Glossary of Business Terms

Glossary of Business Terms

When starting and running your business, there will often be business terms that you may not know the meaning of. These terms may not get taught to you but it is important to know what they mean for your business.

Our glossary of business terms give you a brief understanding of the term with a definition and link to the most relevant place to learn more.

You will find these business terms in business plans, accounting, finance, marketing and other aspects of your business.

Here are the most common business terms listed in alphabetical order:

A

Australian Business Number (ABN)
A single identifying number used to identify your business when dealing with the Tax Office and can be used by other businesses to determine the legitimacy of your business by doing an ABN lookup.

Australian Company Number (ACN)
A unique number allocated by the Australian Securities and Investments Commission (ASIC) to identify your company when registered under the Corporations Law.

Anticipated Demand
The assumed quantity of products or services your customers are likely to purchase in a specified amount of time. e.g. How much will a customer buy in a period of 12 months.


B

Blog
Blog is the shortened word for weblog (see Weblog). Blog is the more commonly used term than weblog.

Break-even
Break-even is a financial term indicating the point where a business’ income meets a business’ expenses.

Business Name
A business name is the name under which your business trades. You register a business name with the Australian Securities & Investments Commission (ASIC) and can operate it anywhere in Australia.
You do not need to register a new business name if you are trading under your own personal name.

Business Structure
The way your business is legally setup to operate. It can be setup as either a sole trader, partnership, company or trust.



C

Capital Cost
An initial, and often substantial, purchase of physical items such as plant, equipment, building or land.

Cash Incoming
Cash that is coming into the business through sales and other income generating activities.

Cash Outgoing
Cash that is going out of the business through purchases, business operating expenses or fees.

Cash Flow
The measure of money that is flowing in and out of a business.

Channel
A way of delivering something to its destination, whether it is a message to be communicated or a physical product to be delivered to a customer.

Contract
A legally binding agreement made between two or more parties. This is enforceable by law. A contract may be a verbal contract or a written contract (or may be partly of each).

It is best practise to have all contracts written and well documented so that they can be easily referenced in the future.

Copyright
A law that protects original work from being copied and also prevents certain other uses.

The work that can be copyrighted includes art, literature, music, films, sound recording, broadcasts and computer programs.


D

Demographics
The characteristics and statistical data relating to the population and particular segments within it.

Demographics help you determine your ideal customers.

e.g. A customers demographics are age, gender, location etc.

Domain Name
Is the web address that identifies your organisation on the internet.

A domain name can be used for accessing a website or sending emails to that organisation.

When you purchase a domain name, you have exclusive access to use it whilst it is registered with you. Registration is typically for one or two years and can be renewed at the end of the period.

e.g. Lemodus’s domain name is lemodus.com.


E

Environmental Audit
This is the business’ impact on the environment, and to what extent.

Environmental audits are an objective assessment backed by facts and data.

Environmental Management System (EMS)
A system created in the business to manage current and future environmental impacts. This usually comes after an environmental audit.


F

Fixed Asset
A physical asset that has been purchased with the intent to be used in the business for a long period of time.

It is not likely going to be quickly converted into cash for a long time.

e.g. Land, buildings and equipment for production.

Fixed Cost
The recurring costs in a business that are likely to remain the same over each period of time.

e.g. rent.

Fixed costs are not to be confused with costs associated with producing a product/service that change depending on the quantity.


G

Goods and Services Tax (GST)
A wide-ranging tax of 10 percent charged on the sale of most goods and services in Australia.

Goods and services tax is exempt from some products and services. This includes basic foods, some education courses and some medical, health and care products. Whereas the purchase of a computer for example isn’t life essential and will come with GST.

Growth Potential
The anticipated growth of business workforce or production or sales in the future.

Growth potential is often a gauge for investors.

Gross Profit
Gross profit is the amount of money a company has after taking out the cost of producing a product or service from the money earned.

Gross profit is also referred to as net sales.


H

High-end
Refers to the most expensive or high quality products/services.


I

Intellectual Property
Laws that protect intangible property rights in creative and inventive endeavours.

The creative and inventive endeavours may include art, literature, music, films, sound recording, broadcasts and computer programs.

Inventory
A complete list of items a business currently has in stock.

e.g. property, goods in stock or the contents of a building.


L

Liability
Is a debt or financial obligation that will be paid in the future.

Licence
A legal permit from an authority to grant a business or person official permission to do a particular activity.

Lease
A contract between two parties where one provides land, property, services, etc. to the other party for a specified time in exchange for a periodic payment.


M

Market Position
Refers to the place an organisation, product or service occupies in the market and how it distinguishes itself from others. This is usually in relation to its competition.

Milestone
A significant stage or goal in the development of something. A successful milestone is assigned with a target date attached.

Mission Statement
Is a formal statement outlining aims and values of an organisation and how it intends on achieving its vision.


N

Net Profit
Is the actual profit after all business working expenses have been taken out.


O

Off-the-shelf
A product that has not been made to order and taken from existing stock purchasable by the general public. Commonly referred to technology or computer products.

Organisation Chart
A visual representation of the positions or structure of the roles and people in your business.


P

Patent
An exclusive right granted by a government authority to allow the owner to sell their particular device, substance, method or process that is new, inventive and useful.

It gives them the sole right to prevent others from making, using or selling the patented invention.

Pay As You Go (PAYG) Withholding
A legal requirement to hold back a portion of payments made to employees and other businesses. It is advance payments of income due to be paid to the Tax Office.

Payroll Tax
A government tax that is imposed on employers. The tax is calculated as a percentage of the amount of wages paid to your employees.

Permit
A legal document officially allowing to do something. A permit is usually temporary and will require another permit each subsequent time the planned action is carried out.

Plant and Equipment
The land, buildings and equipment purchased for long term use. Plant and equipment can also be referred to as fixed assets used in the operation of a business.

Pricing Strategy
A business will use a variety of pricing strategies when selling a product or service to help maximise profitability.

Strategies can be used for a number of reasons. They can help defend an existing market from new entrants, increase market share within a market or to enter a new market.

Product Liability
Is insurance that covers the trader for damage or injury caused to another business or person, through producing or selling a faulty product.

Professional Indemnity
Is insurance that protects a business if they provide advice to a client and the client suffers a loss as a direct result.

Public Liability Insurance
Is insurance to protect your business for claims made against your business if a third party is injured or their property suffers damage whilst at your business premises. It also applies when you are working in their home, office or business property.


R

Retail Lease
A legally binding contract between a business and a landlord that sets out the terms by which a business can occupy a landlord’s shop or premises. The lease is for a fixed period of time in exchange for a periodic payment.


S

Social Media
Websites or applications that allow you to collaborate and socialise with your network and target market online. Popular social networking sites such as Facebook, Instagram, Twitter and LinkedIn allow you to share your content and participate in niched networking to help grow your business.

Stamp Duty
A government tax paid by a buyer on the purchase price of the property or asset.

Stocktaking
A regular process involving a physical count of merchandise or supplies actually held by a business. This is to verify correct stock records and accounts.

Good stock management processes will help alleviate the need to continually count stock but it is still required as a means to verify records.

Sustainability
1. Taking full account of the environmental consequences caused as a result of economic activity utilising resources that can be replaced or renewed.

2. The ability to maintain economic growth at a certain rate or level.


T

Third Party
A person or group who is separate from the primary parties involved. Usually involves a contract or dispute.

Trademark
The registration of a letter, number, word, phrase, sound, smell, shape, logo, picture, aspect of packaging, which gives the owner the legal right to use, licence or sell it within Australia.

A trademark can be combination of any of the above.

Trading Name
A trading name is the name you will be using to trade under. It is the name that appears on all your businesses marketing and advertising material. You need to register your trading name as a business name with ASIC.

Turnover (Financial)
Financial turnover is the amount of money typically earned by a business in a given period.

Turnover (Staff)
Staff turnover is the rate at which staff leave a position and are replace in an organisation.


U

Unique Selling Position (USP)
A feature or characteristic of a business or a product/service that distinguishes it from the competition. A USP is used to make the product perceived as more appealing to a customer.


V

Value to Customer
How do your customers value your products/services? Are they a life necessity, luxury item or somewhere in between?

Venture Capital (VC)
Capital invested in a start-up business that is thought to have excellent growth prospects. VC funding is often a risky investment as they are investing in new or expanding businesses.

Private companies do not have access to capital markets so venture capital is a means to receiving funds for their business.

Vision Statement
An inspiring statement that expresses an organisation’s main ambitions/goals intended to guide internal decision making.


W

Weblog
An individual’s or organisation’s online website displaying a reverse-chronological list of entries (known as posts). Posts typically include thoughts, observations, promotions, links, images or videos. A Weblog is publicly accessible, usually written in an informal or conversational style and allows readers to comment on posts.

A weblog is most commonly referred to as its shortened term, blog.

Lemodus.com/blog is our web blog.

Worker’s Compensation
A payment made to an employee affected by a work related injury or illness. This is awarded to someone to compensate for the loss of their earning capacity or for medical and rehabilitation expenses.


Did we miss any business terms in this glossary?

let us know in the comments below and we will add them to the list.

Joseph Chesterton

Written by Joseph Chesterton

Joseph is the founder of Lemodus. He's obsessed with building businesses that help businesses grow. He founded Lemodus to introduce better processes and automation to the community. Lemodus is the number one tool to get your business under control.

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