Business jargon buster
Whether you've just started your business, or have been up and running for years, the jargon used in the business world can get a little confusing.
Our article will take you through some commonly used business words so that you can talk with confidence when doing business.
Terms for different types of businesses
Small business: In general, a small business is a business that operates on a small scale. However, different organisations have more specific definitions of what a small business is.
For unfair dismissal cases, the Fair Work Commission defines a small business as any business with fewer than 15 employees.
For tax purposes , the Australian Taxation Office (ATO) classifies you as a small business if your business turnover is less than $2 million for the financial year.
Micro-business: A micro-business is a business with fewer than five employees and generally includes self-employed individuals. It is also known as a micro-enterprise.
Entrepreneur: Generally, this term is used to describe a person who starts and grows a unique or innovative business operation.
SME:This stands for small to medium enterprises. The term SME is used to refer to micro-businesses, small businesses and medium sized firms.
Start-up: A start up is a company that wants to grow fast. They often have a unique business idea, are trying to innovate and are interested in solving one particular problem.
Tax, superannuation and finance
SMSF: Stands for self-managed superannuation fund . An SMSF is a way of saving for your retirement. Unlike other super funds, an SMSF is self-managed, which means you're responsible for making sure the super fund complies with super and tax laws.
R&D: Stands for 'research and development'. Businesses conduct research and development to innovate, create new products and find better ways of doing things. To help with the costs of R&D, the Australian government offers an R&D Tax Incentive to eligible Australian businesses. Employee share schemes: An employee share scheme (ESS) is where you give your employees the opportunity to buy shares in your company. It is also known as an 'employee share purchase plan' or an 'employee equity scheme'.
ROI: Stands for 'return on investment'. It's a way of thinking about the benefit (return) of the money you've invested into the business. To calculate ROI, divide the gain (net profit) of the investment by the cost of the investment - the ROI is expressed as a percentage or a ratio.
(Net profit) / (Cost) x 100 = ROI
Annie buys $1000 worth of stocks and sells the stocks a year later for $1500. The net profit is $500.
Return on Investment = (500 / 1000) = 0.5 x 100 = 50%
Annie's ROI on the stocks is 50%.
Astroturfing: Is when someone generates fake feedback to post promotional or negative reviews of their own business. For example, a hotel creating false travel review profiles to make the hotel seem more popular. The Australian Competition and Consumer Commission (ACCC) considers this practice unethical and misleading to consumers.
Drip pricing : Is when one price is presented at the beginning of an online shopping experience and gradually, incremental fees and charges are added (or 'dripped') as you progress, for example, when buying a plane ticket. Drip pricing can result in the customer paying a higher price for a service or product than they first thought.
As a business owner, you are required to show fees and charges at the beginning of an online shopping process and not gradually add them in.
Crowd funding : Is a way of financing your business idea through donations of money from the public. This is usually done online, through a crowd funding website.