The Ultimate Glossary of Business Terms for Entrepreneurs

Ask any new business owner what their biggest challenge was when setting up their company and they’ll list things like funding, hiring staff, and brand-building.

They’re all lying.

In truth, the most difficult aspect of founding a startup is knowing what on earth everyone in the room is talking about.

PAYE, OPEX, IFAs – these might all sound like new oat milk brands, but they’re actually important terms that you’ll encounter as you navigate through your first year in business.

Luckily, we’ve designed a handy cheat sheet below to help you fake it till you make it. Read on for the complete A-Z on all things startup-related..

A

• Accelerator – an organisation that offers a range of support services, and funding opportunities for startup companies.
• Acquisition – the purchase of one company by another.
• AGM (Annual General Meeting) – a yearly meeting where shareholders vote on company issues including who sits on the board of directors.
• Angel Investor – someone who invests their own capital into the growth of a business in its early stages.
• Asset – anything owned by a company that has value.
• Auditors – accountants who check over a company’s accounts to check they are correct.

B

• Balance sheet – a snapshot of a company’s financial position as organised into assets, liabilities, and equity.
• Basis period – the time period for which a sole trader or partnership pays tax each year. Learn more about the new reforms to basis periods in our guide.
• Bootstrapping – launching a company with very little money, often relying on personal savings and pushing for the lowest possible operating costs.
• Break-even point – the point in time when your startup has paid back all outstanding debts.

C

• Capital – term for financial assets, such as funds held in deposit accounts.
• Capital gains tax –  a tax on profits made by the sale or disposal of a business asset, encompassing everything from property to shares.
• Cash flow – the total amount of money being transferred into and out of your business.
• Corporation tax – tax paid on your profits – currently 19%.
• CTR (Click-Through Rate) – the ratio of users who click on your marketing materials, compared to the number of total users who view it.
• CPC (Cost-Per-Click) a pricing model that charges businesses for the number of times their marketing ads were displayed to a consumer.
• CRM (Customer Relationship Management) – the process by which businesses interact and communicate with customers to improve their experiences. For example, sending a personalised email with a special service discount.
• CSR (Corporate Social Responsibility) – a business policy that prioritises philanthropic or charitable causes.
• CTA (Call To Action) – a marketing term for any design that prompts the customer to make a decision, such as an ‘add to basket’ button on ecommerce websites.

D

• DEI (Diversity, Equity, and Inclusion) – term used to describe policies and practices that promote equal opportunities for all employees.
• Debtor – a person or company that owes money to your business.
• Dividend – optional reward paid to shareholders if a firm reports particularly high profits.
• Down round – a fundraising round in which a startup’s valuation is lower than in previous rounds.
• Dropshipping – type of sales method that involves purchasing a larger volume of products from a wholesaler and selling them on to consumers for a profit.

E

• EBIT – a form of operating profit. Stands for Earnings Before Interest and Tax.
• EBITDA – another form of operating profit. Stands for Earnings Before Interest, Tax, Depreciation and Amortisation and is a measure of a company’s overall financial performance.
• Elevator pitch – a brief statement providing an overview of your business.
• Exit strategy – a founder’s plan to sell their ownership to investors/another company.

F

• FSA (Financial Services Authority) – the FSA is Britain’s single statutory financial regulator.
• Financial year – a year as reckoned for taxing or accounting purposes.
• Fixed costs – Costs that a company incurs in making goods regardless of how much it is producing.

G

• GDP (Gross Domestic Product) – the total value of all goods and services produced by a country.
• GA (Google Analytics) – a web analytics service offered by Google that tracks and reports website traffic.
• Gross profit – the profit a company makes after deducting the costs of selling its products or services.
• Growth capital – funding that allows a company to accelerate its growth. For startups, this is the second stage of funding after seed money.
• Guerilla marketing – the use of unconventional, usually cost-saving, marketing methods.

H

• Half year – UK companies must produce profit figures for a ‘half-year’ (six months into their financial year).
• Hostile takeover – when someone tries to acquire a company without approval from the board of directors.

I

• IFA (Independent Financial Advisor) – professionals who offer independent advice on financial matters to businesses.
  Income tax – a tax paid on the income or profits earned by an individual or business.
• Income statement – annual report on a company’s income and expenses.
• Incubator – this is similar to an accelerator but focussed primarily on innovation. You’ll be “incubating” an idea into a viable business model.
• Insolvency – when a company is unable to pay its bills. Insolvency can lead to business bankruptcy.

J

• Joint Ownership – ownership of a property or other business assets by more than one party.

K

• Keyword –  popular phrases or words used by search engines to determine the ranking of a webpage.
• KPI (Key Performance Indicator) – measure of performance to assess the success of a company or its activities. For example, you might target a specific amount of revenue per month.

L

• Lead – a potential sales prospect who may have expressed an interest in your product or service.
• Lead generation – Lead generation is the process of driving leads to your place of business and is the first step in the sales funnel.
• Leasehold – a property that is rented from the freeholder for a set amount of time and usually under certain conditions. See if it’s the right choice for you in our guide to a commercial lease.
• Leveraged buyout – when a company is bought out using borrowed money.
• Limited company – in a limited company, the liability of members or subscribers of the company is limited to what they have invested or guaranteed to the company.
• Liquid asset – an asset that can easily be converted into cash, for example a bank account.
• Liquidity – the ease with which a company’s assets can be converted into cash.

M

• Margin – the difference between the cost and the selling price of a product or service.
• Market analysis – the study of your competitors to identify and quantify business opportunities. Click for a list of free competitor analysis templates.
• Markup – the difference between the cost of a product or service and its selling price.
• Merger – the combining of two or more companies that are relatively equal in size.
• Mission statement – also known as a vision statement, this is an aspirational statement given by a new business that declares its goals and objectives.
• MVP (Minimal Viable Product) – when a product has enough features to be usable by early customers, or to validate a business idea. Also known as Proof of Concept.
• MPC (Monetary Policy Committee) – a committee of the Bank of England which decides the official interest rate in the UK.

N

• Negative equity – when the value of an asset becomes worth less than what you originally paid.
• Net – the amount of profit remaining when deductions – such as tax – have been made.
• Nominal values – any value that does not take inflation into account, such as a nominal interest rate.
• Note – a legal document that is evidence of debt.

O

• OPEX (Operating Expenditure) – the money a company spends on an ongoing, day-to-day basis. Examples include employee salaries, rent, and electricity bills.
• Outsourcing – the process of subcontracting work to outside vendors.
  Overheads – business expenditures that are not directly involved with the cost of producing a good or service, such as rent.

P

• Patent – official legal document confirming that an individual or company has the sole right to make, use, or sell a particular invention.
• Partnership – formal agreement made by two or more parties to jointly manage a company.
• PAYE (Pay As You Earn) – method of tax collection by the government that’s taken directly from your employees’ weekly/monthly pay.
• Payment gateway – a system that reads and transfers payment information from a customer to a merchant’s bank account.
• Pitch deck – a presentation that covers all aspects of your business and revenue model, targeted at generating investment.
• POS (Point-of-Sale) – the place where a customer makes a transaction, such as a payment till. Find the best POS system for small businesses in our full guide.
• Private equity – funds and investors that directly invest in private companies.
• Profit and loss statement – report outlining the total amount of sales (rev­enues) and total costs (expenses). The difference between these figures is your profit.
• Project management – the application of processes, methods, skills, knowledge, and technology to achieve specific objectives during a project. Our guide to the top project management software for small businesses has more information.

Q

• Quota – a government-issued limit on how much of a product can be imported and exported.

R

• Rate of return – accounting ratio of the income from investment to the amount of investment, used to measure financial performance.
• RPC (Revenue Per Click) – the value of a customer clicking on a firm’s online marketing materials, judged by the potential profit generated.
• RPI (Retail Price Index) – measure of inflation that tracks the price of an average basket of goods.
• RPV (Revenue Per Visitor) – the value of a customer visiting a firm’s online sales channels, judged by the potential profit generated.
• Revenue – the total amount of income generated by the sale of goods and services.
• Reverse takeover – when a small company buys a larger one.
• ROI (Return on Investment) – the amount of money earned from a business activity as calculated by the income received compared to the operational cost.

S

• Sales channel – a method for distributing products to the marketplace, such as a website.
• Sales forecast – estimate of future sales using data on past sales performance.
• SEO (Search Engine Optimisation) – the process of improving website traffic by improving ranking on search engines.
• Seed money – generally a small amount of money used to get a business idea off the ground.
• Setup costs – any expenses incurred during the process of setting up a company.
  SME (small or medium sized enterprise) – any firm with fewer than 250 employees.
• Sole proprietorship – a legal business structure where only one person owns the business.
• Supply chain – sequence of activities involved in the production and distribution of goods.

T

• Takeover – when one company tries to bid for another by offering a higher price than the market value. Learn how to protect your business from a takeover in our guide.
• Tariff – a government duty imposed on imports or exports.
• Tax return – mandatory form completed at the end of a financial year to report on income and expenses.
• Tender – a bid for a work contract, typically submitted in competition with other suppliers.
• Trademark – branding that’s been legally registered and cannot be copied by a rival firm. Find out how to apply for a trademark in our guide.
• Turnover – the total sales of a business or company during a specified period.

U

• Unbundling – the concept of dividing a company into separate constituent companies, often to sell all or some of them after a takeover.
• Unearned income – profit received from sources other than employees, such as a donation.
• Unicorn – a startup (usually based in tech) that’s valued at over $1bn.
• USP (Unique Selling Point) – also known as a value proposition. This is what makes the business uniquely attractive to customers and investors.

V

• Valuation – calculated amount of what a startup is worth.
• VAT (Value-added Tax) – a tax paid on most goods and services in the UK, currently 20%.
• VC (Venture Capital) – capital invested into high-risk opportunities, often startups.
• Vertical merger – when a company acquires a business in the same industry, but at different stages of the life cycle, like if a car manufacturer buys a tyre company.

W

• Wireframe – a basic, two-dimensional visual representation of a web page, app interface, or product layout.
• Wholesale price – the amount charged to firms who buy large quantities of an item to sell them on in smaller quantities.
• Working capital – the capital that a business uses for its day-to-day running. The amount of working capital you have indicates your overall liquidity outside of assets and after liabilities.

Y

• Year-end – the end of a fiscal (tax) year. In the UK, this date always falls on 5 April. Find out how to prepare for the next year end in our expert guide.
• Yield – the profit made on an investment.