Small business glossary
Short, plain definitions of the numbers and terms small business owners run into, with links to the full guide or a free calculator.
- Accounts receivable
- Money customers owe you for work already delivered or invoiced.Read the guide
- Break-even point
- The sales volume where total revenue equals total costs — no profit, no loss.Read the guideTry the calculator
- Cash flow
- The money actually moving in and out of your bank account over a period, as opposed to profit on paper.Read the guideTry the calculator
- Cash runway
- How many months you can keep operating at the current monthly shortfall before cash runs out.Try the calculator
- Churn rate
- The share of customers lost during a period, divided by customers at the start of it.Read the guideTry the calculator
- Contribution margin
- Price minus the variable cost of delivering one unit; what each sale contributes to fixed costs and profit.Read the guide
- Customer acquisition cost (CAC)
- Total sales and marketing spend in a period divided by the new customers won in that period.Read the guideTry the calculator
- Fixed costs
- Costs that stay the same regardless of how much you sell, such as rent, salaries and software.
- Gross margin
- Profit after direct costs, as a percentage of the selling price.Read the guideTry the calculator
- KPI
- Key performance indicator — a number you track regularly because it shows whether the business is on course.Read the guide
- Lead qualification
- Deciding whether a prospect has the need, budget, authority and timing to become a customer.Read the guide
- Lead scoring
- Ranking leads with points for fit and engagement so the best ones get attention first.Read the guide
- Lifetime value (LTV)
- The total contribution margin you expect from one customer over the whole relationship.Read the guideTry the calculator
- Markup
- Profit as a percentage of cost. A 50% markup equals a 33.3% margin.Read the guideTry the calculator
- Payback period
- How long it takes a customer's margin to repay what it cost to win them.
- Reorder point
- The stock level at which you place a new order so you don't run out before it arrives.Read the guide
- Retention rate
- The share of customers you keep over a period — 100% minus churn.
- Sales pipeline
- The stages a deal moves through from first contact to won or lost.Read the guide
- Scope creep
- Work added to a project without an agreed change to price or timeline.Read the guide
- Standard operating procedure (SOP)
- A written, repeatable set of steps for doing a recurring task the same way every time.Read the guide
- Unit economics
- The revenue and costs tied to a single customer or unit, used to check each sale is profitable.Read the guide
- Variable costs
- Costs that rise with each unit sold, such as materials, payment fees and shipping.