Business glossary

The words, without the fog.

59 terms you will meet while starting something, each explained in one sentence. Copy any definition, or take the whole thing offline.

All 59 terms, A to Z

A

Accounts payableMoney: Money your business owes to suppliers and has not yet paid.
Accounts receivableMoney: Money customers owe you for work already delivered but not yet paid for.
Accrual accountingMoney: Recording income and costs when they are earned or incurred, rather than when cash moves.
Angel investorFunding: An individual who invests their own money into an early business, usually for equity.
Articles of organizationLegal: The document filed with a state to formally create an LLC.

BootstrappingFunding: Funding a business from revenue and personal savings instead of outside investment.
Breakeven pointMoney: The level of sales at which total revenue equals total costs, so profit is zero.
Burn rateMoney: How much cash a business spends in a month beyond what it brings in.
Business planPlanning: A written description of what a business does, who it serves, how it makes money, and what it needs.

CACMetrics: Customer acquisition cost. What it costs on average to win one new customer.
Cap tableFunding: A record of who owns what percentage of a company, including investors and option holders.
Cash flowMoney: The movement of money in and out of a business over a period, separate from whether it is profitable.
Churn rateMetrics: The percentage of customers or subscribers who stop buying within a period.
COGSMoney: Cost of goods sold. The direct cost of producing what you sell, excluding overheads.
Convertible noteFunding: A loan from an investor that converts into equity later, usually at the next funding round.
CorporationLegal: A business structure that exists as a separate legal entity from its owners, with its own tax treatment.

DBALegal: Doing business as. A registered trading name that differs from the legal name of the business.
DilutionFunding: The reduction in an existing owner's percentage when new shares are issued.
Doing business asLegal: See DBA. A registered trading name that differs from the legal name of the business.
Due diligenceFunding: The investigation an investor or buyer runs on a business before committing money.

EINLegal: Employer identification number. A federal tax ID for a business, issued by the IRS.
EquityFunding: Ownership in a business, usually expressed as a percentage or a number of shares.

Fixed costsMoney: Costs that stay the same regardless of how much you sell, such as rent or software subscriptions.
FulfillmentOperations: Everything involved in getting a paid order to the customer.

Gross marginMoney: Revenue minus the direct cost of delivering it, shown as a percentage of revenue.

Independent contractorOperations: Someone who does paid work for a business without being an employee of it.
Intellectual propertyLegal: Creations a business can own or protect, including names, logos, writing, designs and inventions.
InvoiceMoney: A document requesting payment, listing what was delivered, the amount owed and the due date.

LeadSales: A person or business that has shown some interest and might become a customer.
Lean startupPlanning: An approach built on releasing something small, learning from real customers, then adjusting.
LLCLegal: Limited liability company. A structure that separates personal assets from business liabilities.
LTVMetrics: Lifetime value. The total revenue you expect from one customer across the whole relationship.

MarginMoney: What is left from revenue after costs, usually expressed as a percentage.
Market researchPlanning: Gathering information about the people you want to sell to and who else already sells to them.
MRRMetrics: Monthly recurring revenue. Predictable revenue that repeats each month, as in a subscription.
MVPPlanning: Minimum viable product. The smallest version of an idea that a real customer can actually use.

Net profitMoney: What is left after every cost, including tax and overheads, is subtracted from revenue.

Operating expensesMoney: The ongoing costs of running a business that are not tied directly to producing what you sell.
OverheadMoney: Ongoing costs that keep the business open regardless of sales volume.

Pass-through taxationLegal: When business profits are taxed on the owner's personal return rather than at the company level.
PivotPlanning: A deliberate change of direction in product, market or model, based on what you have learned.
PositioningMarketing: The specific place your offer occupies in a customer's mind relative to the alternatives.
Product market fitPlanning: The point at which a product clearly satisfies strong demand in a defined market.
Profit and loss statementMoney: A summary of revenue, costs and profit across a period. Often shortened to P and L.

Registered agentLegal: A person or service designated to receive legal documents on behalf of a business.
RetainerMoney: A recurring fee a client pays for ongoing access to your work, usually monthly.
RunwayMoney: How many months a business can keep operating before it runs out of cash.

S corporationLegal: A tax election that lets a qualifying company pass income through to owners while paying them a salary.
SaaSOperations: Software as a service. Software sold as an ongoing subscription rather than a one time purchase.
SBA loanFunding: A business loan partly guaranteed by the US Small Business Administration and issued by a lender.
Self-employment taxMoney: The Social Security and Medicare tax owed by people who work for themselves.
SEOMarketing: Search engine optimization. Work done so that pages are found and understood by search engines.
Sole proprietorshipLegal: The default structure when one person runs a business without forming a separate entity.

Term sheetFunding: A non binding outline of the main terms of a proposed investment.
TrademarkLegal: A registered name, logo or phrase that identifies the source of goods or services.

Unit economicsMetrics: The revenue and cost attached to one single unit sold, or one single customer.

ValuationFunding: What a business is judged to be worth, usually agreed at the point of an investment.
Variable costsMoney: Costs that rise and fall with how much you sell, such as materials or payment fees.

Working capitalMoney: The cash available to cover day to day operations, calculated as current assets minus current liabilities.