29 Nov PART 2: The A-Z Of Common Business Terms & Policies
Welcome to the second and final instalment of our A-Z guide to common Business Terms and Policies.
These are all some of the most used — and searched for — business terms, so being clear on their meanings will help to ensure that you always understand what other businesspeople are trying to say… even if they’re not sure themself!
Many of these terms you will already be familiar with, but others you likely won’t. Hopefully then, this guide will inform you about certain phrases that you may encounter in the near future.
K: Key Message
The key message of a business might be its USP (Unique Selling Point: see U below), mission statement, brand identity, or anything else which should be communicated to clients and customers upfront – such as the role of the business and the value it provides.
Your key message should always be clear, concise, and at the forefront of your Marketing Plan (see M below).
The debts or obligations that a company incurs as a result of its business operations are referred to as the business’ liabilities.
M: Marketing Plan
A company’s marketing plan outlines the theme, messaging, and platforms that their marketing activity will employ. It should also include other details, such as target audiences, goals, deadlines, budgets, growth projections, and strategy.
N: Net Profit
This may be a basic term, but it is often misunderstood! A business’ net profit is its total income minus its total costs. These total costs include things such as salaries, rent, software subscriptions, and bank charges.
Note that this calculation of net profit usually refers to the profits made BEFORE taxes are paid on them.
Outsourcing has become increasingly popular in a wide range of industries, and it involves purchasing an outside service or item to replace the same task or item within the internal organisation.
P: Public Relations
Public relations refers to the two-way communication between a business and those who interact with it — especially clients and customers, but also investors, the media, and regulatory officials.
Q: Quarterly Reviews
Many businesses undertake regular audits or reviews to get a full understanding of the health of current business operations. These reviews are usually either annual, quarterly, or both, and they help businesspeople to assess a company’s processes, efficiency, compliance, and overall success – among other things.
ROI stands for Return On Investment. It can be used as a measure of profitability by assessing how the gains of an investment compare to its costs and expenses.
The term can also be used more figuratively, such as when assessing how much of a positive impact a particular purchase or policy has had on a business in terms of factors such as morale, team spirit, productivity, and more.
S: Social Impact
More businesses and industries than ever are assessing the social impact of their projects and enterprises. This refers to the effect — negative or positive — that will be experienced by communities such as local residents or customers as a result of the company’s work.
T: Target Market
Target market refers to the specific demographic(s) that a business is targeting with its policies, products, or advertisements. It usually refers to potential customers, but can also be used in the context of investors.
USP stands for Unique Selling Point. It is the difference — or perceived difference — that is offered by a company over its competitors.
VAT stands for Value Added Tax, and it is a form of consumption tax that is applied to the purchase of services, goods, and other ‘taxable supplies’. There are some different sets of VAT rules for limited companies, sole traders, charities, and consumers.
W: Working Capital
Working capital refers to the accessible resources used to support the day-to-day operations and functioning of a business. It is especially commonly used when referring to current or short-term assets and cash supplies.
A commonly used business term, yield generally refers to the income from an investment. (See also ROI above.)
Z: Zero Interest Rates
While it may not refer to businesses directly, you may see the term Zero Interest Rates used with reference to banks who attempt to spur economic activity by offering cheaper credit and low-cost borrowing to businesses and individuals.
By reading these two instalments of our A-Z business terms, and by keeping up to date with how their meanings may change over time, you will ensure that you are always aware of the most commonly used business terms, and will know what people mean when they use them!