Essential Business Terms: Definitions and Key Concepts

Posted on Jan 29, 2025 in Economy

General Business Terms

  • Business Plan: A formal report showing how a business sets out to achieve its aims and objectives.
  • Consumer: The ultimate user of the product or service; the consumer may not have paid for it.
  • Customer: A purchaser of a product or service.
  • Customer Satisfaction: How happy the customer is with the product or service.
  • Entrepreneur: An individual with an idea for a business.
  • External Stakeholder: An individual or group outside the business who is indirectly connected with that business.
  • Forecast: A technique where the business attempts to estimate future sales or other financial variables.
  • Funding: The capital (money) provided for the various stages of business growth by different sources of finance, either on a short- or long-term basis.
  • Gap in the Market: A business opportunity that is either a new idea or adds something different to an existing product or service.
  • Growth: An increase in turnover (sales), market share, or profit.
  • Internal Stakeholder: An individual or group inside the business who is directly connected to that business.
  • Logistics: The process of buying, managing, and delivering goods from the point of manufacture to the end consumer.
  • Market: A set of all actual and potential buyers of a product or service.
  • Risk: The potential for loss, but rewards in business make it a calculated gamble.
  • Social Enterprise: An activity that receives a reward for society.
  • Stakeholder: An individual or group with an interest in a business.
  • Uncertainty: Not knowing the future or what is going to happen.

Business Structures and Legal Terms

  • Incorporation: The process of forming a limited liability company, such as an Ltd or Plc.
  • Limited Liability: Investors (shareholders) in a limited company can only lose their investment in the business if it fails; they cannot be forced to sell assets to pay off the firm’s debts.
  • Partnership: Occurs when two or more people combine to form a business. The partners share the responsibility of running the business and therefore any decisions relating to the business.
  • Unlimited Liability: Unincorporated businesses, such as sole traders and partnerships, have unlimited liability, which means that the owners are responsible for all the business’s debts.

Franchising Terms

  • Franchise: The legal right to use the name and logo of an existing firm and sell the same products.
  • Franchisee: The buyer of a franchise.
  • Franchisor: The seller of a franchise.

Marketing and Sales Terms

  • Mail Order: Direct marketing through mail shots leading to goods being delivered directly to the consumer.
  • Market Share: The proportion of total market sales sold by one business.
  • Mass Market: A market for goods/services that are produced/provided in large quantities.
  • Niche Market: A small segment of a wider market – often a specialist item/service.
  • Product: Physical items that can be purchased.
  • Sales: The amount of products/services sold or the value sold (e.g., 200 units or £400). Also called Revenue and Turnover.
  • Service: Non-physical items that can be purchased.

Financial Terms

  • Profit: What is left after costs have been deducted from revenue: Profit = Revenue – Costs
  • Profit Margin: The profit made as a proportion of sales revenue.