Business Terminology

This glossary covers every key business term used in this book, organized alphabetically. Each term includes a simple definition and, where helpful, a quick example drawn from our characters and their businesses in Uttarakhand.

Use this as a reference whenever you encounter an unfamiliar word in any chapter.

A

Accelerator A time-bound program (usually 3-6 months) that helps early-stage startups grow fast through mentorship, funding, and connections. Unlike incubators, accelerators expect you to already have a product or early traction. Example: Priya's agri-tech app got into an accelerator in Bangalore that gave her ₹25 lakh, office space, and introductions to investors.

Accounts Payable (AP) Money your business owes to others — suppliers, vendors, landlords. It's a liability on your balance sheet. Example: Bhandari uncle owes ₹1,80,000 to his cement distributor. That's his accounts payable.

Accounts Receivable (AR) Money others owe to your business — customers who bought on credit and haven't paid yet. It's an asset on your balance sheet, but you can't spend it until it actually arrives. Example: Contractors owe Bhandari uncle ₹4,00,000. That's his accounts receivable — real on paper, but not in his bank account.

Acquisition When one company buys another company, either to absorb its product, team, or customer base. This is one way startup founders "exit." Example: If a large food company buys Ankita's pahadi food brand, that's an acquisition.

Angel Investor An individual who invests their own personal money in an early-stage startup, usually before venture capital firms come in. Angels often invest ₹5-50 lakh and may also provide mentorship. Example: Priya's first investor was an angel — a retired tech executive who put in ₹20 lakh for 10% equity.

Anti-dilution A clause in an investment agreement that protects an investor's ownership percentage if the company later raises money at a lower valuation. It prevents the investor's shares from losing value disproportionately.

APMC (Agricultural Produce Market Committee) A government-regulated market (mandi) where farmers must sell certain crops. The APMC system controls pricing through licensed middlemen. Reforms are slowly allowing direct farmer-to-buyer sales. Example: Rawat ji's apples traditionally had to pass through an APMC mandi in Haldwani before reaching Delhi.

ARPU (Average Revenue Per User) Total revenue divided by total number of users. Tells you how much money each user generates on average. Example: If Priya's app earns ₹5 lakh/month from 1,000 active farmers, her ARPU is ₹500.

ARR (Annual Recurring Revenue) The yearly value of your recurring subscription or contract revenue. ARR = MRR x 12. Used mostly by SaaS and subscription businesses to show predictable revenue.

Assets Anything of value that your business owns — cash, inventory, equipment, land, vehicles, money owed to you. Listed on the left side (or top) of a balance sheet. Example: Bhandari uncle's assets include his stock of cement and pipes (₹15-20 lakh), cash in the register, and ₹4 lakh in accounts receivable.

B

B2B (Business to Business) Selling your product or service to other businesses, not individual consumers. Example: Ankita selling 500 jars to a corporate gifting company is B2B.

B2C (Business to Consumer) Selling directly to individual end-customers. Example: Ankita selling one jar of chutney to a customer through Instagram is B2C.

Balance Sheet A financial statement that shows what your business owns (assets), owes (liabilities), and what's left for the owner (equity) at a specific point in time. The fundamental equation: Assets = Liabilities + Equity.

Bootstrapping Building and growing a business using only your own money and revenue — no external investors. Most small businesses in India are bootstrapped. Example: Pushpa didi built her chai shop with her own savings. Ankita started her food brand with ₹80,000 of personal savings. Both are bootstrapped.

Break-even The point where your total revenue exactly equals your total costs. Below it, you're losing money. Above it, you're making profit. Example: Pushpa didi needs to sell 36 cups of chai per day to cover her ₹13,000 monthly fixed costs. That's her break-even point.

Burn Rate How much cash a startup spends per month beyond what it earns. If you earn ₹2 lakh and spend ₹5 lakh, your burn rate is ₹3 lakh/month. High burn rate without revenue growth is a danger signal.

C

CAC (Customer Acquisition Cost) The total cost of getting one new customer — including advertising, discounts, sales team time, everything. Example: If Ankita spends ₹15,000 on Instagram ads and gets 50 new customers, her CAC is ₹300 per customer.

Cap Table (Capitalization Table) A spreadsheet or document showing who owns what percentage of a company. It lists all shareholders — founders, investors, ESOP holders — and their stake. Essential when raising funds.

Cash Crunch When a business doesn't have enough cash to pay its immediate bills, even though it may be profitable on paper. Example: Bhandari uncle's P&L shows profit, but ₹4 lakh is stuck in credit. He has ₹47,000 in the bank and ₹1.8 lakh due Friday. That's a cash crunch.

Cash Flow The actual movement of money in and out of your business. Positive cash flow means more money is coming in than going out. Negative cash flow means you're bleeding cash. Cash flow is not the same as profit. You can be profitable and still run out of cash.

Cash Flow Statement A financial statement showing where cash came from and where it went during a period. Divided into three sections: operating activities, investing activities, and financing activities.

Churn The percentage of customers who stop using your product or cancel their subscription in a given period. High churn means you're losing customers faster than you're gaining them. The opposite of retention.

CIBIL Score A credit score (300-900) maintained by TransUnion CIBIL that reflects your credit history. Banks and lenders check this before approving loans. 750+ is considered good. Example: When Vikram applied for a loan to set up his franchise, the bank checked his CIBIL score first.

COGS (Cost of Goods Sold) The direct cost of producing or buying the goods you sell — raw materials, packaging, direct labor. Not rent, not ads, not your salary. Example: Ankita's COGS per jar of chutney is ₹80 (ingredients ₹45 + labor ₹10 + packaging ₹25).

Cohort Analysis Grouping your users by when they signed up and tracking their behavior over time. Helps you see whether newer users are doing better or worse than older ones. Example: Priya tracks whether farmers who joined her app in January are still active in June.

Cold Chain An unbroken chain of refrigerated storage and transport, from production to consumer. Essential for perishable goods. Example: Rawat ji's apples need cold storage after harvest; without it, they spoil in days and he's forced to sell cheap at the mandi.

Collateral An asset you pledge to a lender as security for a loan. If you can't repay, the lender can seize the collateral. Example: Vikram used his family's property papers as collateral for a ₹12 lakh bank loan.

Conversion Rate The percentage of people who take a desired action out of everyone who had the opportunity. Example: If 1,000 people visit Ankita's Instagram shop page and 30 place an order, her conversion rate is 3%.

Convertible Note A loan given to a startup that converts into equity (shares) at a later funding round, usually at a discount. Common in very early-stage deals when it's hard to set a valuation.

Copyright Legal protection for original creative works — writing, music, software code, photographs, designs. Automatic upon creation in India, but registration provides stronger legal protection.

Cross-selling Selling a related or complementary product to an existing customer. Example: Ankita's customer buys pahadi chutney; Ankita suggests adding a jar of mixed pickle to the order. That's cross-selling.

CTR (Click-Through Rate) The percentage of people who click on your ad or link out of everyone who saw it. CTR = (Clicks / Impressions) x 100. Example: If Ankita's Instagram ad is shown to 10,000 people and 200 click on it, her CTR is 2%.

Current Account A bank account designed for businesses, allowing unlimited transactions. Unlike a savings account, it doesn't earn interest but has no limits on deposits or withdrawals. Required for GST registration.

D

D2C (Direct to Consumer) Selling directly to the end customer — through your own website, Instagram, or WhatsApp — cutting out middlemen, distributors, and retailers. Example: Ankita's pahadi food brand is D2C. She makes the product, markets it on Instagram, and ships directly to customers.

DAU (Daily Active Users) The number of unique users who engage with your product on a single day. A key metric for apps and digital platforms. Example: If 350 farmers open Priya's app on a given day, her DAU is 350.

Depreciation The gradual reduction in the value of an asset over time due to wear and tear or obsolescence. Used in accounting to spread the cost of expensive equipment over its useful life. Example: If Rawat ji buys a juice processing machine for ₹5 lakh and it lasts 10 years, he can show ₹50,000 per year as depreciation expense.

Dilution When a company issues new shares (usually to investors), existing shareholders' percentage ownership goes down. The total pie gets bigger, but each person's slice becomes a smaller fraction. Example: If Priya owns 100% of her company and sells 20% to an angel investor, she's been diluted to 80%.

Diversification Expanding into new products, services, or markets to reduce dependence on a single revenue source. Example: Rawat ji diversifying from selling raw apples to also making apple juice and apple cider vinegar — so one bad apple season doesn't ruin him.

Due Diligence The detailed investigation an investor (or buyer) does before investing in or acquiring a company. They check financials, legal records, contracts, team backgrounds, and more. Think of it as a thorough audit before writing the check.

E

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) A measure of a business's operating profitability that strips out financing decisions, tax environments, and accounting choices. Useful for comparing profitability across different businesses.

EMI (Equated Monthly Installment) The fixed monthly payment you make to repay a loan, covering both principal and interest. Example: Vikram pays ₹28,000 EMI every month for the loan he took to set up his franchise outlet.

Equity The owner's stake in a business. Calculated as Assets minus Liabilities. In startups, equity is what founders give up in exchange for investment. Example: Priya giving 20% equity to an angel investor means the investor now owns 20% of her company.

ESOP (Employee Stock Ownership Plan) A plan where employees receive shares (or the right to buy shares) in the company as part of their compensation. Used by startups to attract talent when they can't pay high salaries. Shares typically vest over 3-4 years.

Exit How founders and investors eventually get their money out of a business — through an IPO, acquisition, or selling their shares. Not every business needs an exit; small businesses often run for a lifetime.

F

Fixed Cost A cost that stays the same regardless of how much you sell. Rent, salaries, loan EMIs, insurance — these don't change whether you sell 10 units or 10,000. Example: Vikram's rent (₹45,000), staff (₹48,000), electricity (₹12,000), royalty (₹15,000), and loan EMI (₹28,000) total ₹1,48,000/month — whether he sells zero burgers or a thousand.

FOCO (Franchise Owned, Company Operated) A franchise model where the franchisee owns the property/investment but the parent company runs the day-to-day operations. Lower risk for the franchisee, but less control.

FOFO (Franchise Owned, Franchise Operated) A franchise model where the franchisee both invests the money and runs the daily operations. The most common franchise model. Example: Vikram's franchise outlet in Dehradun is FOFO — he put up the money and he runs it.

FPO (Farmer Producer Organization) A collective of farmers registered as a company, allowing them to pool resources, negotiate better prices, access credit, and sell directly to buyers. Example: Rawat ji joining an FPO in Ranikhet could help him bypass the mandi and sell apples directly to retailers in Delhi.

Franchise Fee The one-time upfront fee you pay to a franchisor for the right to use their brand, system, and model. Example: Vikram paid a franchise fee of several lakh rupees before even starting construction on his outlet.

FSSAI (Food Safety and Standards Authority of India) The government body that regulates food businesses in India. Every business that manufactures, stores, transports, or sells food needs an FSSAI license. Example: Ankita's FSSAI registration lapsed, and she got a legal notice — a compliance mistake that almost derailed her brand.

G

Gross Profit Revenue minus the direct cost of goods sold (COGS). It shows how much money is left after paying for the product itself, before covering overhead expenses. Example: Ankita sells a chutney jar for ₹249 and COGS is ₹80. Gross profit = ₹169 per jar.

GST (Goods and Services Tax) India's unified indirect tax on the supply of goods and services. Replaced multiple older taxes. Rates are 0%, 5%, 12%, 18%, or 28% depending on the product or service category.

I

IMPS (Immediate Payment Service) A real-time interbank electronic fund transfer service available 24/7 in India. Useful for instant payments up to ₹5 lakh per transaction.

Incubator An organization that supports very early-stage businesses or ideas by providing workspace, mentorship, and sometimes small funding — usually before the product is built. Slower-paced than accelerators.

Income Tax Tax levied by the government on the income earned by individuals and businesses. Proprietorships are taxed at individual slab rates; companies are taxed at flat rates (typically 25-30%).

IPO (Initial Public Offering) When a private company offers its shares to the public for the first time on a stock exchange. This allows founders and investors to sell some or all of their shares, "exiting" their investment.

ITC (Input Tax Credit) Under GST, you can claim credit for the GST you've already paid on your purchases (inputs) against the GST you collect on your sales (output). This prevents tax-on-tax. Example: Ankita pays 5% GST when buying packaging material. She can offset this against the GST she collects when selling her jars.

L

Liabilities What your business owes to others — loans, accounts payable, unpaid rent, taxes due. Listed on the right side (or bottom) of a balance sheet. Example: Vikram's liabilities include his outstanding bank loan and the monthly royalty due to the franchise company.

Liquidation Preference A clause in an investment deal that determines who gets paid first (and how much) if the company is sold or shut down. Investors with liquidation preference get their money back before founders see anything.

LLP (Limited Liability Partnership) A business structure where partners have limited liability — their personal assets are protected if the business fails. Requires registration with MCA. Popular among professionals and startups that want partnership flexibility with liability protection.

LTV (Lifetime Value) The total revenue you expect to earn from a single customer over their entire relationship with your business. If LTV is much higher than CAC, your business model is healthy. Example: If Ankita's average customer orders 4 times a year, spending ₹600 per order, and stays for 3 years — LTV = ₹7,200.

M

Mandi The wholesale agricultural market where farmers sell their produce, usually through commission agents (aadhtis). Prices fluctuate daily. Example: Rawat ji sells his apples at the Haldwani mandi, losing 15-20% to middlemen commissions.

Margin The difference between the selling price and the cost, expressed as a percentage. Higher margin means more room for expenses and profit. See also: Gross Margin, Net Margin.

MAU (Monthly Active Users) The number of unique users who engage with your product in a calendar month. Example: If 2,800 farmers use Priya's app at least once a month, her MAU is 2,800.

MRP (Maximum Retail Price) The highest price at which a product can be sold to a consumer in India, as printed on the packaging. Legally mandated under the Legal Metrology Act.

MRR (Monthly Recurring Revenue) The predictable monthly revenue from subscriptions or recurring contracts. Key metric for subscription businesses. Example: If Priya charges farmers ₹200/month and has 500 paying users, her MRR is ₹1,00,000.

MUDRA Loan A government scheme under Pradhan Mantri MUDRA Yojana offering collateral-free loans up to ₹10 lakh to small and micro enterprises. Three categories: Shishu (up to ₹50,000), Kishore (₹50,000 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh). Example: Pushpa didi could apply for a Kishore MUDRA loan to buy a better stove and expand her seating area.

MVP (Minimum Viable Product) The simplest version of your product that can be released to early users to test whether the core idea works. You build just enough to learn, then improve based on feedback. Example: Priya's first MVP was a simple WhatsApp group connecting 15 farmers with 3 buyers — no app, no website, just a group chat.

N

NEFT (National Electronic Fund Transfer) A bank-to-bank electronic fund transfer system in India, processed in half-hourly batches. Free or very low cost, with no per-transaction limit.

Net Profit The final profit after subtracting all expenses — COGS, operating expenses, interest, taxes, depreciation — everything. Also called the "bottom line." This is what the business truly earned.

North Star Metric The single most important metric that best captures the core value your product delivers to customers. Every team focuses on moving this one number. Example: For Priya's agri-tech app, the North Star Metric might be "number of successful farmer-buyer transactions per week."

O

OPC (One Person Company) A company structure in India where a single person can form a company with limited liability. It gives the benefits of a Private Limited Company — limited liability, separate legal entity — without needing a second director or shareholder.

Overdraft A banking facility where you can withdraw more money than your account balance, up to a pre-approved limit. You pay interest only on the amount you actually use. Example: Bhandari uncle has a ₹3 lakh overdraft facility on his current account — useful for cash crunches when contractors haven't paid on time.

P

P&L Statement (Profit & Loss Statement) A financial statement showing your revenue, costs, and profit (or loss) over a period of time — a month, a quarter, or a year. Also called an Income Statement. Example: Bhandari uncle's quarterly P&L shows ₹1.8 lakh profit — but his bank balance tells a different story.

PAN (Permanent Account Number) A 10-character alphanumeric identifier issued by the Income Tax Department. Required for filing taxes, opening bank accounts, and most financial transactions in India.

Partnership A business structure where two or more people share ownership, responsibilities, profits, and liabilities. Simple to form but comes with unlimited personal liability for all partners. Example: Neema and Jyoti could run their homestay as a partnership firm, sharing profits and costs equally.

Patent A legal right that gives the inventor exclusive control over a new invention for 20 years. Others cannot make, use, or sell the patented invention without permission. Relevant for businesses with genuinely novel products or processes.

Pitch Deck A short presentation (usually 10-15 slides) that a startup founder uses to tell investors about the business — the problem, solution, market, team, traction, and how much funding they need.

Pivot A significant change in a startup's business model, product, or target market based on what you've learned. Not a failure — a strategic shift. Example: If Priya realizes farmers don't want an app but do want WhatsApp-based price alerts, shifting from app to WhatsApp is a pivot.

Post-money Valuation The company's valuation immediately after receiving investment. Post-money = Pre-money + Investment amount. Example: If Priya's company is valued at ₹1 crore (pre-money) and an investor puts in ₹25 lakh, the post-money valuation is ₹1.25 crore.

Pre-money Valuation The company's valuation before receiving an investment. It's what the company is "worth" right before the investor's money comes in. This is what founders and investors negotiate.

Private Limited Company The most common formal business structure for startups in India. Has limited liability, can raise equity funding, and exists as a separate legal entity. Requires at least 2 directors and 2 shareholders. More compliance than proprietorship or LLP but more credibility and fundraising ability.

Product-Market Fit The stage where your product clearly satisfies a strong market demand — customers want it, use it repeatedly, and recommend it to others. The most important milestone for any startup.

Profit The money left over after all costs are subtracted from revenue. The reward for taking the risk of running a business. See also: Gross Profit, Net Profit.

R

Reinvestment Taking profits from your business and putting them back in — buying better equipment, increasing inventory, opening a second location — instead of withdrawing them for personal use. Example: Pushpa didi uses her monthly profit to buy a better stove and add four more chairs, increasing her capacity.

Retail Selling products directly to end consumers, usually in small quantities and at the maximum margin. The final step in the supply chain. Example: Ankita selling one jar at a time to individual customers is retail.

Retention The percentage of customers or users who continue using your product over time. The opposite of churn. High retention means your product delivers lasting value. Example: If 80 out of 100 farmers who signed up for Priya's app in January are still active in April, her 3-month retention is 80%.

Revenue The total money that comes into a business from selling its products or services. Also called "turnover" or "top line." Revenue is not profit — you haven't subtracted costs yet. Example: Ankita did ₹2.8 lakh in revenue last month. But her bank balance was only ₹31,000.

ROI (Return on Investment) A measure of how much profit or value you gained relative to what you invested. ROI = (Gain - Cost of Investment) / Cost of Investment x 100. Example: If Vikram invested ₹18 lakh in his franchise and earns ₹3 lakh net profit per year, his annual ROI is about 16.7%.

Royalty A recurring fee (usually monthly or as a percentage of revenue) paid by a franchisee to the franchisor for ongoing use of the brand, systems, and support. Example: Vikram pays a minimum ₹15,000 monthly royalty plus a percentage of his revenue to the franchise company.

RTGS (Real Time Gross Settlement) A real-time bank-to-bank electronic fund transfer system for high-value transactions (minimum ₹2 lakh). Settled individually, not in batches like NEFT.

Runway How many months a startup can survive at its current burn rate before running out of cash. Runway = Cash in bank / Monthly burn rate. Example: If Priya has ₹30 lakh in the bank and burns ₹3 lakh/month, she has a 10-month runway.

S

SAFE (Simple Agreement for Future Equity) A simple investment agreement where an investor gives money now in exchange for the right to receive equity later, at the next funding round. Simpler than a convertible note — no interest, no maturity date.

Scaling Growing a business rapidly — increasing revenue, customers, or capacity significantly while keeping costs manageable. What separates a local business from a large one. Example: Priya scaling her app from 500 farmers to 50,000 farmers across Uttarakhand.

SEO (Search Engine Optimization) Improving your website or content so it appears higher in Google search results, bringing in free organic traffic. Example: If someone in Delhi searches "buy pahadi pickle online" and Ankita's website appears on the first page, that's good SEO.

Series A / B / C The named rounds of venture capital funding a startup raises as it grows. Series A is typically the first major institutional round (₹5-25 crore). Series B and C are larger rounds for companies showing strong growth.

Sole Proprietorship The simplest business structure — you and the business are legally the same entity. Easy to start but comes with unlimited personal liability. Example: Pushpa didi's chai shop is a sole proprietorship. She got a Shop & Establishment license and started selling.

SOP (Standard Operating Procedure) A written, step-by-step guide for a routine task in your business, ensuring consistency regardless of who does it. Example: Ankita writes an SOP for packing and labeling each jar so her helper does it exactly the same way every time.

Startup A young company designed for high growth, usually solving a problem in a new or scalable way. Distinguished from a small business by its ambition to grow rapidly and potentially serve millions. Example: Priya's agri-tech app is a startup — it aims to scale across Uttarakhand and eventually other states.

T

TAN (Tax Deduction and Collection Account Number) A 10-character alphanumeric number required by entities that deduct or collect tax at source (TDS/TCS). Needed if you're paying salaries, rent above certain limits, or contractor fees.

TDS (Tax Deducted at Source) A system where the payer deducts a percentage of tax from a payment before sending it to the payee. The deducted amount is deposited with the government. Example: When a corporate gifting company pays Ankita ₹1,20,000, they deduct 1% TDS (₹1,200) and pay her ₹1,18,800.

Term Sheet A document outlining the key terms and conditions of a proposed investment. It covers valuation, equity offered, investor rights, board seats, and special clauses. Not legally binding, but sets the framework for the final deal.

Trademark A legal protection for your brand name, logo, tagline, or any distinctive sign that identifies your business. Registration gives you exclusive rights to use it. Example: Ankita registering "Pahadi Zaika" as a trademark so no one else can sell products under that name.

U

Udyam Registration The government registration for micro, small, and medium enterprises (MSMEs) in India. Free, online, and based on your Aadhaar number. Gives access to government schemes, subsidies, and easier loan processing. Example: Pushpa didi registering her chai shop under Udyam gives her access to MUDRA loans and government subsidies.

Unit Economics The revenue and cost analysis for a single unit of your product or service. Tells you whether each sale is profitable before overhead costs. Example: Ankita earns ₹249 per jar, spends ₹80 on COGS and ₹65 on shipping. Her unit economics: ₹104 contribution per jar toward covering fixed costs.

UPI (Unified Payments Interface) India's real-time mobile payment system that allows instant bank-to-bank transfers using a phone number, QR code, or UPI ID. Most common digital payment method for small businesses. Example: Pushpa didi accepts payment via UPI — customers scan a QR code taped to her counter.

Upselling Encouraging a customer to buy a higher-priced version or a larger quantity of what they're already buying. Example: Pushpa didi asking "Bada cup lenge? Sirf ₹10 zyada" — that's upselling.

V

Valuation The estimated total worth of a company. For startups, valuation is negotiated between founders and investors. For established businesses, it can be calculated from revenue, profit, or asset value. Example: Priya and her investor agree that her company is worth ₹1 crore before investment — that's her pre-money valuation.

Variable Cost A cost that changes in proportion to how much you produce or sell. More sales means more variable cost; zero sales means zero variable cost. Example: Ankita's raw ingredients (₹35-60/jar), packaging (₹25/jar), and shipping (₹65/order) are all variable costs. Sell more jars, spend more.

Venture Capital (VC) Professional investment firms that pool money from large investors and deploy it into high-growth startups in exchange for equity. VCs typically invest larger amounts (₹2 crore+) than angel investors and expect high returns.

Vesting The process by which employees (or founders) gradually earn their equity/shares over time, rather than receiving it all at once. Typical schedule: 4 years with a 1-year "cliff" — you get nothing in year 1, then shares vest monthly or quarterly after that.

W

Wholesale Selling products in large quantities, usually to retailers or other businesses, at a lower per-unit price. Example: Ankita selling 200 jars to a retailer at ₹180 per jar (vs ₹249 MRP) is a wholesale deal.

Working Capital The money available for day-to-day operations — calculated as Current Assets (cash, inventory, receivables) minus Current Liabilities (payables, short-term debts). Positive working capital means you can pay your bills. Example: Bhandari uncle's working capital crunch — he has ₹4 lakh in receivables but ₹1.8 lakh due to his supplier in two days and only ₹47,000 in the bank.

Tip: Don't try to memorize all of these. Read the book, and when you encounter a term you've forgotten, come back here. After a few months of running a business, most of these words will feel as natural as the names of people you work with every day.