3PL (third-party logistics)
A 3PL (third-party logistics provider) is an outside company that stores a brand's inventory and packs and ships its orders.
Reference
Plain-language definitions of the business terms heard on Unit Economics, with links to the episodes where they come up.
A 3PL (third-party logistics provider) is an outside company that stores a brand's inventory and packs and ships its orders.
A person who invests their own money in very early companies, usually in exchange for a small share of ownership.
RelatedPre-seedSeed round
Heard inE. 59 Springdale VenturesE. 3 Talea Beer Co.E. 63 Matic Robots
B2B (business-to-business) means selling to other businesses rather than to individual consumers.
RelatedDTC (direct-to-consumer)
Also called self-funded
Building a company with the founders' own money and the cash the business earns, rather than raising money from outside investors.
RelatedVenture capital
Also called food broker, sales broker
An outside sales agent who pitches a brand's products to store buyers and is usually paid a commission on sales.
RelatedCategory reviewUNFI / KeHE
Also called cash burn, burn
How much cash a company uses up each month after accounting for the cash it brings in. This is often called net burn.
RelatedRunway
Heard inE. 14 JonesE. 9 Bezi
CAC (customer acquisition cost) is the average amount a business spends on marketing and sales to win one new customer.
RelatedLTV (lifetime value)Payback periodContribution margin
Also called capitalization table
A table showing who owns what share of a company, including founders, investors, and employees.
Also called line review
A scheduled period, often once a year, when a store chain's buyer decides which products to add to or drop from a section of the store.
RelatedSlotting feesBroker
Also called churn rate
The share of customers or subscribers who stop buying or cancel over a period of time.
RelatedCohortLTV (lifetime value)
Heard inE. 22 Hiya
A loosely defined term for products made with simple, recognizable ingredients, often without artificial additives. There is no single agreed-upon standard.
Heard inE. 9 BeziE. 43 Gato Dates
Also called co-manufacturer, contract manufacturer
A co-packer, also called a co-man (co-manufacturer), is an outside company that manufactures or packages products for a brand, allowing the brand to outsource some or all of its production.
RelatedMOQ (minimum order quantity)Private labelLead time
Heard inE. 49 Jamie's FarmE. 48 PistakioE. 6 Alec's Ice Cream
Also called cost of goods
COGS (cost of goods sold) is the cost of making or buying the products a company sells, including materials, packaging, manufacturing labor, and factory overhead, but not marketing or general administrative expenses.
A group of customers who started buying in the same period, tracked together to see how their buying changes over time.
RelatedChurnLTV (lifetime value)
What is left from a sale after paying for the product and the costs that rise with each order, such as shipping, packaging, and payment fees. It shows how much each sale adds toward covering fixed costs and profit.
RelatedGross marginCOGS (cost of goods sold)Unit economicsCAC (customer acquisition cost)
Also called conventional
Mainstream supermarket chains such as Kroger or Albertsons, as opposed to natural or specialty stores.
RelatedNatural channel
CPG (consumer packaged goods) refers to products sold in packages to everyday shoppers, such as food, drinks, and personal care items.
RelatedNatural channelConventional groceryCo-packer (co-man)
Also called sampling, in-store demo
Handing out free samples in a store so shoppers can try a product.
RelatedTrade spend
The drop in each existing owner's percentage of a company when new shares are issued, for example to new investors.
RelatedEquityCap tableValuation
Heard inE. 39 Lasso
Also called D2C
DTC (direct-to-consumer) means selling straight to customers, usually through the brand's own website, instead of through stores or other middlemen.
Related3PL (third-party logistics)CAC (customer acquisition cost)B2B (business-to-business)
Also called diligence
The research an investor or buyer does on a company before investing in it or buying it.
Also called ownership, stake
Ownership in a company. Giving up equity means selling part of the business to investors or giving it to employees.
RelatedCap tableDilutionValuation
Heard inE. 3 Talea Beer Co.E. 51 Betty Jo'sE. 59 Springdale Ventures
The sale or public listing of a company, which gives founders and investors a chance to sell their ownership for cash.
RelatedValuationDue diligenceVenture capital
Heard inE. 60 Great Circle VenturesE. 3 Talea Beer Co.E. 59 Springdale Ventures
A cycle where each part of the business feeds the next, so growth builds on itself over time.
Free product a brand gives a retailer to stock its shelves when a new product launches, often in place of a cash slotting fee.
RelatedSlotting feesTrade spendTPR (temporary price reduction)
Heard inE. 31 Laurel's CoffeeE. 46 9 Mini InterviewsE. 57 Joy Supply
Also called F&F round
An early round of money raised from people the founder already knows, usually before professional investors get involved.
RelatedPre-seedAngel investor
Also called GTM
The plan for how a business reaches and sells to customers, whether it is launching a new product or entering a new market, including who to sell to, where, and at what price.
The share of each sale left over after paying the direct cost of making the product. If a $10 item costs $4 to make, the gross margin is 60%.
RelatedCOGS (cost of goods sold)Contribution marginUnit economics
Heard inE. 3 Talea Beer Co.E. 65 Mikey's PiesE. 16 One Trick Pony
How long it takes from placing an order with a supplier to receiving the goods.
Also called CLV, customer lifetime value
LTV (lifetime value) is the revenue or gross profit a business expects to earn from a customer over their entire relationship. The profit-based version is the one usually compared with CAC (customer acquisition cost).
RelatedCAC (customer acquisition cost)Payback periodChurnCohort
Something that makes a business hard for competitors to copy, such as a brand, a patent, or a cost advantage.
Also called minimums
MOQ (minimum order quantity) is the smallest order a factory or supplier will accept.
RelatedCo-packer (co-man)Lead time
Heard inE. 4 Spring & MulberryE. 5 P.F. Candle Co.E. 61 Rite of Way
An MVP (minimum viable product) is a basic first version of a product, released to learn whether people want it before investing more.
RelatedProduct-market fit
Also called natural grocery
The group of grocery stores focused on natural and organic foods, such as Whole Foods, Sprouts, and independent co-ops.
RelatedConventional groceryUNFI / KeHE
Heard inE. 6 Alec's Ice CreamE. 4 Spring & MulberryE. 9 Bezi
The number of days a buyer has to pay an invoice. Net 30 usually means payment is due 30 days after the invoice date, unless the agreement says otherwise.
RelatedWorking capital
Also called payback
How long it takes for the money spent winning a customer, or on an investment, to be earned back.
RelatedCAC (customer acquisition cost)LTV (lifetime value)
Heard inE. 23 PickleE. 14 Jones
Also called pre-seed round
The earliest formal round of outside money, often used to build a first product or test an idea.
Also called store brand
Products made by one company and sold under another company's brand name, such as a store's own brand.
RelatedCo-packer (co-man)
Also called PMF
The point at which a product meets a need for a group of customers who buy it and keep using it.
A schedule that sets when and where a brand's products will be on sale or featured in stores over the year.
Also called doors
The number of individual store locations that carry a product. Being in 500 doors means being sold in 500 stores.
RelatedVelocitySell-through
Also called revenue run rate
A projection of yearly sales based on a recent period. For example, $100,000 in one month is a $1.2 million annual run rate.
Heard inE. 53 BrightlandE. 59 Springdale VenturesE. 60 Great Circle Ventures
How many months a company can keep operating before running out of cash, based on its current cash balance and burn rate.
RelatedBurn rate
An SBA loan is a small business loan that is partly guaranteed by the U.S. Small Business Administration, so the business repays it with interest without giving up ownership.
RelatedWorking capital
Also called seed, seed funding
An early round of investment that helps a young company prove its idea works and start growing. It usually comes before a Series A.
Heard inE. 14 JonesE. 15 GOBE. 23 Pickle
The share of the products a store bought that sold to shoppers during a given period.
RelatedVelocityRetail doors
Heard inE. 61 Rite of WayE. 10 Almond SurfboardsE. 45 YUZUCO
A round of venture investment that usually comes after the seed round. Later rounds are lettered B, C, and so on.
Describes a product that can be stored at room temperature without refrigeration until it is opened.
Heard inE. 64 TofuGo
A SKU (stock keeping unit) is a distinct version of a product, such as one flavor in one size, tracked separately in inventory with its own code.
RelatedVelocity
Also called slotting
Payments a brand makes to a store chain, in cash or free product, to get its product placed on the shelf.
RelatedFree fillTrade spendCategory review
Heard inE. 31 Laurel's CoffeeE. 46 9 Mini InterviewsE. 16 One Trick Pony
SRP (suggested retail price), or MSRP (manufacturer's suggested retail price), is the shelf price a brand recommends that stores charge.
RelatedTPR (temporary price reduction)
Heard inE. 57 Joy SupplyE. 34 Something SweetE. 55 Noshi for Kids
TAM (total addressable market) is the total potential yearly revenue for a product if it captured the entire market it could serve.
RelatedGo-to-market
Custom molds, dies, and equipment a factory needs to make a specific product. It often requires a significant upfront investment before the first unit is made.
A TPR (temporary price reduction) is a short-term price cut on a product in a store, usually funded by the brand.
RelatedTrade spendPromo calendarSRP / MSRP (suggested retail price)
Heard inE. 41 Esspo
Money a brand spends on promotions and incentives through retailers and distributors, including price discounts, advertising, and in-store displays.
RelatedTPR (temporary price reduction)Promo calendarSlotting feesFree fill
Heard inE. 60 Great Circle VenturesE. 31 Laurel's CoffeeE. 57 Joy Supply
UNFI (United Natural Foods, Inc.) and KeHE Distributors are the two largest U.S. wholesale distributors that supply natural and specialty grocery stores.
RelatedNatural channelBroker
Heard inE. 4 Spring & MulberryE. 9 BeziE. 34 Something Sweet
The revenue and costs tied to one unit of a business, such as one product sold, one order fulfilled, or one customer served. It helps show whether the business can grow profitably.
RelatedGross marginContribution marginCAC (customer acquisition cost)LTV (lifetime value)
What a company is judged to be worth, usually agreed on during a fundraise or sale. It sets how much ownership an investor gets for their money.
RelatedDilutionCap tableEquity
Heard inE. 59 Springdale VenturesE. 3 Talea Beer Co.E. 60 Great Circle Ventures
Also called sales velocity
How fast a product sells in each store, often measured as units sold per store per week.
RelatedSell-throughRetail doors
Also called VC
Money invested in young, high-growth companies in exchange for ownership, usually by firms managing funds raised from outside investors.
Heard inE. 20 LightE. 30 LoftieE. 15 GOB
The difference between a company's short-term assets, such as cash and inventory, and its short-term liabilities, such as unpaid bills. It shows the resources available to run the business day to day.