Glossary of Business Terms for Digital Nomads

Managing a business in the world of digital nomadism requires familiarity with a variety of business terms. Understanding these key concepts will help you set up, manage, and optimize your business effectively. This glossary provides clear definitions and explanations for essential business terms relevant to digital nomads.

• Accounting Software: Software designed to manage and record financial transactions, track expenses, and generate financial reports. Examples include QuickBooks, Xero, and FreshBooks.
• Asset: Any resource owned by a business that is expected to provide future economic benefits. Examples include cash, inventory, and property.
• Balance Sheet: A financial statement that provides a snapshot of a company's financial position at a specific point in time. Lists assets, liabilities, and equity.
• Bookkeeping: The systematic recording of financial transactions in a company's accounts. A fundamental part of accounting.
• Business Plan: A written document outlining a company's goals, strategies, market analysis, and financial projections. Serves as a roadmap for business operations and growth.
• Cash Flow: The total amount of money being transferred into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing.
• Chart of Accounts: A listing of all the accounts in the general ledger, each categorized by type. Includes assets, liabilities, equity, income, and expenses.
• Corporation: A legal entity that is separate from its owners, providing limited liability protection. Subject to corporate tax rates and regulations.
• Credit Method: A method under double taxation agreements where tax paid in the country of income can be offset against tax due in the country of residence. Prevents double taxation.
• Crowdfunding: Raising small amounts of money from a large number of people, typically via the Internet, to fund a project or venture. Popular platforms include Kickstarter and Indiegogo.
• Customer Relationship Management (CRM): A technology for managing all your company's relationships and interactions with customers and potential customers. Examples include Salesforce and HubSpot.
• Double Taxation Agreement (DTA): Treaties between two countries to prevent the same income from being taxed by both countries. Provides methods like exemption or credit to avoid double taxation.
• Dividend: A portion of a company's earnings distributed to shareholders. Often taxed at a different rate than regular income.
• E-Residency: A government-issued digital identity that allows non-residents to start and manage an EU-based company online. Estonia is known for its e-Residency program.
• Equity: The value of an owner's interest in a business, calculated as assets minus liabilities. Represents the residual value after debts have been paid.
• Expense: Costs incurred in the operation of a business. Common expenses include rent, utilities, salaries, and office supplies.
• Financial Forecasting: The process of estimating future financial outcomes based on historical data and assumptions about future market conditions. Helps in planning and decision-making.
• Financial Statement: Reports that summarize the financial performance and position of a business. Key statements include the balance sheet, income statement, and cash flow statement.
• Freelancing: Working independently for multiple clients, often remotely, and providing services on a project or contract basis. Common in industries like writing, design, and programming.
• Income Statement: A financial report that shows a company’s revenues, expenses, and profits over a specific period. Provides insight into operational performance.
• Intellectual Property (IP): Creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. Protecting IP is crucial for business.
• Invoice: A document issued by a seller to a buyer, listing products or services provided, their prices, and payment terms. Essential for payment tracking.
• Liability: An obligation that a business owes to outsiders. Includes loans, accounts payable, and mortgages.
• Limited Liability Company (LLC): A business structure that offers liability protection to its owners and flexibility in tax treatment. Combines characteristics of both corporations and partnerships.
• Non-Habitual Resident (NHR) Regime: A tax program in Portugal that offers significant tax benefits to new residents. Includes exemptions on foreign income for a period of ten years.
• Retained Earnings: The portion of net income that is retained in the business rather than distributed to shareholders as dividends. Used for reinvestment in the business.
• Sales Tax/VAT: Taxes imposed on the sale of goods and services. VAT (Value Added Tax) is a type of consumption tax levied at each stage of production.
• Sole Proprietorship: The simplest business structure, where the business and the owner are legally the same entity. The owner is personally liable for business debts.
• Startup: A company in the initial stages of operations, often focused on innovative products or services and looking for significant growth. Startups typically seek external funding from investors.
• Tax Residency: A status determining where an individual or business is liable to pay taxes. Based on the number of days spent in a country or other specific criteria.
• Tax Treaty: Agreements between two countries to avoid double taxation and prevent tax evasion. Provides relief from double taxation through exemption or credit methods.
• Venture Capital: Financing provided by investors to startups and small businesses with high growth potential in exchange for equity. Often involves significant risk for the investor.
• Working Capital: The difference between a company's current assets and current liabilities. Indicates the liquidity and operational efficiency of a business.

Other relevant terms for digital nomad businesses

• Angel Investor: An individual who provides capital to startups, often in exchange for convertible debt or ownership equity.
• Burn Rate: The rate at which a company spends its capital before generating positive cash flow.
• Capital Gains Tax: A tax on the profit realized from the sale of non-inventory assets.
• Convertible Note: A type of short-term debt that converts into equity, typically in conjunction with a future financing round.
• Crowdsourcing: Obtaining services, ideas, or content by soliciting contributions from a large group of people, typically from an online community.
• Due Diligence: An investigation or audit of a potential investment to confirm all facts and assess the risk.
• Exit Strategy: A plan for a business owner to sell their ownership in a company to investors or another company.
• Growth Hacking: Experimenting with marketing, product development, and sales to identify the most efficient ways to grow a business.
• Initial Public Offering (IPO): The first sale of stock by a private company to the public.
• Market Penetration: The extent to which a product or service is known and used by customers in a particular market.
• Merger and Acquisition (M&A): The process of consolidating companies or assets through various types of financial transactions.
• Pivot: A significant change in a business model or strategy to adapt to market demands.
• Runway: The amount of time a company has before it runs out of cash.
• Scalability: The ability of a business to grow and manage increased demand.
• Seed Capital: The initial funding used to start a business, covering early expenses.
• Series A/B/C Funding: Stages of venture capital financing that occur after seed capital, typically involving larger amounts of investment.
• Sweat Equity: The non-monetary investment that owners or employees contribute in the form of hard work.
• Term Sheet: A non-binding agreement setting out the basic terms and conditions under which an investment will be made.
• User Acquisition: The process of bringing new users to a service or product.
• Valuation: The process of determining the current worth of an asset or a company

Familiarizing yourself with these key business terms will help you navigate the complexities of running a digital nomad business. Understanding these concepts is essential for making informed decisions and optimizing your business operations.

If you have more questions or need clarification on any terms, feel free to reach out to us!

Check out our next blogpost on our "Business Fundamentals" series below:

Introduction to Digital Nomad Businesses: Setting Up and Managing Your Business

Discover the essentials of setting up and managing a digital nomad business. From choosing the right structure to managing finances and legal compliance, our guide offers practical steps to ensure your business thrives while you travel the world.

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