Accounts Receivable/Accounts Payable

What it means: “‘Accounts receivable’ is all of the money that customers pay you or owe to you,” Salter says. “‘Accounts payable’ is all the money the company owes to its suppliers and vendors.”

The dance-business application: If, say, you run a dance-focused subscription service, “accounts receivable” would refer to customers’ monthly or quarterly subscription fees, plus one-off fees for any special- or limited-edition offerings. “Accounts payable,” then, means the money you owe to the manufacturers that make the items with which you’re filling the subscription boxes, or to instructors who teach the classes that you offer via the subscription service.

Assets

What it means: Physical assets are all the property owned by your business that have value and can be used to provide goods or services. But there are also such things as intellectual/intangible assets and human assets.

The dance-business application: “In a dance studio, physical assets would include barres, mirrors and floors,” Salter says. “Intellectual-property assets would be our curriculum, choreography, institutional memory and best practices. But people assets—the teachers and staff—are often the most valuable and interesting asset of a dance studio.”

Cash Flow

What it means: The total amount of money being transferred in and out of a business, especially the amount considered to be doing so on a regular or predictable basis.

The dance-business application: If you run a dance studio, your cash flow is probably heaviest at the beginning of each semester or school year—and lightest in summer, when many students take a break or go off to summer intensives. On the other hand, in the month when you pay manufacturers for recital costumes, your cash flow may not look very healthy: You’ll have all this money flowing out of your business, but not a lot coming in. “It’s really important for dance businesses to think about when in the year or season their cash flow is heavy or light, and to be aware of when big expenses need to be paid,” Salter says.

Markup

What it means: Markup is the difference between how much it costs to actually make or deliver a product, and how much you end up selling it to the customer for. In other words, it’s the percentage of an item or service’s retail price that covers what you have to spend to do business—and ensures you stay profitable.

The dance-business application: Markup can get a bad rap, Salter says, but “you want to create markup so that you’re covering your overhead as well as creating a profit opportunity.” For dance-studio owners, recital costumes are often a clear markup moment. “If you paid the costume manufacturer $50, you might want to mark that up 100 percent and charge $100,” Salter says. But it’s the same general principle for private lessons, or anything else your dance business is trying to sell.

Revenue

What it means: Revenue is your business’ income, or all the money coming in as a result of your business’ operation. You’ll sometimes hear revenue called “the top line,” because it sits at the top of your income statement—before any expenses are subtracted.

The dance-business application: “If you have a dance studio, your revenue would include everything that you sell inside of your studio: group classes, private lessons, costumes, merchandise, recital ticketing, etc.,” says Salter.

Profit

What it means: Profit is “the bottom line” to revenue’s “top line,” and there are three different subtypes:

Gross profit = [revenue] – [cost of goods sold] (what you spend on materials and/or labor to produce those goods)

Operating profit = [gross profit] – [all other fixed and variable costs of doing business]

Net profit = [operating profit] – [debt, taxes, loan interest and other one-off expenses] (Net profit is usually what people are referring to when they talk about a business’ profits.)

The dance-business application: Say you’re a dancewear manufacturer. Your gross profit would be your revenue (all the money you’ve made in sales) minus the cost of materials, packaging, shipping and such. Your operating profit would be that number minus costs like rent and payroll. And your net profit would be that final amount, minus any other miscellaneous expenses and taxes.

ROI

What it means: “‘ROI’ stands for ‘return on investment,’” says Salter, and can refer to any type of investment in your business, but it often refers to marketing: “When we spend money, we want the result to be money coming back into the business.” More money coming back to you means a higher ROI.

The dance-business application: Let’s say you spend $120 on Facebook ads to get the word out about your fledgling dance-apparel company. If you get three customers as a result of those ads (and each customer spends an average of $50 on your site), then each customer has cost you $40 to acquire—and you’re up just $30 total in the end.

According to Salter, how you look at ROI will depend on your business model. A dance studio can afford to spend more on acquiring each new customer if that customer signs up for more than one class at a time or stays at the studio for years. That’s in contrast to the dance-apparel company, where one new customer could just mean a one-time purchase of a leotard or two.

Scale

What it means: “Scaling” is a jargon-y way of talking about intentionally growing a business. It’s often used when referencing fast growth to the point of taking on financial risk—what Salter calls “pulling all of the levers” at once.

The dance-business application: At a dance retail shop, scaling could look like opening another location, hiring specialist pointe shoe fitters, and/or ordering greater quantities of products to stock. For a dance-accessory manufacturer, scaling might mean hiring lots of new employees, expanding from online sales only to brick-and-mortar locations, and/or widening the variety of items on offer.

Helen Hope teaches dance and has written for Dance Spirit and Dance Teacher magazines.