From the blog 17 Business Terms Every Business Leader Should Know

You’re never too old to learn. Even rockstar entrepreneurs like Bill Gates seek new knowledge every day.

When it comes to running a business, there’s always something new to learn. But keeping up can be a challenge, even for dedicated business leaders.

Building your business vocabulary

To help you stay sharp, we’ve collected 17 crucial business terms. Some of them are basic. Some of them are a little more advanced. All are terms you should be familiar with. 

We’ve also included ways to put them into practice.

Read on for some handy reminders of business terms you need to know.

Owner’s equity

This describes a business owner’s assets after they pay off their liabilities. If a business owner took out a loan to open another location, their equity would include that loan’s value.

Private assets matter when you want to apply for a business loan or invest cash into a new endeavor.


When an entrepreneur self-funds a business, they’re said to be bootstrapping. But many financing options don’t put an owner’s equity at risk. Companies can find outside investors, crowdfund online or take loans from a bank.

Research your options before you decide to bootstrap. 


Scalability refers to a business’s ability to grow if given more resources. These resources can be anything from a cash value to human resources.

Before trying to develop your business, realistically consider how scalable things are.

Term sheet

During business agreements, participants make term sheets that list their respective conditions.

Term-sheets are usually non-binding. They just make things easier for everyone to understand during negotiations.


Incubators are persons or businesses that research, plan or advise fledgling organizations. They can help with anything from entrepreneurial ideas to training management. Local governments even use them from time to time.

They’re great for small businesses that need help making developments.

Run rate

A run rate is a method businesses use to predict future earnings. A company with a $50,000 first-quarter profit might estimate an annual run rate of $200,000.

Run rate predictions help businesses plan significant developments when used conservatively.


An MVP, or a “minimum viable product,” describes a product or service that meets a customer’s minimum expectations. Businesses usually show customers MVPs to collect feedback for product development.

Knowing what customers want helps SMBs reduce costs and fine-tune their marketing strategies.


When a business sells to people, we call it a B2C, or a business-to-consumer relationship. That’s what most people think of when they think of company activity. 

Examples include retail stores, restaurants and auto repair shops.


In contrast to B2C, a B2B interaction stands for business-to-business. It describes commercial sales from one corporation to another. For example, a finance company receiving IT support from a tech company would be a B2B service.

Businesses engaging in B2B activities usually market themselves differently than B2C companies. Knowing the difference helps focus an SMB’s marketing strategy.

Value proposition 

This is simply what a business promises to provide a customer. Honest value propositions are indispensable in marketing. They establish market expectations that the company can reasonably meet.

Customers never like it when a business lies in a VP.

Outbound Marketing

This traditional marketing strategy seeks out customers. Advertising, telemarketing, seminars, trade shows and email blasts are all considered outbound strategies.

It’s been falling out of favor due to its cost and low success rate. Some analysts believe outbound marketing makes customers feel overwhelmed and targeted. The customers respond in turn with email filters and ad-blocking software. 

Inbound Marketing

As opposed to outbound marketing, inbound strategies attract customers.

Inbound marketing takes many forms, like helpful blog posts and well-maintained social media pages. This strategy’s been gaining popularity for the last several years.

A/B testing

This practice tests two versions of a business variable to find out which is more effective: web pages, marketing emails, product features and more.

A/B testing can help SMB owners decide which strategies work best for them. The test results appear in several different ways, including KPI, ROI, and more.


A KPI, or “key performance indicator,” measures a business’s success as a whole or on one activity. Customer retention, market share percentage and support ticket resolution time are all KPIs.

After a round of A/B testing, the before and after KPIs help businesses determine their next steps.


ROI stands for “return on investment.” It measures how much a particular expense gained for a business.

It’s usually represented as a ratio. The larger the ratio, the more profitable the expense was for the company. 


Short for Software-as-a-Service, this describes “software on demand.” Programs like Google Apps, Dropbox, DocuSign, Slack and Salesforce all fall under SaaS.

They’re one of the fastest-growing IT trends because they help businesses run with fewer expenses. They’re great for companies looking to scale back costs or modernize outdated systems.


In web development, a wireframe proposes how websites sites will look and function. They’re like blueprints for developers that save end-users time and money.

If you want a website, look into wireframes before finding a web consultant.

Learn (and implement) one new thing a day

Successful entrepreneurs learn something new every day. But to make learning worthwhile, SMB leaders should practice their new knowledge. That makes the difference between personal development and developing a business.

These business terms were a great place to start. But we have all kinds of solid resources you may find helpful—and they’re all free.

Are you ready to grow together?