Starting your first business can feel like learning a new language. From LLCs to cash flow, understanding core terms isn’t just academic — it’s essential for making smart decisions and avoiding costly missteps. This guide breaks down foundational business vocabulary in plain language, with helpful resources and examples to get you confident and fluent faster. Whether you're launching a food truck, building an e-commerce site, or planning a consulting practice, knowing these terms helps you communicate like a pro with partners, investors, and customers alike. Here are key terms every new entrepreneur should learn early: LLC (Limited Liability Company): A flexible business structure that protects your personal assets while offering tax advantages. Check out SBA.gov's entity overview for structure comparisons. Cash Flow: The movement of money in and out of your business. Positive cash flow means more is coming in than going out. Burn Rate: How quickly your business spends cash. Crucial for startups managing limited capital. P&L (Profit and Loss Statement): A report that shows revenues, costs, and profits over a period — useful for assessing performance. Working Capital: Current assets minus current liabilities. It shows how much cash you have to keep the business running. ROI (Return on Investment): Measures the efficiency of an investment — typically shown as a percentage gain or loss. Customer Acquisition Cost (CAC): How much it costs to get a new customer, including marketing and sales expenses. Runway: How long your business can operate before needing new capital, based on current expenses and cash on hand. Gross vs. Net Profit: Gross profit is revenue minus the cost of goods sold. Net profit includes all expenses, giving you the bottom line. Equity: Ownership in a company. Entrepreneurs may give up equity to investors in exchange for funding. When negotiating deals or partnerships, you may not start with a full contract. That’s where understanding a letter of intent comes in. A letter of intent in business outlines the preliminary understanding between parties before finalizing a formal agreement. Businesses use LOIs to announce new transactions or partnerships, giving stakeholders visibility into intent before binding documents (like a purchase agreement) are signed. Grasping the purpose of LOIs helps entrepreneurs avoid missteps during early-stage discussions, especially when exploring new vendor relationships, potential investors, or franchise deals. Term What It Means Why It Matters Gross Revenue Total income before expenses Top-line growth indicator Operating Expenses Costs for day-to-day operations Key to understanding efficiency Net Income Profit after all expenses Your bottom line Accounts Receivable Money owed to your business Affects cash flow planning Accounts Payable Money your business owes Impacts financial stability Need help setting up your books? Consider using tools like Wave Accounting or Bench to streamline the process. What’s the difference between revenue and profit? Do I need to understand EBITDA? What is a business model? What’s a registered agent? What are the main types of funding? Before you get too deep into your business journey, make sure you: Understand your business model and pricing strategy Know your startup costs and operating expenses Have a clear legal structure (LLC, S-Corp, etc.) Can define basic financial reports (P&L, balance sheet) Know where to find support — your local Chamber of Commerce is often a hidden gem for free resources and networking. Looking for a lightweight platform that combines proposals, invoices, and client communication in one place? HoneyBook is built for service-based small businesses and freelancers. It's especially helpful for solo founders managing multiple client workflows without hiring a full back-office team. Learning business terms doesn’t make you an expert overnight — but it does give you the foundation to ask better questions, negotiate smarter, and stay in control as your venture grows. When you know the difference between gross and net, or how to spot a healthy runway, you're not just building a business — you're building business literacy. That’s a skill that pays off again and again.
?? Must-Know Business Terms
?? Clarifying Documents: Letters of Intent
?? Common Financial Terms at a Glance
? FAQ: Business Terms Explained
Revenue is total income. Profit is what remains after subtracting all costs.
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It's often used by investors to evaluate profitability, but early-stage founders may focus more on net income and cash flow.
Your business model describes how your company makes money. It covers revenue streams, pricing, and customer segments.
A registered agent is a designated person or service that receives legal notices on behalf of your business. Many formation services include this role — LegalZoom is one example that provides it.
Common types include bootstrapping (using your own funds), venture capital, small business loans, and grants. For grant seekers, Grants.gov is a solid starting point.
? Quick Checklist for Entrepreneurs
?? Spotlight: HoneyBook
?? In Conclusion
