Cracking the code of business terms: a small business glossary

15 MINS Team

Cash basis accounting versus cash conversion cycles? Gross incomes versus gross margins? Market access versus market segments? As a small business owner, you have the dream, the drive and the dedication. Understanding the language of business may not come as naturally. 

If some business terms and topics seem confusing, you’re not alone. Here’s where things get easier. After years of working with new business owners and enterprising entrepreneurs, we’ve compiled a small business glossary to help. Learning these terms will go a long way toward helping you grow your business.


Accounting – The measurement, processing and communication of financial information about businesses and corporations.

Accounts Payable (AP) – Amounts of money owed by your company to external suppliers.

Accounts Receivable (AR) – Money owed to your company by customers.

Accumulated Depreciation – The cumulative depreciation of an asset up to a single point in its life.

Automated Clearing House (ACH) – An electronic payment that is created when the customer gives authorization to debit directly from his or her checking or savings account for a bill payment.

Acquisition Costs – The cost of an asset after deducting discounts and adding normal incidental costs, except for taxes.

Annual Percentage Rate (APR) – The annual rate charged for borrowing or earned through an investment.

Assets – Property owned by a person or company, regarded as having value and being available to meet debts, commitments or legacies.


Balance Sheet – A summary of the financial value of a company, usually published at the endof its financial year.

Bankruptcy – The legal proceeding involving a person or business that is unable to repay outstanding debts.

Benchmark – Checking your company’s standards by comparing them with certain criteria, such as a competitor’s activities.  

Bookkeeping – records of the financial affairs of a business.

Brand Equity – The commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself.

Break-Even Analysis – Compares the level of fixed costs relative to the profit earned by each additional unit produced and sold.

Business Mission – A description of a company’s function, markets and competitive advantages.

Business to Business (B2B) – Business that is conducted between companies, rather than between a company and individual consumers. 

Business to Consumer (B2C) – Commerce between a business and an individual consumer.


C Corporation (C-Corp) – A company or group of people authorized to act as a single entity (legally as a person) and recognized as such in law.

Crowdfunding – Funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.     

Capital Assets – A tangible asset with a useful life longer than a year that is not intended for sale in the regular course of the business’s operation.   

Capital Expenditure – Money spent by a company either to buy fixed assets orto add to the value of existing fixed assets with a useful life that extends beyond the taxable year.       

Cash Basis Accounting – A method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made.      

Cash Conversion Cycles (CCC) – A metric that expresses the time it takes (typically measured in days) for a company to convert its investments in inventory and other resources into cash flows from sales.

Cash Flow – The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Click-Through Rate – A metric that measures the number of clicks advertisers receive on their ads per number of impressions.

Collection Period (Days) – The average number of days required to collect receivables from customers.

Commission – An amount paid to an employee upon the completion of a task, such as selling a certain amount of goods or services.

Credit Limit – The maximum amount of credit a financial institution extends to a client.


Doing Business As (DBA) – A trade name, trading name or business name that is a pseudonym frequently used by companies to operate under a name different from their registered, legal name. Sometimes referred to as a “fictitious name.”

Debt Consolidation – Taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger amount of debt, usually with more favorable payoff terms.

Depreciation – A reduction in the value of an asset over time, due in particular to wear and tear.

Diversification – The process of a business enlarging or varying its range of products or field of operation.

Dividends – A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits or reserves.

Dual Distribution – A system of channel organization in which a manufacturer uses two approaches simultaneously to get products to end-users.

Early Adopter – A person who starts using a product or technology as soon as it becomes available.

Earnings – Income derived from an investment or product.

Economies of Scale – A proportionate savings in costs gained by an increased level of production.

Equity Financing – The method of raising capital by selling company stock to investors. In return for the investment, the shareholders receive ownership interests in the company.

Exclusive Distribution – An agreement between a distributor and a manufacturer that the manufacturer will not sell the product to anyone else and will sell it only to the exclusive distributor.

Expenses – The cost of operations that a company incurs to generate revenue.  


Fixed Assets – Assets that are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings and equipment.

Fiscal Year – A one-year (calendar year) period that companies and governments use for financial reporting and budgeting.

Fixed Cost – Business expenses that are not dependent on the level of goods or services produced by the business. 

Fixed Liabilities – Debts, bonds, mortgages or loans that are payable over a term exceeding one year.

Floating Liabilities – Debts that must be paid. Floating liabilities, in contrast to fixed liabilities, are secured by assets with a constantly changing value, such as a company’s accounts receivables, and are usually in the form of short-term loans.

Focus Group – A demographically diverse group of people assembled to participate in a guided discussion about a particular brand, product or service typically before it is launched.

Franchise Agreement – A legally binding agreement that outlines the franchisor’s terms and conditions for the franchisee.

Full-Cost Price Strategies – A pricing strategy in which all relevant variable costs and a full share of fixed costs directly attributable to the product are used in setting its selling price.

Woman Working on Laptop


Goodwill – Arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the fair market value of the tangible assets, the intangible assets that can be identified and the liabilities obtained in the purchase.

Gross Income – The amount of money earned before taxes or other deductions are taken out.

Gross Profit – The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Gross Margin – A company’s net sales revenue minus its cost of goods sold.

Guerrilla Marketing – An advertising strategy that focuses on low-cost unconventional marketing tactics that yield maximum results.

Guarantor – A person or organization that provides a guarantee.


Harvest Strategy – A business plan for either canceling or reducing marketing spending on a product.


Income Statement – Used for reporting a company’s financial performance over a specific accounting period.

Initial Public Offering (IPO) – The process by which a private company can go public by selling its stocks to the general public.

Innovation (Evolutionary and Revolutionary) – Evolutionary innovation focuses on the orientation toward today’s customers. Revolutionary innovation focuses on the orientation of tomorrow’s customers.

Innovator – A person who introduces new methods, ideas or products.

Intensive Distribution – A marketing strategy under which a company sells through as many outlets as possible, so that consumers encounter the product or service virtually everywhere they go.

Interest Expense – A non-operating expense shown on the income statement. It represents interest payable on any borrowings, such as bonds, loans, convertible debt or lines of credit.Inventory – A complete list of items such as property, goods in stock or the contents of a building.


Jobber – A middleman in the sale of goods; one who buys from a wholesaler and sells to a retailer. 


Labor – The effort that people contribute to the production of products and services.

Leveraged Buyout (LBO) – The acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.

Liability – A company’s legal financial debts or obligations that arise during the course of business operations.

Life Cycle – A course of events that brings a new product into existence and follows its growth into a mature product and eventually to critical mass and decline.

Lien – A right to keep possession of property belonging to another person until a debt owed by that person is discharged.

Limited (Public) Company (AUS) – A public company which may or may not be listed on the Australian Stock Exchange.

Limited Liability Company (LLC) – A corporate structure in the United States whereby the owners are not personally liable for the company’s debts or liabilities.

Limited Liability Partnership (LLP) – A partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. 

Long-Term Assets – Assets that are not intended to be turned into cash or to be consumed within one year of the balance sheet date. 

Loan-to-Value – An assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. 

Liquidity – The availability of liquid assets to a market or company.


Market Access – The ability of a company or country to sell goods and services across domestic and international borders.

Market Penetration Strategy – The extent to which a product is recognized and bought by customers in a particular market.

Market Segment – A group of people who share one or more common characteristics, lumped together for marketing purposes.

Market Share – The portion of a market controlled by a particular company or product.

Marketing Plan – A comprehensive document or blueprint that outlines the advertising and marketing efforts for the coming year.

Marketing Cost Analysis – A strategy applied in marketing in which the costs connected with selling, storing, advertising and distributing products to particular buyers are analyzed to determine their profitability.

Mission Statement – A formal summary of the goals and values of a company, organization or individual.


Net Cash Flow – The difference between a company’s cash inflows and outflows in a given period.

Net Present Value (NPV) – The difference between the present value of cash inflows and the present value of cash outflows over a period.

Net Profit – The profit of a company after operating expenses and all other charges including taxes, interest and depreciation have been deducted from total revenue. Also called net earnings, net income or the “bottom line.”

Net Loss – The amount of money the company lost during the period. This is the negative amount of cash that is left over after all the expenses have been paid.

Net Worth – The value of all the non-financial and financial assets owned by an institutional unit or sector minus the value of its outstanding liabilities.

New Visitors – An internet user’s first visit to a site that is being audited.

New Brand Strategy – A long-term plan for developing a successful brand to achieve specific goals. 

Newsletter Subscriptions – A set of online fields users complete to subscribe to a newsletter from a website or blog.


Offering Mix or Portfolio – The complete array of an organization’s offerings, including all products and services.

Online Tax Tools – Resources found on the internet that assist a business with its marketing, finances and taxes.

On-Costs – The cost an employer has when they employ someone, in addition to the cost of paying the person’s salary or wages. 

Operating Expenses – Expenses such as payroll, sales commissions, employee benefits and pension contributions, as well as transportation and travel, amortization and depreciation, rent, repairs and taxes.

Operating Leverage – A cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue.

Operations Control – Authority over normal business operations at the operational level, as opposed to the strategic or tactical levels. 

Original Equipment Manufacturer (OEM) – A company that manufactures a product that is sold to another company, which resells the product under its own brand name.

Outsourcing – The business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff.

Owner’s Equity – Represents the owner’s investment in the business minus the owner’s debts or withdrawals from the business plus the net income (or minus the net loss) since the business started.


Profit and Loss Statement – A financial statement that summarizes the revenues, costs and expenses incurred during a specified period, usually a fiscal quarter or year.

Payroll – The total amount of money that a company pays to its employees.

Penetration Pricing Strategy – A marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. 

Point of Purchase Advertising (POP) – A retail in-store presentation that displays products and communicates information to retail consumers at the place of purchase.

Price Elasticity of Demand – A measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a variation in its price when nothing but the price changes.

Privately Owned – A business company owned either by non-governmental organizations or by a relatively small number of shareholders or company members.

Product Life Cycle (PLC) – Broken into four stages: introduction, growth, maturity and decline. 

Profit Margin – A measure of profitability that is calculated by finding the net profit as a percentage of the revenue.

Publicly Traded – A company whose ownership is organized via shares of stock that are intended to be freely traded on a stock exchange or in over-the-counter markets.


Revenue – The income that a business has from its normal business activities, usually from the sale of goods and services to customers (also referred to as sales or turnover).

Relevant Cost – A cost that only relates to a specific management decision, which will change in the future as a result of that decision.

Repositioning – To change the image or customer strategy of a company, product or brand to target a new or wider market.

Resource Requirements (Websites) – The personnel, time, space and equipment necessary to create and maintain your website. 

Return on Investment (ROI) – A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

Return on Sales – A ratio used to evaluate a company’s operational efficiency.Return Visitors – People who return to your website or business location. 


S Corporation (S-Corp) – Small business corporations that elect to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes. 

Small Business Loan – Loans provided to small businesses for various purposes by a lender. These loans may have less restrictive requirements, enabling the small business to secure the funds.

Sales Forecast – The process of estimating future sales. Accurate sales forecasts enable companies to make informed business decisions and predict short- and long-term performance.

Seed Capital – Money allocated to initiate a project. Also known as seed money. 

Short-Term Assets – An asset that is to be sold, converted to cash or liquidated to pay for liabilities within one year.

Short-Term Notes – Represent obligations to pay a specified sum, plus interest, within one year. These notes payable usually refer to the repayment of loaned funds in the near term.

Short-Term Liabilities – Financial obligations that are to be paid within one year. This type of liability is classified within the current liabilities section of an entity’s balance sheet. 

Situation Analysis – An analysis of the internal and external factors of a business. It clearly identifies a business’s capabilities, customers, potential customers and business environment, and their impact on the company.

Sole Proprietorship – A type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity.

Secured Loan – A loan backed by collateral (financial assets like a home or a car) that can be used as payment to the lender if the loan is not repaid. 

Swift Code – An international bank code that identifies particular banks worldwide. Also known as a Bank Identifier Code (BIC).


Target Market – A particular group of consumers at which a product or service is aimed.

Tax Rate Percent – The percentage at which an individual or corporation is taxed. 

Tax Lien – A legal claim against the assets of an individual or business who fails to pay taxes owed to the government. In general, a lien serves to guarantee payment of a debt such as a loan or, in this case, taxes. 

Taxes Incurred – The total amount of tax debt owed by an individual, corporation or other entity to a taxing authority such as the Internal Revenue Service (IRS).

Term Loan – A monetary loan that is repaid in regular payments over a set period of time. Term loans usually last between one and 10 years, but may last as long as 30 years in some cases. 

Telemarketing – The marketing of goods or services by means of telephone calls, typically unsolicited, to potential customers.

Trade Margin – The difference between the actual or imputed price realized on a good purchased for resale (either wholesale or retail) and the price that would have to be paid by the distributor to replace the good at the time it is sold or otherwise disposed of.

Traffic – As related to eCommerce, the number of “hits” (visits) a website receives, usually during a 24-hour period. As related to a traditional storefront business, the number of people who visit a business location during a set period.


Unsecured Loan – A loan that is issued and supported only by the borrower’s creditworthiness, rather than by any type of collateral. 

User Interface (UI) – The means by which the user and a computer system interact, in particular the use of input devices and software.

Unique User Sessions – In online marketing, a unique pageview represents the number of times or “sessions” during which that page was viewed one or more times.

Unit Variable Cost – The production cost for each unit produced that is affected by changes in a firm’s output or activity level. Unlike fixed costs, these costs change when production levels increase or decrease.


Venture Capital — Capital needed in the earliest stages of a venture’s creation before the product or service is available.

Use the Language of Business to Your Advantage

Understanding common business terms helps you navigate the marketplace and prepare for success. Keep this glossary handy and contact the small business experts at with additional questions

For questions about online business terms, “The Small Business Online Marketing Pocket Dictionary” is a great choice.

Whether you are planning, launching, managing or trying to grow your business, we are always here to help you realize your full potential – and be your own boss. 

Image Credits
Images 1-2: Shutterstock

  • Team

    Our goal is to be your go-to partner in today’s always-on digital world.

Leave a Comment

Trending Topics