Here’s a Helpful Guide to Basic Business Terms for New and Aspiring Entrepreneurs

You’ve just taken the first step toward launching your business — maybe it’s forming an LLC, opening a business bank account, or building your first product. Whatever the stage, getting familiar with basic business terminology can save you time, money, and stress when making early decisions.

From structuring your company to talking to investors or setting up payroll, this guide offers a beginner-friendly rundown of key business terms every new founder or small business owner should know.

📘 Foundational Terms Every Entrepreneur Should Know

Here are some must-know terms that show up often in startup life, vendor relationships, and business planning:

• Revenue vs. Profit: Revenue is all the money you bring in. Profit is what remains after deducting all expenses — it’s your real earnings.
   

• Cash Flow: The movement of money in and out of your business. Positive cash flow means you’re bringing in more than you’re spending.
   

• Burn Rate: How quickly your business uses up available cash, often tracked monthly. Especially relevant for startups between funding rounds.
   

• Equity: Ownership in a company, often divided among founders, investors, and key employees.
   

• Liability: Any debt or financial obligation — including loans, taxes, or payments owed to vendors.
   

• LLC vs. Corporation: A Limited Liability Company (LLC) is simpler and tax-flexible, while a C-Corp is often better for outside investment and equity planning. This guide from the IRS outlines the options.
   

• Operating Expenses (OPEX): Your ongoing costs to run the business, like rent, software subscriptions, or wages.
   

• Gross Margin: Your revenue minus the cost of goods sold (COGS). This figure helps measure product-level profitability.

If you're not sure where to start, Score's business planning templates can help break these terms into practical action items.

📝 Letters of Intent: What They Mean and Why They Matter

As your business matures, you'll likely explore vendor agreements, partnerships, or even acquisitions. These often begin with a Letter of Intent (LOI) — a document that lays out a preliminary agreement before diving into formal contracts.

An LOI outlines shared intentions, key terms, and points of agreement. Though usually non-binding, it provides clarity and signals commitment during early-stage negotiations. Businesses also use letters of intent to announce upcoming deals or align on shared goals before signing definitive agreements. This resource features tips on how to draft letter of intent, including templates and formatting guidance.

📊 Common Business Terms by Function

Want a real-world example? Crunchbase’s investor glossary breaks down these and other terms used in pitch decks and funding rounds.

💡 Essential List: First 10 Terms to Learn

New entrepreneurs should lock in these foundational concepts:

• Business Plan
   

• Revenue Model
   

• P&L Statement
   

• Gross Margin
   

• Runway
   

• Operating Agreement
   

• Liability Insurance
   

• Business Credit Score
   

• Break-Even Point
   

• Founder Equity Split

A great place to explore these further is through your local Chamber of Commerce, which often offers free classes and mentorship programs to new founders.

❓ FAQ: Fast Answers for First-Time Founders

Do I need to register my business name?
If your brand name differs from your personal name, you likely need to register a DBA (“Doing Business As”) through your state or county office.

What's a business credit score?
It reflects your company’s creditworthiness and affects your ability to get loans or vendor terms. Dun & Bradstreet is a common business credit bureau.

What is a pitch deck?
A slide-based summary of your business, often used to raise funding. It typically includes your problem, solution, business model, team, and financials.

How do I calculate gross margin?
Gross Margin = (Revenue – Cost of Goods Sold) ÷ Revenue. This shows how efficiently you’re producing and selling your product.

What’s a term sheet?
A non-binding agreement outlining key terms of an investment deal — like valuation, investor rights, and exit terms — often preceding a formal funding round.

🌟 Product Spotlight: Foundersuite

If you’re beginning to talk with advisors or investors, Foundersuite offers tools to organize your investor pipeline, build pitch decks, and manage outreach — ideal for pre-seed to Series A startups.

✅ Conclusion

Understanding business basics isn’t just about looking smart in a meeting — it’s about making confident, informed decisions that move your business forward. From revenue models to legal structures, these core concepts are your compass for navigating the early stages of entrepreneurship.

As you grow, revisit these definitions and layer in more advanced concepts. The more fluent you become in business language, the better equipped you’ll be to hire, partner, pitch, and scale.