91 terms

Business Glossary

The key vocabulary of Business, each term defined in plain language. Start learning in the Business subject, or drill these terms as flashcards.

Ad-supported: A model where a third party pays for access to the audience; the user is not the paying customer.
Balance sheet: A snapshot of what a business owns (assets) and owes (liabilities) at a point in time.
BATNA: Best Alternative To a Negotiated Agreement — your fallback if a deal falls through, which sets your walk-away point.
Bottleneck: The step that limits the throughput of an entire process; improving anything else changes little.
Brand management: Coordinating a product’s identity and reputation; formalized as a business function in the 1930s.
Break-even point: The level of sales at which total revenue exactly covers total costs.
Business: An organisation that creates value by solving problems or meeting needs, and earns revenue in exchange.
Business model: The logic of how an organisation creates, delivers, and captures value.
Business resilience: An organisation’s capacity to absorb shocks, adapt, and continue operating through disruption.
Cash flow: The timing of money in and out; distinct from profit, and what determines survival.
Cash flow statement: A statement tracking the actual cash moving into and out of a business.
Change management: The practice of guiding people and organisations through change so it actually sticks.
Churn: The rate at which customers leave.
Company culture: The behaviours a group actually rewards and tolerates — which forms whether or not it is designed.
Comparative advantage: The ability to produce a good at a lower opportunity cost than others, the classic rationale for trade.
Competition: Pressure from anyone solving the same problem, including the option of doing nothing.
Contribution margin: The revenue from a sale minus its variable costs — what each unit contributes toward fixed costs and profit.
Corporate social responsibility: A company’s commitment to operate ethically and contribute to social and environmental wellbeing.
Cost: Resources consumed in producing and selling.
Cost leadership: Competing by achieving a genuine, sustainable cost advantage over rivals.
Cost-plus pricing: Setting price by adding a fixed margin on top of what it costs to produce.
Creative destruction: Joseph Schumpeter’s idea (1942) that innovation continually replaces old firms and industries with new ones.
Creator economy: The set of businesses built by individuals who earn from an audience they build online.
Customer: The specific person or organisation that chooses to pay.
Debt financing: Raising money by borrowing, which must be repaid with interest.
Delegation: Entrusting tasks and authority to others, which a growing business requires of its founders.
Demand: How much of something customers want at a given price; moves with price, income, and substitutes.
Differentiation: Being meaningfully different on something customers value, rather than merely cheaper.
Digital transformation: Rethinking how a business creates and delivers value using digital technology, not merely adding technology to old processes.
Disruptive innovation: An innovation that starts in a simple or low-end application and improves until it displaces established competitors.
Division of labour: Splitting work into specialized tasks to raise productivity, famously described by Adam Smith in 1776.
Dropshipping: A retail model where a supplier ships products directly to the customer, so the seller holds no inventory.
E-commerce: Buying and selling goods or services over the internet.
Equity financing: Raising money by selling ownership stakes in a business.
ESG: Environmental, social, and governance factors used to assess a company beyond financial returns.
Feature: What a product is — as distinct from what it does for the customer.
Feedback: Information given to help someone improve, most useful when specific, timely, and caring.
Fixed cost: A cost that stays roughly constant regardless of volume.
Freemium: A free tier attracting users and a paid tier converting some of them.
Greenwashing: Misleading claims that overstate how environmentally responsible a product or company is.
Guild: A medieval association of craftsmen or merchants that controlled the practice of a trade in a town.
Income statement: A financial statement showing revenue, costs, and profit over a period of time.
Incremental innovation: Gradual, continuous improvement of an existing product, service, or process.
Indirect competition: Anything competing for the same time, money, or attention.
Intrinsic motivation: Motivation that comes from within — autonomy, mastery, and purpose — rather than external rewards.
Joint-stock company: A business owned by shareholders who hold tradable shares; an early example is the Dutch East India Company (1602).
Key performance indicator: A small set of measures reflecting whether goals are being met.
Knowledge worker: A term popularized by Peter Drucker for workers whose main capital is knowledge rather than manual labour.
Lagging indicator: A financial measure reporting what has already happened.
Leadership: Setting direction and aligning, motivating, and inspiring people toward a shared goal.
Leading indicator: An operational measure that moves before the financial results do.
Level 5 leadership: Jim Collins’s idea that the best leaders blend strong professional will with personal humility.
Limited liability: A legal protection limiting owners’ losses to what they invested, encouraging investment in companies.
Management: Planning, organising, and coordinating resources and work to deliver results reliably.
Margin: Profit expressed as a percentage of revenue.
Marginal cost: The cost of producing one more unit; near zero for many digital products.
Market: The group of customers who might buy; rarely uniform.
Market segment: A group within a market with genuinely different needs.
Marketing channel: A route by which a business reaches customers, such as organic search, paid ads, or word of mouth.
Marketplace: A model connecting buyers and sellers for a cut; powerful at scale, hard to start.
Mass production: Making large quantities of standardized goods efficiently, exemplified by Ford’s assembly line around 1913.
Minimum viable product: The simplest version of a product that lets you test a real market need with the least effort.
Network effect: A product or service that becomes more valuable to each user as more people use it.
OKRs: Objectives and Key Results: a goal-setting system pairing ambitious objectives with measurable results.
Organic reach: Unpaid discovery of a business through search and sharing, which compounds over time.
Platform (two-sided market): A business that creates value by connecting two or more groups, such as buyers and sellers.
Positioning: The place a business occupies in a customer's mind relative to alternatives.
Price elasticity: How much the quantity demanded changes when the price changes.
Product-market fit: The point at which a product genuinely satisfies a strong market demand.
Profit: What remains after costs are subtracted from revenue.
Psychological safety: A shared belief that a team is safe for interpersonal risk-taking, linked to higher team performance.
Retention: Whether customers come back; usually more informative than acquisition.
Return on investment: A measure of an investment’s gain relative to its cost.
Revenue: Money earned from sales.
Runway: How long a business can keep operating at its current burn rate before it runs out of cash.
Scientific management: Frederick Taylor’s early-20th-century approach of optimizing work through measurement, later widely critiqued.
Search engine optimization (SEO): Improving content so it ranks well in search results by being useful, relevant, and readable.
Servant leadership: A model of leadership focused on serving and developing the people one leads.
Shareholder primacy: The view that a company’s main obligation is to maximise returns for its owners.
Software as a service (SaaS): Software delivered over the internet for a recurring subscription fee rather than a one-time purchase.
Stakeholder: Any party affected by a business — customers, employees, suppliers, communities — not only its shareholders.
Subscription: A model charging a recurring fee; predictable, and dependent on continuous value.
Triple bottom line: A framework measuring performance across three dimensions: people, planet, and profit.
Unit economics: Whether a single sale makes money once its direct costs are counted.
Valuation: An estimate of what a business or asset is worth, based on assumptions rather than certainty.
Value: The outcome a customer actually receives; time, money, feeling, or a job done.
Value creation: Solving a meaningful customer problem better than the available alternatives.
Value-based pricing: Setting price according to the value delivered to the customer rather than only the cost to produce.
Vanity metric: A number that rises reliably while telling you nothing actionable.
Variable cost: A cost that rises with each additional unit.
Working capital: The money tied up in day-to-day operations — roughly, current assets minus current liabilities.

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