Glossary

The vocabulary of
disciplined operators.

165 business operating terms defined with US and UK context examples and application notes.

Finance (46)

Gross Profit

Revenue minus direct cost of goods sold. Measures how profitable the product or service is before overhead.

Operating Profit (EBIT)

Profit left after operating expenses, before interest and tax. Measures whether the core business works.

Net Profit

The bottom line: what is left after every expense, interest and tax. Belongs to the owners.

Revenue / Turnover

Total sales in a period, before any costs. A size metric, not a profitability metric.

Pricing

Setting the price for your product or service. The highest-leverage business decision you make.

Dynamic Pricing

Adjusting prices in real time based on demand, segment, or context.

EBITDA

Earnings Before Interest, Tax, Depreciation, and Amortization. The standard profitability metric for valuation.

EBIT

Earnings Before Interest and Tax. Same as operating profit.

P&L (Profit & Loss Statement)

The income statement: revenue minus expenses, ending with net profit.

Balance Sheet

Snapshot of what the business owns (assets), owes (liabilities), and what's left for owners (equity).

Break-Even Point

Revenue level where total costs equal total revenue. Below it you lose money; above it you make money.

Fixed Costs

Costs that don't change with sales volume. The base load you pay every month regardless.

Variable Costs

Costs that scale with sales volume. Materials, commissions, payment processing.

KPI (Key Performance Indicator)

A metric that, if it moves, signals success or failure of a strategic objective.

OKR (Objectives and Key Results)

Goal framework: one ambitious objective paired with 3-5 measurable key results.

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats - a 2x2 strategic snapshot framework.

PESTEL Analysis

External-environment scan: Political, Economic, Social, Technological, Environmental, Legal forces.

Working Capital

Current assets minus current liabilities. Money available to fund day-to-day operations.

Liquidity

How easily the business can meet short-term obligations with cash or cash-equivalent assets.

Budget

Planned revenue and expenses for an upcoming period. The financial map for the year.

Equity

What's left for owners after subtracting liabilities from assets. The owner's stake in the business.

Leverage (Financial)

Using debt to amplify returns - and amplify risk.

Accounts Receivable (AR)

Money customers owe you for goods or services already delivered.

Depreciation

Spreading the cost of a long-lived asset across its useful life as an expense.

Business Valuation

Estimating what the business is worth - typically as a multiple of EBITDA or revenue.

MRR (Monthly Recurring Revenue)

Monthly subscription revenue, normalized to a recurring base. The headline SaaS metric.

Retainer

Recurring monthly fee for ongoing service - the service equivalent of subscription revenue.

Profit Margin

Profit as a percentage of revenue. The compact measure of business efficiency.

COGS (Cost of Goods Sold)

Direct costs of delivering the product or service - materials, direct labor, delivery costs.

Unit Economics

Revenue and cost per single unit (customer, transaction, project). The atom of business viability.

Financial Forecast

Projected revenue, expenses, and cash for upcoming periods. The map of where the business is going.

Payback Period

How long it takes for an investment to pay back its initial cost from the cash it generates.

Due Diligence

Systematic verification of a business before acquiring, investing in, or partnering with it.

Exit Strategy

The plan for how the founder will eventually leave or sell the business.

Business Partnership

Formal relationship with another business for mutual benefit - referrals, co-marketing, joint products.

Franchising

Licensing your business model to independent operators who run their own locations under your brand.

Collateral

Assets pledged to secure a loan - the lender's safety net if you default.

Gross Margin

Gross profit as a percentage of revenue. The product profitability ratio.

Profit Sharing

Compensation arrangement that distributes a share of profits to employees.

Pareto Principle (80/20 Rule)

Roughly 80% of effects come from 20% of causes. The lens that reveals where leverage lives.

Customer Concentration Risk

The danger of relying on too few customers for too much of revenue.

Operating Leverage

How much profit grows when revenue grows - driven by the ratio of fixed to variable costs.

OpEx vs CapEx

Operating expenses (ongoing) vs Capital expenditures (long-lived assets). The accounting and tax distinction matters.

Rule of 72

Quick mental math: divide 72 by the growth rate to estimate years to double.

Economic Moat

Sustainable competitive advantage that protects long-term profits from competition.

Quality of Earnings

How sustainable and repeatable reported profits are - distinguishes real performance from accounting noise.

Cash Flow (14)

Cash Flow

Actual money moving in and out of the business. The metric that decides survival.

13-Week Cash Flow Forecast

Rolling 13-week schedule of cash in and cash out. The single most important operating spreadsheet.

Burn Rate

Monthly net cash outflow. How fast you're depleting reserves.

Runway

Months you can keep operating at current burn before running out of cash.

Accounts Payable (AP)

Money you owe suppliers for goods or services already received.

Payment Terms

The contractual rules for when and how customers pay you. The lever that controls cash flow.

Invoice Factoring

Selling outstanding invoices to a third party for immediate cash, at a discount.

Cash Reserve

Cash buffer kept separate from operating cash. The shock absorber for the business.

Deferred Revenue

Cash collected for services not yet delivered. A liability until the work is done.

Invoice Aging

Tracking how long invoices have been outstanding - 0-30, 30-60, 60-90, 90+ days.

Overdraft / Credit Line

Pre-approved short-term borrowing facility - flexible cash buffer for working capital needs.

Cash Conversion Cycle (CCC)

Days from paying for inputs to collecting cash from sales. The full cash cycle of the business.

Inventory Turnover

How many times you sell through your inventory in a year. High turnover = efficient inventory.

DSO (Days Sales Outstanding)

Average days to collect cash from invoiced sales. The collections speed metric.

Marketing (49)

ROI (Return on Investment)

Return generated per dollar invested. The universal yardstick for any spend decision.

ROAS (Return on Ad Spend)

Revenue generated per dollar of paid advertising. Specifically a paid-media metric.

CAC (Customer Acquisition Cost)

What it costs to acquire one paying customer, including every cost.

LTV (Customer Lifetime Value)

Total gross profit you can expect from a customer over their full relationship with you.

Conversion Rate

Percentage of visitors who take a desired action.

Churn Rate

Percentage of customers who leave in a given period. The silent killer of recurring revenue.

Lead

A potential customer who has expressed some level of interest in your business.

Conversion

Any moment a prospect takes a meaningful action - signing up, buying, requesting a demo.

Marketing Funnel

Stages from first awareness to qualified lead handed off to sales.

Marketing Mix (4P / 5P)

Classic framework: Product, Price, Place, Promotion (plus People in the 5P version).

Lead Magnet

A free resource offered in exchange for contact info. The classic lead-capture mechanism.

Buyer Journey

The stages a buyer moves through from problem awareness to purchase decision.

Touchpoint

Any interaction between a customer and your brand. Each one shapes perception.

Search Intent

The underlying reason behind a search query. The key to ranking content that actually converts.

Branding

Building the perception, identity, and emotional association customers attach to your business.

Content Marketing

Attracting customers by publishing valuable content - articles, videos, podcasts, guides.

Email Marketing

Marketing through email - newsletters, sequences, and broadcast campaigns to an owned list.

Social Media Marketing

Building audience, awareness, and demand through organic and paid social channels.

Paid Advertising / PPC

Paying platforms (Google, Meta, LinkedIn) to put your message in front of targeted audiences.

Marketing Funnel Stages

The discrete stages from stranger to customer: TOFU, MOFU, BOFU.

Lead Generation

The systematic process of attracting and capturing prospect contact info.

CPA (Cost Per Acquisition)

Cost to acquire one conversion - often used as a near-synonym for CAC in paid advertising.

Business Model

How the business creates, delivers, and captures value. The shape of the money flow.

Competitive Analysis

Systematic study of competitors - what they offer, charge, do well, and miss.

Target Market

The specific group of customers you focus on serving.

Strategic Planning

The annual ritual of setting direction, priorities, and risks for the business.

Competitive Advantage

Something you do better, cheaper, or different enough that customers choose you over alternatives.

SEO (Search Engine Optimization)

Optimizing content and site structure to rank in Google search results.

Landing Page

Standalone web page designed for a single conversion action.

A/B Testing

Comparing two versions of something to see which performs better. The discipline of data-driven decisions.

Brand Positioning

The space your brand occupies in the customer's mind relative to alternatives.

Referral Marketing

Driving new customers through deliberate, incentivized referrals from existing ones.

Customer Journey

The full path a customer takes - from first awareness through purchase to advocacy.

Buyer Persona

Detailed semi-fictional profile of your ideal customer - their role, goals, frustrations, decision criteria.

Value Proposition

The clear promise of value you deliver to customers - what they get, why it matters, why you.

Differentiation

The specific way you're meaningfully different from alternatives - and why that matters to customers.

Market Penetration

The percentage of your target market that buys from you - versus alternatives.

Competitive Moat

Sustainable competitive advantage that's hard for competitors to copy - the 'moat' protecting your business.

Copywriting

Writing that's designed to drive action - clicks, signups, purchases.

Market Share

Your share of total industry revenue. The competitive scoreboard.

Retention Rate

Percentage of customers retained over a period. The other side of churn.

Brand Awareness

How well your target market recognizes and remembers your brand.

B2C (Business-to-Consumer)

Selling to individual consumers rather than businesses. Shorter cycles, smaller deals, larger volume.

TAM / SAM / SOM

Market sizing framework: Total Addressable Market, Serviceable Available Market, Serviceable Obtainable Market.

Product-Market Fit (PMF)

The state where the product satisfies strong market demand. The thing every startup is chasing.

AOV (Average Order Value)

Average revenue per order or transaction. A key e-commerce and retail metric.

Switching Cost

What it costs a customer to leave you for a competitor - financial, operational, or psychological.

CAC Payback Period

Months it takes to recover CAC from gross profit. The speed metric for unit economics.

RFM Analysis (Recency, Frequency, Monetary)

Customer segmentation based on Recency of last purchase, Frequency, and Monetary value.

Sales (26)

MQL (Marketing Qualified Lead)

A lead engaged enough to suggest interest but not yet ready for sales contact.

SQL (Sales Qualified Lead)

A lead that meets fit criteria AND is ready to engage with sales.

Sales Funnel

The stage-by-stage path from first touch to closed deal.

CRM (Customer Relationship Management)

Software that tracks every customer and prospect interaction in one place.

Sales System

The documented, repeatable process that takes a lead from first contact to closed customer.

Lead Scoring

Numerical system that prioritizes leads based on fit and intent signals.

Sales Funnel

The stages a deal moves through from qualified lead to closed customer.

Follow-Up

Reaching back out to prospects who haven't responded. Where most deals are won or lost.

Sales Conversion Rate

Percentage of qualified opportunities that close. The headline number for sales effectiveness.

Customer Retention

Keeping the customers you already have. The cheapest growth lever.

NPS (Net Promoter Score)

Customer satisfaction metric on a -100 to +100 scale. The standard loyalty benchmark.

Upsell

Selling a more expensive or expanded version of what the customer already has.

Churn Rate (SaaS)

Subscription cancellation rate in a SaaS business. The metric that decides whether you can grow.

Closing

Asking for the business and converting a prospect into a customer.

Sales Pipeline

The collection of active deals across all sales stages. The forward-looking view of revenue.

Objection Handling

The discipline of addressing prospect concerns and converting hesitation into commitment.

Discovery Call

The first sales conversation - focused on understanding the prospect's situation, not pitching.

Sales Cycle

Average time from first sales conversation to closed deal.

Account Management

Owning the long-term relationship with existing customers - retention, expansion, advocacy.

Cross-Sell

Selling additional, complementary products or services to existing customers.

Cold Outreach

Reaching out to prospects who haven't heard of you - typically via email, LinkedIn, or phone.

Sales Quota

The revenue target assigned to a sales rep over a defined period.

Average Deal Size

Average revenue per closed deal. A key driver of sales productivity.

Net Revenue Retention (NRR)

Revenue from existing customers a year later - including expansion, contraction, and churn.

B2B (Business-to-Business)

Selling to businesses rather than individual consumers. Longer cycles, larger deals, fewer customers.

NRR (Net Revenue Retention)

Same as Net Revenue Retention - how much existing customer revenue grows or shrinks year over year.

AI (9)

AI Agent

An AI system that performs multi-step tasks autonomously, often using tools.

RAG (Retrieval-Augmented Generation)

AI architecture that retrieves relevant documents and uses them to generate accurate answers.

Prompt

The instruction or question you give an AI model. Wording dramatically affects output.

LLM (Large Language Model)

An AI model trained on massive text data that can read, write, and reason in natural language.

Automation

Replacing repetitive manual work with software that runs the process for you.

Process Automation

Automating an entire multi-step business process, not just one task.

Generative AI

AI that creates new content - text, images, code, audio - rather than just classifying or predicting.

Prompt Engineering

The craft of designing prompts that get reliable, high-quality output from AI models.

AI Workflow

A multi-step business process that uses AI at one or more steps.

The vocabulary ofdisciplined operators.