The Ultimate Glossary of Business Terms for Entrepreneurs

When it comes to starting a business, you can 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.