Nearly 80% of employees don’t know what KPI stands for. And more than half of Americans say they rarely look up terms they don’t understand.
If that sounds familiar, you’re in the right place. From ROI to LLC, business acronyms are everywhere, and easy to ignore until you need them.
This guide breaks down the most common ones for small business owners. It’s the kind of list you’ll want open in one tab while writing your next proposal or scanning a software contract.
Financial & accounting acronyms
You don’t need to be a finance pro to run a healthy business, but a few key terms can help you talk to your accountant with confidence and make smarter decisions when it’s time to borrow or grow.
ROI – Return on Investment
ROI tells how much profit you’ve made from a specific investment. It’s a measure of how profitable a particular spend or strategy is.
Formula: (Net Profit ÷ Cost of Investment) × 100
Say you spend $1,000 on a campaign and it brings in $5,000 – your ROI is 400%.
EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization
A way to show profitability by stripping out variables like debt and accounting adjustments. Investors often ask for EBITDA to assess your core performance without extra noise.
Formula: Net Income + Interest + Taxes + Depreciation + Amortization
If net income is $80,000, with $5,000 in interest, $10,000 in taxes, $2,000 in depreciation, and $3,000 in amortization, EBITDA = $100,000
Cash flow
Money entering and exiting your business. Knowing your cash flow helps e.g., plan payroll or pay vendors.
Formula: Cash Inflows – Cash Outflows (typically over a month or quarter)
You collect $20,000 in payments but spend $15,000 on expenses. Net cash flow = $5,000
P&L – Profit and Loss
A P&L report summarizes revenue and expenses over time to show profit or loss, so you can see if the company is profitable.
Formula: Total Revenue – Total Expenses = Net Profit or Loss
$50,000 in revenue – $35,000 in costs = $15,000 profit
CAGR – Compound Annual Growth Rate
Measures average growth per year over multiple years.
Formula: [(Ending Value ÷ Beginning Value) ^ (1 ÷ Number of Years)] – 1
From $100K to $200K over 3 years → CAGR = [(200 ÷ 100) ^ (1/3)] – 1 ≈ 26%
APR – Annual Percentage Rate
The APR refers to the total annual cost of borrowing money, which includes fees, loans, or credit lines. Based on it, you can adjust your financial operations and budgeting.
Formula: (Total Interest + Fees ÷ Loan Amount) ÷ Loan Term in Years × 100
Borrow $10,000, repay $11,200 in a year → APR = (1,200 ÷ 10,000) × 100 = 12%
SBA – Small Business Administration
It’s not a formula, but a U.S. agency that helps small businesses with loans and resources. SBA-backed loans typically have lower interest rates and longer repayment terms.
GAAP – Generally Accepted Accounting Principles
No direct formula, but GAAP means using recognized, standard accounting practices. Following GAAP builds trust with banks, investors, and partners.
Sales & marketing acronyms
Whether you're reviewing a campaign report or meeting with a freelancer, these acronyms show up everywhere. They're worth knowing – because they tell you if your marketing is actually working.
KPI – Key Performance Indicator
A specific goal you track to measure success. It acts as your scoreboard, showing progress toward things like lead volume or sales conversions.
Example: “Our KPI this quarter is a 15% increase in qualified leads.”
CRM – Customer Relationship Management
A tool for keeping track of contacts, deals, and customer history. For many, it replaces scattered spreadsheets and brings sales consistency.
Capsule is a CRM built for small businesses. It keeps all your contacts, conversations, and sales opportunities in one place. Try it for free.
SEO – Search Engine Optimization
Tactics that help your website appear higher in search results. Good SEO means showing up when people search for what you offer, without paying for ads.
SEM – Search Engine Marketing
Paid advertising that puts your business at the top of search results. It’s often used to boost visibility fast, especially for seasonal or time-limited offers.
While SEO builds traffic over time, SEM lets you pay for instant visibility.
PPC – Pay Per Click
A model where you only pay when someone clicks your ad. It’s commonly used in platforms like Google Ads or social media campaigns.
CTR – Click-Through Rate
The percentage of people who click after seeing your ad, email, or link.
Formula: (Clicks ÷ Impressions) × 100
Example: You send a newsletter to 1,000 people and have 30 clicks through; your CTR is only 3%. With such a low CTR, you may need to improve your headline or call to action.
CAC – Customer Acquisition Cost
This explains how much it costs to bring in a new customer on board. It tells you if your marketing is cost-effective or draining your budget.
Formula: Total Marketing Spend ÷ New Customers
Example: You spend $1,000 on ads and land 10 new customers. Your CAC is $100.
LTV – Customer Lifetime Value
The total revenue you expect from one customer over time.
Formula: Average Purchase Value × Purchase Frequency × Customer Lifespan
Knowing your LTV helps set smarter budgets for sales and retention.
B2B – Business-to-Business
You sell to other companies, not individuals. It often involves longer sales cycles but higher-value deals.
Example: “We build software for accounting firms.”
B2C – Business-to-Consumer
You sell directly to individuals. Success here often hinges on fast, engaging experiences and strong brand appeal.
Operational & management acronyms
These acronyms come up as you set up your business structure, hire employees, or handle company paperwork. You’ll encounter them in everything from contracts to HR software and onboarding docs, especially as your team and workload expand.
SMB / SME – Small and Medium-sized Business / Enterprise
If you’re reading this, your business probably fits this category—typically fewer than 500 employees. These labels matter when applying for grants or joining certain business programs.
Example: Capsule CRM is designed with small and midsize companies in mind, offering a lighter approach to managing contacts and sales.
LLC – Limited Liability Company
A legal structure that separates your assets from your business debts. For many founders, forming an LLC is an early step to reduce risk and boost credibility.
Example: “We registered as an LLC to simplify taxes and protect ourselves financially.”
DBA – Doing Business As
Let's say you run your company under a different name than what’s registered legally. You’ll need this if you want a bank account or to sign contracts under your brand name.
Example: “Our company is legally ‘Jane Smith Enterprises,’ but we operate under the DBA ‘Smith Design Co.’”
HR – Human Resources
Handles everything related to employees, from recruitment and onboarding to training and payroll records. Even solo founders need to take on some HR tasks as the business starts to grow.
Example: “We started using HR software to keep track of leave requests and timesheets.”
NDA – Non-Disclosure Agreement
A legal contract used to protect private information. NDAs are common when you need to share sensitive details with contractors, investors, or partners.
Example: “Before discussing our product launch, we asked them to sign an NDA.”
RFP – Request for Proposal
A document that invites vendors or agencies to bid on a project. You might issue an RFP when searching for new software or hiring a marketing partner.
OKR – Objectives and Key Results
A system for setting goals and tracking progress. OKRs help keep everyone focused on measurable outcomes and the work needed to reach them.
Example: “Our OKR this quarter is to grow online sales by 15% and launch a new product page.”
Tech & digital acronyms
Even the smallest business relies on digital tools, from managing websites to connecting apps. You’ll run into these acronyms any time you pick new software or look for ways to make your daily workflow less manual. Understanding them helps you make smarter choices (and keeps the IT jargon from slowing you down).
SaaS – Software as a Service
Software you access online and pay for by subscription, instead of installing it on your computer. This model keeps costs flexible and lets you access updates automatically.
Example: “We use Capsule as our SaaS CRM, so we pay monthly and always have the latest version – no IT team needed.”
API – Application Programming Interface
A tool that lets two different pieces of software talk to each other and share information. You’ll hear this term when connecting your CRM to email, accounting, or other tools you use.
Example: “We connected our customer support app to Capsule through the API, so all our conversations sync up automatically.”
CMS – Content Management System
Software that makes it easy to update your website. WordPress and Shopify are two of the most popular.
IT – Information Technology
Covers everything from setting up your computers and software to keeping your business data safe. Even the smallest businesses have IT needs, whether it’s troubleshooting, security, or choosing the right tech.
ISP – Internet Service Provider
The company that connects your business to the internet. If your Wi-Fi is down, your ISP is your first call.
Example: “Our ISP is BT, but Comcast or Orange are popular in other regions.”
Government & compliance acronyms
Sorting out your taxes, drafting your first contract, or just updating your website’s privacy page? You’ll run into government acronyms everywhere. Knowing what they mean saves you time, so you can focus on running your business, not wrestling with red tape.
IRS – Internal Revenue Service
The agency that handles taxes for U.S. businesses. If you’re filing returns or applying for a federal tax ID, you’ll deal with the IRS.
“We submitted our quarterly tax payment through the IRS portal.”
VAT – Value Added Tax
A sales tax added to most goods and services in the UK, EU, and beyond. If you sell internationally, you need to know when to add VAT and what to charge.
“We charge VAT for EU customers, but not for U.S.-based clients.”
GDPR – General Data Protection Regulation
A privacy law that applies if you collect personal data from anyone in the EU. It governs what you can store, how you use it, and what rights your customers have, even if you’re not based in Europe.
Improve your business communication today!
Acronyms are everywhere, from your inbox to your accountant’s emails. With this guide, you can skip the jargon and act with confidence. Share it with your team or keep it open for quick reference!
