Glossary

Some of these words sound more complicated than they are, and a few are used in ways that keep owners on the outside of the conversation. Each one is explained here in plain language.

152 terms and counting. Every one links to the lesson that explains it in context. Nothing here is legal, tax or accounting advice; where a term touches those areas, ask a qualified professional in your area.

A   B   C   D   E   F   G   H   I   K   L   M   N   O   P   Q   R   S   T   U   V   W

A

A/B test
Showing two versions of one thing, such as two headlines or two emails, to similar people and seeing which does better. Change one thing at a time or you will not know what made the difference. Lesson →

Accounts payable
Money you owe to suppliers and other businesses for things you have received and not yet paid for. Also called A/P. Lesson →

Accounts receivable
Money customers owe you for work you have done or products you have delivered and have not yet paid for. Also called A/R. It counts as earned, but it is not cash until it lands. Lesson →

Accrual accounting
Recording income when you earn it and expenses when you incur them, not when the money moves. The alternative is cash-basis accounting. Ask your accountant which one your business uses. Lesson →

Aging report
A list of unpaid customer invoices grouped by how overdue they are. It shows you who to call first. Lesson →

AI (artificial intelligence)
Software that can do things we usually think of as needing human judgment, like writing, summarizing or spotting patterns. It is a tool, not a person, and it works best when a person checks what it produces. Lesson →

AIDA
Attention, Interest, Desire, Action. A simple order for writing a marketing message. Lesson →

Amortization
The same idea as depreciation for things you cannot touch, such as a purchased customer list: the cost is spread over the years it is useful. Lesson →

Asset
Something the business owns that has value, such as cash, equipment, a vehicle or money customers owe you. Lesson →

Attribution
Working out which marketing effort gets credit for a lead or a sale. It is rarely perfect, and it is worth knowing where the limits are. Lesson →

Average sale
What a typical customer pays you for one purchase. It is the starting point for pricing, break-even and budget math. Lesson →

B

Balance sheet
A snapshot of what the business owns, what it owes and what is left over, on one date. Where the profit-and-loss statement covers a period of time, the balance sheet is a single moment. Lesson →

Bookkeeper
The person who records and organizes your transactions. Different from a tax preparer, who prepares returns, and from a tax professional who helps you plan ahead. One person may do more than one. Lesson →

Bottleneck
The one step, or the one person, that everything has to pass through, so that work piles up. In a small business it is often the owner. Lesson →

Brand promise
What your customers can count on you doing every time. A promise only helps if your operation can actually keep it. Lesson →

Brand voice
How the business sounds in writing and speaking: the words it uses, its tone, what it would never say. Consistent voice makes you recognizable. Lesson →

Branding, external
What the outside world sees and remembers: logo, colors, name, the look of the van, the tone of your posts. It only works when it matches the internal brand. Lesson →

Branding, internal
What your own people believe the business is, and how they behave because of it: how the phone is answered, how the truck is kept, how a complaint is handled. Lesson →

Break-even point
The amount of sales at which the business covers all its costs and makes neither a profit nor a loss. Everything above it is profit. Lesson →

Budget
A plan for what you expect to spend and earn. A marketing budget is best built from gross profit, not from revenue. Lesson →

Burn rate
How much cash the business spends in a typical month. Net burn is what is left after subtracting the money coming in, which is the number that matters when you are starting out and not yet covering your costs. Lesson →

Business continuity
Having a plan for how the business keeps running if you, a key person or a key supplier is suddenly unavailable. Lesson →

Business model
How the business makes money: who the customer is, what you offer, what you charge and what it costs to deliver. Lesson →

C

CAC (customer acquisition cost)
What it costs, on average, to win one new customer. Add up what you spent on marketing and sales in a period and divide by the number of new customers. Cost per lead tells you what a lead costs; CAC tells you what a customer costs, and it is usually higher. Lesson →

Call to action
The single thing you want someone to do next: call, book, fill out a form. Every ad, page and email should have one. Lesson →

Capacity
How much work your business can properly deliver in a given time, given your people, equipment and hours. Marketing beyond capacity creates unhappy customers. Lesson →

Cash flow
The movement of money in and out of the business over time. A business can be profitable and still have poor cash flow. Lesson →

Cash reserve
Money set aside in a separate account for a rainy day, not for everyday spending. How large it should be depends on your monthly costs. Lesson →

Cash-basis accounting
Recording income when the money arrives and expenses when you pay them. Simple, and many small businesses use it, but it can hide the difference between what you have earned and what you have collected. Lesson →

Cash-conversion cycle
The time between spending money to deliver a job and collecting payment for it. The longer it is, the more cash you need to keep on hand. Lesson →

Churn
Customers who stop buying from you. Its opposite is retention. Lesson →

Click-through rate (CTR)
The percentage of people who saw your ad or email and clicked. Clicks divided by views. Lesson →

Close rate
Of the leads you talk to, the share that become customers. Ten leads and four customers is a 40 percent close rate. Lesson →

Closing
The part of a sales conversation where you ask for the decision. Done well it feels like the natural next step, not pressure. Lesson →

Co-branding
Two businesses putting their names together on an offer or campaign so each gets in front of the other’s audience. Lesson →

Collateral
Something of value a lender can claim if a loan is not repaid. Ask your banker what applies to you. Lesson →

Competitive positioning
The place you deliberately take in the customer’s mind compared with the alternatives. It answers why someone should choose you. Lesson →

Contractor (independent)
Someone who does work for the business but is not an employee. Whether a worker is legitimately a contractor is a legal question. Ask an attorney or accountant in your area. Lesson →

Conversion
The action you actually want someone to take: a call, a form, a booking, a purchase. Lesson →

Conversion rate
The share of people who take the action you wanted, out of everyone who had the chance. Website visitors who fill out a form, for example. Lesson →

Cost of goods sold (COGS)
What it costs directly to produce what you sold: materials, product and the labor on the job. Subtract it from revenue to get gross profit. Lesson →

Cost per click (CPC)
What you pay each time someone clicks your ad. Less important than what a lead costs and whether the lead turns into a customer. Lesson →

Cost per customer
What you spent on marketing, divided by the number of new customers. CAC is the fuller version that also counts your sales costs and your time. Lesson →

Cost per lead (CPL)
What you spend, on average, to get one lead. Total marketing spend divided by the number of leads. Lesson →

CRM
Customer Relationship Management software. It remembers every lead and customer, what they asked for, what you promised and when to follow up. Lesson →

Current assets and current liabilities
Assets you expect to turn into cash within about a year, and bills you expect to pay within about a year. Subtract the second from the first for the formal accounting version of working capital. Lesson →

Customer journey
Every step someone takes from first hearing about you to being a customer, and then a repeat customer. Lesson →

Customer lifetime value
What a customer is worth to you over the whole time they buy from you, not just the first sale. Use only what your own records show. Lesson →

D

Data mining
Going back through what you already know about your customers to find patterns: best zip codes, which service leads to a second one, which month the phone starts ringing. Lesson →

Deductible
In insurance, the amount you pay on a claim before the policy starts paying. Ask your agent what yours is for each policy. Lesson →

Demographic profile
The measurable facts about a group of people: age, income, homeowner or renter, zip code, family size. Tells you what people are, never why they buy. Lesson →

Deposit
Money a customer pays before work starts. It can cover your upfront costs and protect your cash. Ask your attorney how to word it in your agreements. Lesson →

Depreciation
Spreading the cost of a truck or a piece of equipment over the years you use it, instead of counting the whole price the year you bought it. It is an accounting entry, not a check you write that month. Lesson →

Direct costs
Costs that go up and down with each job, such as materials and the labor on that job. Lesson →

Discovery (sales conversation)
The part of a sales conversation where you ask questions to understand what the customer actually needs before you offer anything. Lesson →

E

EBITDA
Earnings before interest, taxes, depreciation and amortization. A way of looking at what a business earns from its operations before financing costs, taxes and the accounting write-down of equipment and other assets. Lenders and buyers sometimes ask for it, and people define it slightly differently, so ask your accountant how it is being figured before you rely on it. Lesson →

Email list
People who have chosen to hear from you by email. Owned by you, unlike a social media following. Lesson →

Equity
What is left over for the owner after everything the business owes is subtracted from what it owns. Lesson →

Exclusions (insurance)
Things a policy specifically does not cover. Ask your insurance professional which common risks for your business are excluded. Lesson →

F

Filters
The ways people delete, distort and generalize what they hear, so the same message lands differently with different people. Lesson →

Fixed costs
Costs that stay about the same whatever you sell, such as rent, insurance and software subscriptions. Lesson →

Forecast
An estimate of what you expect to happen, such as sales or cash by month. It will be wrong, and it is still useful because it makes you think. Lesson →

Framing
The way something is presented changes how it is understood. The same price can feel expensive or fair depending on what it is compared to. Lesson →

G

Generative AI
AI that creates new text, images or other content from an instruction, instead of only sorting or analyzing existing data. Tools that write emails or draft ad copy are generative AI. Lesson →

Geo targeting
Showing your marketing only to people in the places you actually serve. Lesson →

Go/no-go decision
The point where you decide, using your numbers and your research, whether to launch, change the plan or stop. Lesson →

Good, better, best
Offering three levels of the same service so customers can choose, and so you are not forced into a single price. Lesson →

Google Business Profile
Your free listing on Google Search and Maps: hours, photos, reviews, services and posts. Lesson →

Gross margin
Gross profit as a percentage of revenue. If you sell for $10,000 and the direct costs are $6,000, gross profit is $4,000 and gross margin is 40 percent. Lesson →

Gross profit
Revenue minus direct costs. What is left to pay overhead, marketing and you. Lesson →

H

Hallucination (AI)
When an AI tool states something confidently that is wrong or invented, such as a fact, a statistic or a source. Always check anything that matters before you publish or act on it. Lesson →

Handoff
The moment a customer passes from sales to delivery. Badly done handoffs are a common cause of complaints. Lesson →

I

Impressions
The number of times your ad or post was shown. It says nothing about whether anyone acted. Lesson →

Interest
What a lender charges you for borrowing money, usually shown as a yearly rate. Ask for the total dollar cost of a loan, not just the monthly payment. Lesson →

Inventory
Products, parts or materials you hold to sell or to use on jobs. Money tied up in inventory is not available as cash. Lesson →

Invoice
A bill you send to a customer for work done or product delivered. Being invoiced is not the same as being paid. Lesson →

K

Keyword
A word or phrase someone types into a search engine. In Google Ads you choose which ones should trigger your ad. Lesson →

KPI (key performance indicator)
A number you watch regularly because it tells you whether the business is healthy. Keep the list short. Lesson →

L

Landing page
The page someone arrives on after clicking an ad or link. It should match what the ad promised and ask for one thing. Lesson →

Large language model (LLM)
The kind of AI behind chatbots and writing tools. It is trained on huge amounts of text and predicts what words should come next. That is why it sounds fluent even when it is wrong. Lesson →

Lead
A person who has shown interest, for example by calling or filling out a form. Not yet a customer. Lesson →

Lead magnet
Something useful you give away in return for contact details, such as a checklist. Only worth using if it is honestly helpful. Lesson →

Lead source
Where a lead came from: a search, a referral, a sign, an ad. Track it for every lead. Lesson →

Lead-to-sale
The path from a lead to a paying customer, and the percentage that make it. Lesson →

Liability
Something the business owes, such as a loan or unpaid bills. In insurance and law the word has other meanings; ask a professional. Lesson →

Line of credit
A set amount a lender lets you borrow from as needed and repay. Ask your banker how it works and what it costs. Lesson →

Local citation
A mention of your business name, address and phone number on another website, such as a directory. Keep it consistent everywhere. Lesson →

Local SEO
The work that helps your business show up when people nearby search for what you do. Lesson →

Local Services Ads
Google’s pay-per-lead ads for service businesses, shown at the very top of search results. Lesson →

M

Margin
The percentage of each sale you keep after a certain cost. Gross margin and net margin are the two you will hear most. Lesson →

Market size
How many people or businesses could realistically buy from you, in the area you serve. Lesson →

Marketing automation
A set of messages that go out on their own, in order, based on what a person does. Lesson →

Marketing avatar
One imaginary person who stands in for your whole target audience, with a name, a situation, a worry and a way of searching. Lesson →

Marketing campaign
One specific, time-boxed effort inside the strategy, with a start, an end, a message and a result you can measure. Lesson →

Marketing strategy
The big-picture decision about who you are going after, what you will say to them and where you will say it. It should fit on one page. Lesson →

Markup
A percentage added on top of cost to set a price. Markup and margin are not the same: a 50 percent markup on a $100 cost is $150, which is a margin of about 33 percent. Lesson →

N

Negative keywords
Search terms you tell Google Ads never to show your ad for, so you stop paying for the wrong clicks. Lesson →

Net 30 (payment terms)
An agreement that the customer will pay within 30 days of the invoice. Net 15 and Net 60 work the same way. Lesson →

Net margin
Net profit as a percentage of revenue. Lesson →

Net profit
What is left after every cost has been subtracted from revenue, including overhead. Different from gross profit, which is before overhead. Lesson →

O

Offer
What you are actually asking the customer to buy, with what it includes and what it costs. Lesson →

Online marketing
Anything that reaches people through a screen: search, social, email, your website, your Google listing, paid ads. Lesson →

Open rate
The share of people who opened an email you sent. Lesson → Treat it as a rough guide, because email apps can open messages automatically and overstate it.

Opt-in
When a person agrees to receive messages from you. Always get it before adding someone to an email or text list. Lesson →

Organic
Traffic or leads you did not pay for directly, such as from search results or referrals. Its opposite is paid. Lesson →

Overhead
The regular costs of running the business that are not tied to a single job: rent, insurance, software, office staff. Lesson →

Owner’s draw
A way an owner takes money out of the business for personal use, in businesses where the owner is not on payroll. How you pay yourself depends on how the business is set up. Ask your accountant. Lesson →

P

Paid traffic
Visitors or leads you get by paying for ads. Lesson →

PAS
Problem, Agitate, Solution. Name the problem, show why it matters, then offer the fix. Lesson →

Payment terms
When and how a customer must pay: deposit, due date, late fees. Set them before the work begins. Lesson →

Personal guarantee
A promise that you, not just the business, will repay a loan if the business cannot. Ask an attorney what you would be putting at risk before you sign one. Lesson →

Pipeline
Everyone you are currently working toward a sale with, at each stage. Your CRM should show it. Lesson →

Pixel
A small piece of tracking code that records visits and actions on your website so ads and reports can be measured. Lesson →

Positioning
See competitive positioning. Lesson →

Premium
In insurance, what you pay to keep a policy in force, usually monthly or yearly. Lesson →

Pricing
What you charge, ideally worked out from your costs and what you need to earn, not from copying competitors. Lesson →

Professional checkpoint
A box in some lessons that marks where the topic touches legal, tax or insurance matters and tells you what to ask a qualified professional in your area. Lesson →

Profit-and-loss statement (P&L)
A report of revenue, costs and profit over a period, such as a month. Also called an income statement. Lesson →

Prompt
The instruction or question you give an AI tool. The clearer you are about who it is for, what you want and what to avoid, the more useful the result. Lesson →

Q

Qualified lead
A lead that fits who you serve and could realistically become a customer. Lesson →

R

Rapport
A feeling of ease and trust between you and the other person in a conversation. Lesson →

Recurring costs
Costs that come back every month or year, like software, insurance or a lease. Lesson →

Referral
A customer or contact recommending you to someone else. Often your cheapest, best lead. Lesson →

Retargeting
Showing ads to people who have already visited your site or engaged with you. Lesson →

Retention
How many customers keep buying from you. Lesson →

Revenue
What you sold. Money customers owe or have paid for your work, before costs. Exactly when it counts depends on your accounting method. Lesson →

Revenue model
How the money comes in: per job, per hour, a subscription, a retainer, a product sale. Different models create different cash patterns. Lesson →

Runway
How long the business can keep going with the cash it has, at the current burn rate. For a small business it is usually easier to count it in weeks of cash. Lesson →

S

Sales funnel
The path a stranger takes to become a customer. Every step where people fall out is a step worth looking at. Lesson →

Scope creep
When a job quietly grows beyond what was agreed without the price or time changing. Lesson →

Scope of work
A written description of exactly what you will do for the customer, and what is not included. Lesson →

Seasonality
A regular pattern of busy and slow times through the year. Plan cash for the slow months while it is busy. Lesson →

Semi-variable costs
Costs with a fixed part and a part that moves with activity, such as a phone plan with usage charges. Lesson →

SEO (search engine optimization)
Making your website and listings easier for search engines to understand and recommend. Lesson →

Service area
The places you travel to work, as opposed to a single address customers visit. Lesson →

SOP (standard operating procedure)
A written description of how a task is done, so anyone can repeat it the same way. Lesson →

Startup costs
What you have to spend before the business can open, plus the monthly costs until it pays for itself. Lesson →

Strategic alliance
An agreement with another business to help each other without merging, such as a referral arrangement. Lesson →

T

Target audience
The specific group you have decided to talk to with a given campaign. Lesson →

Target market
The group of people you have decided to serve. See also target audience and marketing avatar. Lesson →

Traditional marketing
Signs, flyers, direct mail, radio, print, networking, a wrapped truck. Different doors, not old ones. Lesson →

U

Unit economics
What one sale looks like: what you charge, what it costs to deliver and what you keep, per customer or per job. Lesson →

UTM tag
A short code added to a web address so your analytics can tell you which campaign a visitor came from. Lesson →

V

Validation
Testing an idea with real potential customers before you spend money building it. Lesson →

Value proposition
A plain statement of what you do for the customer and why it is worth choosing you. Lesson →

Variable costs
Costs that rise and fall with how much you sell, such as materials. Lesson →

Vendor
A business you buy from: suppliers, subcontractors, software providers. Lesson →

W

Weeks of cash
How many weeks the business could cover its regular bills with the cash it has, if no new money came in. Your cash divided by your average weekly spending. Lesson →

Word of mouth
Customers telling other people about you without being paid to. Built by doing the job well and by making it easy to talk about you. Lesson →

Workflow
The sequence of steps a job follows from start to finish, and who does each. Lesson →

Working capital
In practical terms, the money available to run the business day to day: cash plus what is about to arrive, less what you owe soon. The formal accounting definition is current assets minus current liabilities. Lesson →

Working plan (business plan)
A plan you keep updating as the business changes, rather than one written once for a bank. Lesson →