We at Telsec have compiled a glossary of common business terms and acronyms related to entrepreneurship and small businesses. Some of this business terminology may be familiar to you while some you may have only heard in passing without knowing what it meant. Whatever your experience level or familiarity with these business terms–whether you use these terms on a regular basis, heard them used without knowing their meaning, or you’ve never heard of them at all– our business terms glossary covers the most commonly used business terms and their definitions. So without further ado, here are some business terms every professional should know.
A form of marketing that captures the attention of the public and raises awareness for a product or service through paid announcements on electronic media such as radio, television, or internet PPC (pay per click), as well as on print media such as billboards, posters, newspapers, or magazines. Advertising is not to be confused with other marketing strategies like public relations marketing or SEO (Search Engine Optimization) strategies. Unlike these marketing methods, advertising requires payment in exchange for the distribution of advertisements. If you want to learn more about advertising, there are entire websites devoted to just advertising terms and vocabulary.
In business terminology, an angel investor (also known as a business angel, informal investor, angel funder, or private investor) is an affluent individual who invests capital into a business start-up, usually in exchange for convertible debt or ownership equity. In other words, when they invest capital into a start-up, the angel investor acquires a percentage of the ownership. Angel investors not only contribute financially, but they can also contribute their time, experience, advice, contacts, and business vision. A small but increasing number of angel investors are now investing online through equity crowdfunding, or are organizing themselves into angel groups.
Bartering is a system of exchange wherein goods or services are exchanged directly for other goods or services without the use of a monetary medium such as money. There are many formal barter groups, such as BarterMachine and Barter Network Ltd., that network a large number of businesses looking to trade products or services without the exchange of money. Aside from that, there are still many who engage in informal barters as well.
Business acquisition is the business term used when one company buys a controlling stake in or seizes ownership of another in order to expand their business or diversify their business holdings. This term is frequently used in conjunction with the word merger, as in mergers and acquisitions. However, the two processes are not the same. There are different types of business acquisitions including horizontal acquisitions, vertical acquisitions, conglomerate acquisitions, and congeneric acquisitions. Business acquisitions can be either mutually arranged by the businesses involved or they are not. In either case, the acquisition is referred to either as a takeover or hostile takeover.
Often confused with office business centres (see below for more information), business incubators provide workspaces for clients, but require clients to pay for business coaching courses and support services in the early-stages of their businesses. Business incubators help startups and entrepreneurs develop their businesses by providing training and support services in addition to office space. These additional costs associated with training and support services are normally covered by Employment Insurance benefits to get entrepreneurs to start businesses instead of returning to the workforce. Many business incubators also specialize in a particular industry or type of business and work to bring together similar businesses.
Consumer Direct Marketing
Consumer-direct marketing is a form of marketing in which producers or distributors market their products or services directly to consumers. Consumer direct marketing aims to persuade selected groups of consumers to undertake specific actions such as purchasing a product or service, placing an order, visiting a store or website, or an information request in response to the marketer’s communication, which may take the form of a telemarketing, emails, mail, etc. In consumer-direct marketing, producers engage with and sell directly to their target audience, eliminating the barrier between consumer and producer to initiate a personal relationship with the consumer. Consumer direct marketing grants manufacturers greater control over their marketing, sales tactics, branding, and reputation.
Although copyright is a term that is associated more with writers and music producers, it also applies to content produced by businesses and should therefore be included in a business terms glossary. Copyright is a form of protection for published and unpublished literary, scientific, or artistic works that a business may create to either be associated with or else to promote their product or brand. It is a type of legal protection available to content creators that confers special rights to works that meet specified criteria for protection.
A common business term you’re likely to have encountered at some point is corporation. A corporation is a legal entity that is separate and distinct from its owners and is created by individuals, stockholders, or shareholders for the purposes of operating for profit. During the process of incorporation, an organization or group of people are authorized to act as a single entity that is recognized as such by the law. Incorporation protects a business entity’s owners from being personally liable in the event of a lawsuit or legal claim. Because they are legally recognized as a single entity or “person” by the law, corporations enjoy many of the rights and responsibilities that an individual possesses. That is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
You’ve likely heard the expression “do your due diligence” at some point or other. A relatively common business term, due diligence refers to an investigation undertaken by a business or person prior to entering into an agreement with another business. Due diligence involves a comprehensive appraisal of a business’ assets and liabilities. It is conducted to collect information on said business and evaluate its commercial potential before making a decision to enter into an agreement with the business.
If you are reading this, you are likely an entrepreneur or studying to become one. An entrepreneur, in business terminology, is a person who organizes, operates, and assumes financial risks for a business venture. Entrepreneurs either create or invest in one or more businesses, often pursuing commercially driven opportunities to bring new products or services to the market with limited resources and high risk.
General partnership is the business term for an arrangement in which two or more individuals conducting a business operation together agree to share all assets, profits, and legal or financial liabilities for a jointly owned business. In this organizational structure, each individual has unlimited liability meaning each business partner assumes full legal responsibility for any and all business debts. This liability is not capped–debts incurred or financial obligation can be paid through the seizure and sale of each partners’ personal assets and any partner may be sued for the business’s debt.
An independent contractor is a self-employed individual or business entity contracted to perform work for or provide a service to another business entity as a non-employee. In other words, independent contractors operate an independent trade, business, or profession in which they offer their services to the public or to other businesses. This means that unlike employees who perform work for employers on a regular basis and are subject to the employer’s guidelines when performing work, independent contractors work as required, are usually paid on a freelance basis, and the person contracting them for their services usually has the right to direct only the work, not the means and methods of accomplishing it.
An intrapreneur employs the innovative and risk-taking behaviours of the entrepreneur within the relatively stable and secure environment of a corporation to develop new enterprises and creative solutions. Or, to put it another way, an intrapreneur is someone who takes on entrepreneur-like ventures within a large corporation. An intrapreneur, or inside entrepreneur, typically refers to a manager within a large corporation who uses entrepreneurial skills, such as risk-taking and innovation, to experiment with and promote innovative product development or marketing strategies without incurring the risks associated with those activities. However, intrapreneur can also refer to an employee within a company who is tasked with producing innovative ideas or projects for a corporation and is instructed to approach projects and ideas much like an entrepreneur would. Unlike entrepreneurs, intrapreneurs usually have the resources and capabilities of the company at their disposal.
A joint venture in business terminology is a business arrangement in which two or more parties jointly undertake a commercial enterprise, creating a new business entity together. In a joint venture, each party agrees to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. A joint venture is generally one characterized by shared ownership, shared governance, and shared risks and returns. It is important to note that a joint venture differs from a strategic alliance because it is a legal entity created by two or more businesses joining together to conduct a specific business enterprise with both parties sharing profits and losses for the length of the agreement. It differs from a strategic alliance in that there is a specific legal entity created when the two parties join forces.
Similar to a general partnership, a limited partnership business arrangement is one in which day-to-day operations of a small business are controlled by one or more general partners, but the business is funded by limited or silent partners who are legally responsible for losses based on the amount of their investment. To put it another way, a limited partnership is a business entity composed of at least one general partner–who has unlimited personal liability–and a limited partner, whose liability is capped by the amount of capital they invest. In this type of partnership, the general partner oversees and manages the business, making business decisions to achieve certain business objectives. The limited partners, by contrast, are only responsible for investing capital in the business and do not partake in the management of it. In exchange for their increased contributions and risk, general partners receive a bigger share of the company’s earnings.
Line of Credit
A familiar business term for many entrepreneurs, a line of credit (LOC) is a credit facility or source of funds extended by a financial institution, such as a bank, to a business or individual that enables them to draw on funds when needed. A line of credit is typically opened to address the fluctuating cash flow needs of the borrower. It provides more flexibility to business owners to manage unexpected expenses or ongoing financial obligations. Much like a credit card, a line of credit has a maximum amount of funds that the customer is allowed to draw from called the credit limit. When you apply for a line of credit, lenders grant a preset credit limit that you can draw upon as needed until that limit is reached. And as with a credit card, the business makes periodic payments against the outstanding balance and only pays interest on the amount actually withdrawn. The balance of a line of credit can be paid at any time when the funds are available. When you repay the balance, the credit limit will be replenished, allowing you to continue withdrawing from it until you reach the credit limit once more.
Any business terms glossary that does not include a definition for marketing would be incomplete. Marketing is a foundational business term. There are volumes of books written on marketing, but the simplest explanation is that it is the process of conducting market research and advertising campaigns with the intent of promoting and selling a product or service. Marketing includes a broad range of practices, including advertising, publicity, promotion, pricing, and even the packaging of goods or services. Marketing involves studying the market and consumer behaviours in order to discover ways to attract, acquire, and retain customers by satisfying their needs and wants.
Similar to business acquisitions in that both refer to the joining of two companies, mergers are transactions in which the ownership of companies or business organizations are combined. In a merger, two separate business entities combine resources to create an entirely new business entity with a new ownership and management structure. A true merger in the legal sense occurs when both businesses voluntarily dissolve and move their assets and liabilities into this newly created entity. By contrast, a business acquisition refers to a takeover of one business entity by another. Mergers are typically undertaken to reduce operation costs, expand into new markets, or boost profits.
Multi-level Marketing (MLM)
A form of consumer direct marketing, multi-level marketing is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits’ sales. The recruits are known as a distributor’s “downline distributors.” In this marketing strategy, the business’s revenue for the sale of products or services is derived from a non-salaried workforce enlisted to both sell products or services as well as recruit new participants. Participants are compensated based on a sales commission from selling the product or service as well as a percentage of the commissions made by other participants they recruited, creating an incentive to both make sales and recruit new members. In other words, a person receives proceeds not only from their own sales, but from the sales made by people they have signed up, and potentially people those people have signed up in turn, and so on. Many people just work on developing their downlines as opposed to product sales, because it is more profitable.
Network marketing is a business model in which a distributor network is needed to build the business. Network marketing depends on person-to-person sales of a product or service through a network of distributors. Like multi-level marketing, individuals generate money through commissions from each sale they make as well as commissions from the sales made by recruits. Participants are therefore required to build their networks of customers and recruits to make a profit. Usually, such businesses tend to be MLM’s. However, not all network marketing is multi-level marketiing. Network marketing is often confused with multi-level marketing. Nevertheless, there are differences between the two marketing models. Multi-level marketing is one of three different subsets of network marketing, the other two being single-tier marketing and two-tier marketing.
In all probability, you’ve heard the term networking before. It is a common business term that refers to the process of interacting with other people, businesses, or groups, with the purpose of exchanging information, ideas, or services and thereby developing professional contacts. Networking helps form meaningful, mutually beneficial business relationships to increase your knowledge or awareness of news and trends in particular fields, discover opportunities, and expand your business base. These are considered networking activities and typically take place in informal social settings or at professional gatherings, like conferences or other networking events.
Office Business Centres
Office business centres (often called shared offices or service offices) are an office or office building offering private, shared, or virtual office spaces for lease to businesses and professionals. Office business centers provide temporary and/or long-term office solutions to all types of entrepreneurs and businesses, making them an affordable alternative to traditional leased office spaces. These are facilities where several businesses share common space with a variety of infrastructure necessities built into the centre. Office business centers come fully equipped and furnished so businesses do not have to build walls, install the internet, set up telephone systems, or even purchase office furniture. All they need to do is choose an office and move in. They also offer a number of additional services, including meeting rooms available by appointment, reception, courier services, cleaning crews, security systems, internet, copy services, mail-forwarding services, and more. A business centre is essentially an affordable solution for comanies looking to rent office space. Telsec is a great example of an office business center that offers luxurious private, shared, and virtual office space solutions in addition to a range of other services that will help to facilitate your business operations.
The business term outsourcing is a hybridized form of the phrase outside resourcing, and refers to the act of obtaining goods or services, typically in the form of standard operational services, from an outside or foreign business. In outsourcing, one company hires another to perform tasks, provide services, produce goods, or handle operations prviously performed in-house by the company’s own staff. Outsourced services typically include accounting, payroll, telemarketing, IT support, advertising, and more. It is usually undertaken by businesses to reduce costs and increase efficiency.
Another one of those common business terms you’re likely to have heard before, a patent is a type of intellectual property similar to copyright in which an individual or business entity is granted exclusive rights over an invention, product, design, or process. This property right is granted by a sovereign authority to an inventor to exclude others from making, using, or selling the invention for a set time in exchange for public disclosure of the invention when the patent is granted.
Considered to be the simplest business structure, a sole proprietorship is an unincorporated business owned and operated by a single individual. In this business model, the sole proprietor or owner is solely responsible for all business decisions, receives all of the profits, assumes all risks associated with the business and its operations, and claims all losses. Moreover, the sole proprietor does not have a separate legal status from the business, meaning they have unlimited liability for any losses or debts incurred (i.e. risks extend to their personal property and assets).
Strategic alliance is the business term used to describe a collaboration or cooperation between two or more companies in which each party agrees to undertake a mutually beneficial project while still retaining their status as independent business entities. Less complex and legally binding than joint ventures, in which two companies combine their resources to create an entirely new business entity, strategic allainces are either a long-term or short-term relationship between two or more businesses in which they combine efforts to pursue a set of agreed upon objectives or else work towards a specific purpose, project, or goal that will benefit both companies. Companies usually form strategic alliances to expand into new markets, improve product lines, or develop a competetive edge.
A trademark is another form of legal protection for intellectual property consisting of recognizable words, phrases, names, symbols, sounds, signs, designs, expressions, or a combination of these features that identifies the brand for a good or service. It is how your customers recognize your products or services and distinguish them from your competitors’ products and services. A trademark can be owned by an individual, business, organization, or any other legal entity and can be located on packages, labels, or products. “Trademark” refers to both trademarks and service marks. Trademarks are usually used for goods, while service marks are used for services. Unlike patents that have a limited time span, trademarks can be renewed for as long as they are being used to protect against counterfeit and fraud.
There are many more business terms that are used by entrepreneurs, but this business terms glossary covers some of the most common business terms used. There are some business terms that are more specific to certain industries or sectors of business than others that have not been included in this glossary of common business terms which may be helpful to know. We encourage novice entrepreneurs to research terms that are commonly used in the areas of business into which they are venturing to familiarize themselves as much as possible with the business terminology specific to their industry or niche. Nevertheless, we hope that this glossary of common business terms that every entrepreneur should know has provided you with a helpful start.
Telsec offers a variety of luxurious and fully furnished office solutions, from private and shared offices to virtual offices, along with a range of other services that are designed to help entrepreneurs and other professionals looking to start their own business enterprises in the heart of Toronto’s financial and banking industries.