Generally, “blue chip” is a term used to describe any nationally well-known company, financially stable and adequately established. In short, you can always use the time to explain any large organization whose shares are widely known to be a good investment. For a company to be called a blue-chip, several parameters are put into consideration.
For instance, the company must have a consistent annual revenue for an extended period. In addition to that, other parameters that are usually considered include an average return on equity or RoE, fixed debt-to-equity ratio, price-to-earnings ratio, and many more.
“Blue-chip employee” is a term suggesting that a recently established company is reliable and has all it takes, such as a good team, to make projects work out. It means the startup has experienced staff to keep the company growing, which investors consider when looking to be a part of a business.
A blue-chip investor/shareholder invests in a company with stability and security (often large corporations). These types of investors are generally desirable to startups since they can mean funding.
A blue-chip client is a client who has high purchase and company loyalty. They are the most valuable company to a startup because they will be retained for years, support any new business endeavors they find viable, and buy in bulk and automatically renew their contracts.
In the rest of this article, I’ll further share everything you need to know about what the term “blue chip” really means to startup businesses. So, without wasting any time, let’s get straight down to business.
Understanding What Blue Chip Generally Means
Here’s a quick question, what exactly does the term “blue chip” mean for businesses?
Blue-chip, as earlier mentioned, is a term used to describe top companies across the world. There’s more to the name, as it’s not all top companies that are considered blue-chip.
When a company is considered a blue-chip, that means that the company is financially stable. In addition to being stable financially, the company is also properly established, well known, and long-lasting.
Blue Chip Originates From The Game Of Poker
In case you don’t know, the term “blue chip” was borrowed from the game of poker. In this game, there are white, red, and blue chips. The white chips usually have the most negligible value. Furthermore, the red chips sit in between the white and the blue chips in terms of importance. With that, it means the blue chips are the ones with the highest value in the game.
Blue Chip Players
Apart from companies, the term “blue chip” also applies to several different areas of life. For instance, there are “blue-chip players” in basketball. These players have proven themselves to be some of the best in their different basketball positions, and they are usually more sought after and needed in their teams than other players.
Blue Chip Stocks
Blue-chip is a term that is used for stocks or corporations. It first came into use in 1904 to describe anything that has a lot of value. However, two decades later, the term was introduced to the stock market by commentators.
Blue-chip stocks are stocks in a corporation, and they come with several different features. For instance, a blue-chip stock is said to have a national reputation for quality.
Furthermore, in business, “blue chip” is used to describe companies with shares considered a good investment. They aren’t just suitable investments, blue-chip stocks are known to be, arguably, the most attractive investments out there.
According to experts, blue-chip stocks are known to have elements of safety in them. Of course, that’s so because these corporations are famous and have been around and performing well for an extended period. That’s not all; another reason is that the corporations have a proven track record of being well-established and stable. They can be depended on, as they don’t easily get affected by the recession.
Blue Chip Employees
The term “blue-chip” can also be used to describe employees in a company. When you hear blue-chip employees, the first thing that comes to people’s minds is Ph.D. recipients. Yes, that’s partly true for some companies, such as the tech industry. However, you need to understand that blue-chip employees don’t always mean Ph.D. holders.
Like the game of poker, blue-chip employees usually have the highest value in a company. Yes, these employees are worth a lot, and the company needs them to grow better.
As earlier mentioned, a blue-chip employee can be a Ph.D. holder with experience in handling businesses. It can also mean that the person without a Ph.D. has a lot of founder experience. It could also mean that the person has been around in the company for a more extended period. The bottom line is, “blue-chip employees” usually play a pivotal role in the growth of a business.
What Exactly Does A “Blue Chip” Mean To A Startup?
As we all know, a blue-chip is a term used for corporations that have been around for a more extended period and are well-established. Since that’s the fact, here’s a burning question; what exactly does the term mean to startup companies?
I’m sure you know that starting up a business from scratch and making it successful is not an easy thing to do. One of the many things needed to make a startup thrive is capital. However, if you don’t know, Bill Gross, the founder, and CEO of the business incubator – Idealab – says that five different factors make a startup business thrive in today’s world. They are startup funding or capital, business model, startup idea, and timing. Startup funding or capital makes up about 14% of every startup business, according to Forbes.
Well, there are many ways to source capital for a startup. For instance, you’ll most likely start your business with personal investment, and this is an inevitable thing to do for most entrepreneurs. Besides using your investment, other ways to finance your startup include loans from families, angels, business incubators, government (grants), and venture capitalists.
From the start, venture capitalists mostly look for technology-driven businesses and small companies with the potential to grow big. As a startup business owner, to attract any venture capitalists to fund your business, you need to have what they are looking for.
So, what do venture capital consider when looking to be a part of a business? The potential to make the company big and successful over the years. As you now know, having a solid team is one of the many ways to achieve startup business success, and it makes up about a 32 percent success ratio for startup businesses.
Having a solid team means you need to have blue-chip employees in your company. Having a good business plan is okay; in fact, it’s a must for everybody looking to become an entrepreneur. However, this is not enough to achieve success in a startup business.
According to the famous quote by Mike Tyson, it says “everyone has a plan until they get punched in the face.” Yes, you might have a perfect business plan and all, but what happens when you get faced with different issues? Here’s where the need to have blue-chip employees comes in handy.
As earlier mentioned, blue-chip employees could be Ph.D. recipients working for a company. They usually have experience and know precisely how to deal with real business issues when they arise. Here’s one of the few things that venture capitalists look for in a startup business.
Furthermore, being a blue-chip employee for a company doesn’t necessarily mean having a Ph.D. What matters is that the person must have founder experience and have been working in a similar field for an extended period. That said, having a solid team, including blue-chip employees, is essential to attract venture capitalists to fund your business.
The bottom line is that “blue-chip” is a term that can be utilized to describe employees in a startup company. Blue-chip employees make up a strong team for startup companies, and they have all it takes to do a business thriving over time. Of course, this is one of the reasons why most venture capitalists choose to invest in such companies.
What Are The Best Ways To Attract Blue Chip Employees To Your Startup Company?
As a startup business owner, you’ll surely agree with me that getting top talents or blue-chip employees to work for your business isn’t an easy thing to do. That’s so because most of them are expensive and often prefer to work for blue-chip companies and other top corporations.
As you now know, having blue-chip employees is one of the critical factors that makes startup businesses successful. Since that’s the fact, it’s safe to say that you need top talents to work for your company. So, here’s a quick question; what are the best ways to attract this type of people to your small business?
- Build your brand
There are many ways to attract top talents to your company; one of them is by building your brand. When you make your brand, it’ll undoubtedly become more valuable. And when it does, this could help you attract top talents to your startup company.
According to a study, 72 percent of recruiting leaders worldwide believe that the employer brand has a significant impact on hiring. With that, it means “how valuable your brand is” is a determining factor for attracting blue-chip employees to your firm.
So, how do you build your brand to attract top talents to your company? There are many ways to do that;
- First, start by evaluating employer brand awareness. One way to do that is by using polls or surveys of outside investors.
- The employer branding process isn’t for just one person. Instead, it’s for all your employees. That said, ensure to encourage them to get involved in the process.
- Be selective when recruiting
In addition to building your brand, another way to attract top talents to your startup is by being selective when recruiting people to take up crucial roles in your company. This is especially true if you’re running a startup company in the technology industry.
- Offer stock options to blue-chips employees
As a tech startup, one way to attract blue-chip employees or top talents to your company is by offering them stock options. If you’re interested in using this option, you must be wondering how to go about it.
One of the best ways to use stock options to attract top talents to your startup company is by aligning your mission. What exactly does that mean?
It’s pretty simple; when you provide all your employees with shares, you’ll be able to align them with the company’s mission. Interestingly, this move will motivate them and make them feel like they are also active owners of the company.
One of the benefits of this move is that it enables the employees to think beyond the paycheck. They’ll always want to put in their best and make use of their experiences to ensure the company grows and becomes successful. So, by providing your employees with equity, you can always attract blue-chip employees to your company.
That’s not all; using stock options as an incentive for your employees is another way to attract top talents to your business. This is one of the methods used by Silicon Valley startups to attract great employees to their company. This will indeed work, all you need to do is talk to your potential hires regarding the plan, and you’ll be surprised at how much the approach will work for you.
- Improve the experience of candidates
Improving candidate experience is another proven way to attract talent to your startup business. The way you organize your recruitment process can give candidates an idea of how your company is.
So, for you to attract blue-chip employees to your startup company, you need to deliver the best experience to the candidates. Providing them with a poor experience will do no good to the company, and instead, it will end up affecting its reputation.
Conclusion
Blue chips are essential to startups because they provide a sense of legitimacy and stability. They make it easier for the startup company to attract talent from other companies, especially in high-demand fields such as engineering.
Glossary
The Blue chip stock represents the most stable business with a long track record of producing revenue and profits.
A blue chip company is considered one of the most financially stable companies in the marketplace, usually on par with Microsoft or GE. When a share in this type of company becomes available–be it by purchase, merger, spin-off, etc.–it’s never sold at a price below its current day value.
The Blue chip fund is typically a mutual fund that invests in large financially stable companies and has a long-term history of profitability.
Blue chip status is often used to describe securities that are seen as being highly stable and secure. This can include investments in approved mutual funds, stocks of large and sound companies, government bonds, gold coins, or even real estate.
A blue chip index is a stock market index that contains only the stocks of high-quality, large firms. Blue chips are also called “large-cap stocks” and are generally in prestigious sectors like banking, telecommunications, or pharmaceuticals rather than lower quality manufacturing sectors such as automobiles or steel production.
Market capitalization is the total market value of a publicly-traded company divided by its number of outstanding shares.
The market cap of a company is the number of shares times the stock price.
A company’s market capitalization (market value) is calculated as follows:
- Add up the total number of shares outstanding.
- Multiply that by share price to give us the “value” for equity or enterprise value.
- Add in other values that may be included such as intangible assets, or subtract things like debt to get a final figure which will be adjusted for inflation – this gives us our final calculation called market capitalization or “market value”.
Penny stocks are the least expensive publicly traded stocks, typically sell for less than $1 per share. They can be risky investments because they’re often unproven and high-risk.
A dividend payment is a distribution of a certain proportion of economic profit made to the shareholders of a company. In this case, shareholders are people who own stocks. They’re at the top of the organizational hierarchy, with their voice heard in deciding all major company decisions, including how future dividends will be distributed.
The Large cap stock is large-capitalization companies that have the potential for higher returns. Usually, a market capitalization of more than $5.3 billion is the most recent listing date on the NYSE or NASDAQ.
An investment portfolio refers to the collection of investments held by a person or institution; it is usually stocks, exchange-traded funds, mutual funds, and bonds.
The Growth stock is typically investments in firms that have a strong prospect for future growth. These firms can be relatively small companies that are still trying to grow or large companies with solid options. Growth stocks offer the hope of tremendous gains as those companies continue to expand and meet their potential.
Income stocks are stocks you buy to hold them long-term and that regularly pay dividends.
A Mutual fund is a type of collective investment scheme that pools the money of many investors to purchase diversified portfolios of stocks, bonds, and other investments.
The dividend yield is a percentage that represents the rate at which an investor receives cash in return for their investment in a company. Stock values are primarily determined by what they will pay out as dividends, and it’s important to note that not every company pays dividends.
Stable Earnings are a way of describing the amount that is earned from one company’s stock. Regular Earnings can be measured by calculating all dividend payments, interest, ROI, and cumulative profits. These items are averaged to approximate how much money has been made from the company in a year.
Defensive stocks are just that; they tend to be less risky but have more stable performance in the event of economic turmoil.
Meme stock is an abstract concept used to describe the value of memes. Memes, broadly defined, are units of cultural transmission that function as carriers of meaning. Unlike stocks in the financial world (or literal “stocks” for inventory purposes), meme stocks do not represent any particular tangible asset or liability – but instead refer to the exchange and creation of images and ideas.
A small cap stock is a company that falls between microcap and mid-cap stocks. A small cap stock generally has a market capitalization of about $300 million to $2 billion, including many stores with smaller market caps.
An investment option is the type of investment instrument that an investor can invest in. The two most common types of investments are mutual funds and stocks. When an investor has a brokerage account, he can trade these instruments from there rather than via another portal or platform is known as over-the-counter trading.
A consistent dividend is a stock that makes consistent dividend payments as a form of steady earnings. Many companies that accept and pay regular compensation are in stores considered blue-chip or stable investments. Steady income from this kind of investment can benefit anyone who doesn’t have another means of generating predictable revenue streams, such as from work or pensions.
Reinvested dividends are just dividends that the investor reinvests, and they are also known as “reinvestment of earnings.” A company typically pays a dividend annually to its shareholders. If it produces a cash dividend, the investor receives cash in that amount with their statement and number of shares; if it pays a stock dividend, the company sends additional shares to your account at no expense to you.
An index fund is like an Exchange-Traded Fund. When you invest your money in an index fund, you loan it to a professional investor who will use that loan to buy various stocks on the stock market by the strategies enforced by that index.
A diversified portfolio is a broad term for an investment that has investments in different sectors and classes to reduce risk. Several securities or assets may be, such as stocks, bonds, money market instruments, and similar investments.
