Understanding Business Terminology: A Guide To Business Jargon For Tradesmen

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You know the difference between your linesman pliers and your slip-joint pliers, and you can talk all day about thermostatic radiator valves or rolled steel joists, but when it comes to R.O.I, VAT and PE ratios, they might as well be a foreign language.

Sure, that expert knowledge of your profession can only ever be a good thing. If you’re going to get your projects done – and get them done well – then knowing every little intricacy of every task is only going to make life easier.

Still, as a self-employed tradesman, a Mastermind-level knowledge of your trade sadly isn’t enough to ensure success. With tax returns to complete, marketing and advertising to invest in and a whole heap of other behind-the-scenes tasks to complete, knowing your way around the basics of business-speak certainly comes in handy.

Trying to grow your business but find yourself bamboozled by baffling buzzwords? Need to meet your legal obligations but can’t wrap your head around the complex lingo? Here’s your ultimate jargon-buster, containing all the business terminology you need to know to make a success of your trade business.

 

business jargon for tradesmen

A is for…

Accounts Payable (AP)

Literally, the bills to be paid as part of running your business. For example, you order timber from a supplier and receive it along with an invoice. Until that invoice is paid, it’s recorded as ‘accounts payable.’

 

Accounts Receivable (AR)

The amount owed to you by customers who haven’t yet paid. Whereas Accounts Payable is a liability (as in, it’s money you have to pay), Accounts Receivable is the opposite, as it’s money that you’re owed.

 

Assets

Resources that you have which have value. For example, your van, your equipment, and any money owed to you can all be business assets.

 

Automatic enrollment

If you hire employees in your trade business, then automatic enrollment means that you’re required to enrol them in a pension scheme providing they are over 22 years old, younger than the state pension age, and earning at least £10k per year.

 

business jargon for tradesmen

B is for…

Balance sheets

A summary of your business’ finances. These are usually produced at the end of the financial year and detail your assets and liabilities. Balance sheets are invaluable for helping you to understand how your business is doing.

 

Break-even point

The point at which your costs and your revenues are the same. For example, if a job costs you £500 in materials and labour hire, then you need that job to pay you £500 to break even.

 

business jargon for tradesmen

C is for…

Capital Gains Tax

Tax you pay to HMRC if you make a profit from selling an asset.

Say you buy a van for your business for £500 and sell it for £600, that’s a capital gain of £100. You can make up to  £11,700 in capital gains before you’re eligible to pay Capital Gains Tax.

 

Card Machine

A device that allows you to accept card payments from your customers.

 

Cash flow

The total sum of money going in and out of your business.

 

Click-through rate (CTR)

A way of measuring how successful your online advertising is.

Your CTR is determined by dividing the number of people who clicked on your ad by the number of times that ad was presented. So if it was presented 100 times but only one person clicked on it, you have a CTR of one per cent.

The higher the CTR, the more successful your campaign.

 

business jargon for tradesmen

D is for…

Depreciation

A term used in accounting to calculate the decrease in value of assets. For example, buying a van for £500 which is then only worth £400 a year later.

 

Digital marketing

Using websites, online services and apps to promote your business to potential customers.

 

business jargon for tradesmen

E is for…

Email marketing

Using email to contact people and encourage them to hire your business.

 

business jargon for tradesmen

F is for…

Financial year

Also called the Fiscal Year. This is any period of 12 months used by businesses and the government to calculate finances. In the UK, this runs from the beginning of April to the end of March.

 

Fixed costs

The costs of running your business that stay the same no matter how well your business is doing. For example, the monthly rent on the workshop or storage space you hire would likely be a fixed cost.

 

business jargon for tradesmen

G is for…

GDPR

The General Data Protection Regulation governing how business’ in the European Union use people’s personal data. See our complete guide to GDPR to learn how this affects your business.

 

Google My Business

A tool you can use to improve the way your business is represented in Google’s search results.

 

business jargon for tradesmen

H is for…

HMRC

Her Majesty’s Revenue & Customs – the government department responsible for collecting your taxes, among other things.

 

business jargon for tradesmen

I is for…

Income tax

The basic tax that you pay on any money you earn through your business.

 

Invoice

A document which you give to your customers, outlining the cost of the goods or services you’ve provided. See our recent guide to invoices for a more detailed description.

 

business jargon for tradesmen

L is for…

Liabilities

Any money your business needs to pay, such as loan repayments or money owed to suppliers.

 

Limited company

A type of legal structure for starting a business. Unlike being a sole trader, if you start a limited company, your business is not tied to your own personal finances and assets.

With a limited company, you’re only responsible for any business debts up to the amount that you originally invested in that business.

 

business jargon for tradesmen

M is for…

Market

Your potential customers. The homeowners and businesses willing and able to buy your services.

 

Marketing

Promoting your business to potential and existing customers.

 

Minimum wage

The minimum amount that you need to pay employees and apprentices.

In 2018, this is £7.83 per hour for employees aged 25 and over and £7.38 for ages 21 to 24. Other minimum wage rates are set for young people and apprentices.

 

business jargon for tradesmen

N is for…

Net income

The total amount of earnings after all expenses and taxes have been deducted. The amount of earnings before all those deductions are called your gross income.

 

Negative equity

When the value of an asset is less than what you paid for it.

 

Nominal interest rates

Interest rates which haven’t been adjusted for inflation.

 

business jargon for tradesmen

O is for…

Office of Fair Trading

The Office of Fair Trading is an organisation which aims to protect consumers from commercial practices which are deemed to be unfair.

 

Operating costs

Otherwise known as operating expenses. These are the costs incurred as a result of the day-to-day running of your business, such as wages, material costs, or running your van.

 

business jargon for tradesmen

P is for…

Pay As You Earn (PAYE)

A system for collecting the tax from your employees’ earnings or pensions.

 

Pay Per Click (PPC) Advertising

The standard advertising system used by the likes of Google and Facebook. See our guide to Pay Per Click advertising for more.

 

Profit margin

The amount by which the money you make exceeds your costs.

 

business jargon for tradesmen

R is for…

Responsive design

Designing a website in a way that it responds to the size of the screen you view it on. If you build a website for your business or have one built for you, it should be responsive to ensure that it works just as well on a customer’s iPhone as it does on their home computer.

 

Return on Investment (R.O.I)

A way of measuring the efficiency or success of an investment. This is calculated by subtracting the cost of that investment from the net profit it generated.

The higher the R.O.I, the more successful that investment was.

 

business jargon for tradesmen

S is for…

Search Engine Optimisation (SEO)

Refers to the techniques and processes used to influence how your online presence appears in search engine results. For example, you might use SEO to ensure that yours is one of the first businesses listed when a customer searches for “plumbers in London.”

 

Self Assessment

A self-assessment tax return is a process you’ll need to go through in order to ensure you’re paying the right amount of tax to HMRC.

 

Sole Trader

If you’re a sole trader, you’re self-employed and keep 100% of the profits from your business, but are also responsible for 100% of any debts.

 

Sunk costs

Costs already incurred by a business that can’t be recovered.

 

business jargon for tradesmen

T is for…

Target market

A group of people or businesses who are most likely to need or want your services.

 

business jargon for tradesmen

U is for…

Underwriter

If you take out insurance for your trade business, an underwriter is a person who will analyse the risks involved in your business, determine whether or not you can be improved for insurance, and also determine how much that insurance will cost you.

 

Upselling

A sales technique in which you sell a customer a product or service that is more than what they originally wanted. For example, a homeowner may contact you about painting a single room in your home, but you upsell them a package in which they pay you more to paint several rooms.

 

business jargon for tradesmen

V is for…

Value Added Tax (VAT)

A standard tax rate of 20% on goods or services that businesses must pay if their annual turnover is more than £80,000.

 

Did we miss out any terms that you’d like to us to include? Let us know in the comments below, or tell us about the business terms that cause you the most headaches on Facebook or Twitter.

Tradesman Saver also provides insurance for tradesmen covering a wide variety of professions. For further information, please see our Tradesman Insurance or Who We Cover pages.

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