Business Terms Every Business Owner Should Know

Common terms used in business and what they mean. 

It does not matter what industry you work in, there always seems to be that inside language, the lingo which is usually spoken in acronyms. I am often asked (mainly by first time buyers or sellers) to clarify acronyms within our Business Broking industry, which in recent times has prompted me to be mindful not to use acronyms at all. 

So, what are some of the most commonly used industry lingo or acronyms Business Brokers consistently use in their day-to-day advertising? 

The acronyms: 

• WIWO – means the price advertised is walk in-walk out 

• SAV – means the price advertised, is the price plus stock at valuation 

• ROI – means the return on investment 

• EBIT – means earnings before interest and tax 

• PEBIT – means proprietors earnings before interest and tax 

• EBITDA or PEBITDA – is the same as points 4 and 5 above with depreciation and amortisation added 

• P and E – often used, which means plant and equipment 

• WIP – means work in progress 

• CPI – means consumer price index 

• POA – means price on appointment 

• ABN – means Australian business number 

• ACN – Australian company number 

• GST – means goods and services tax 

• PA – means per annum 

• PW – means per week 

• PM – means per month 

• ATO – means Australian tax office 

• DD – is referred to as due diligence 

The Lingo: 

1. Encumbered – means that plant and equipment that has a chattel mortgage or loan hold over it from a financial institute that needs to be dealt with prior to settlement. 
2. Unencumbered – The assets are completely owned outright without any encumbrance or hold over them. 
3. Working Capital – the liquid funds available in the business owner’s bank account to operate a business, post settlement/purchase. 
4. Legals – means the additional cost of a solicitor or accountant fee. 
5. Stamps – means there is Government Stamp Duty to consider (note: this varies from state to state) 
6. Trial – the seller is willing for a buyer to come in and trail the business to access the financial performance of the business (conditions apply) 

I hope these basics help you when reading marketing material. 

If you are looking for more business terms, the Australian government compiled a list of common financial terms which you can find here: 

https://www.business.gov.au/Finance/Accounting/Key-financial-terms