Whether you’re just starting out or an experienced engineer, this series will shed light on various terms used in the hi-tech business. You can find the first post here: 10 Terms Every Engineer Must Know.
Capital Expense. An accounting term used to describe a one-time investment in some asset for the business. It could be a new office, IP, or a dozen new MBPs for a rocking engineering team.
Most businesses expenses are tax-deductible, ultimately saving the company some money. However capital expense deduction needs to be amortized over the expected life of the thing you bought. So unless the value is clear such purchases can be a bigger headache to manage than the benefit.
Operating Expense. An accounting term used to describe the on-going cost of a product. So, paying $9.99/month for Netflix is Opex and purchasing a million DVDs is Capex.
Not only is a recurring monthly purchase of a smaller amount easier to comprehend, operating expenses are also tax-deductible in the same year, making such purchases more attractive than capital expenses. This is why SaaS works.
Software as a service. Instead of paying a million dollars today to watch Netflix for the rest of your life, you pay a small monthly subscription fee and share the same software service with other customers. You don’t install it on your laptop, the movie-watching software is online, managed by the company.
The period of time denoting the financial year for a company. It doesn’t have to match with a regular calendar year. Has 4 Quarters — 3 month segments.
Foreign Corrupt Practices Act. Don’t bribe a foreign official. Don’t give gifts. Don’t take gifts.
Rough Order of Magnitude. The approximate cost of doing something, i.e a project, a feature.
Looking at this bathtub full of colored balls, how many do you think are in it? 1000 or 10,000? Now you’re thinking in ROM.
Bill of Materials. List of all the individual parts, raw materials and their quantities needed to create a product. It’s literally used not as a “bill” of costs associated with those parts, but a way to see everything that’s in a product.
Generally applicable for hardware goods. For software, a BOM would describe all the shared libraries and components in that software.
Statement of Work — usually given to a contractor or vendor for a specific project. A detailed document describing, “here’s the problem, here’s what you will be doing, here’s how we will measure success, completed by this date”.
SWOT analysis. A 4 quadrant grid describing Strengths Weaknesses Opportunities and Threats for a product or business strategy.
Specific Measurable Achievable Relevant Time-bound objectives for a product or business strategy.
Bonus: B2B, B2C
B2B: Business to Business. A business who’s customers are other businesses.
B2C: Business to Consumer. A business who’s customers are regular people.
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