This glossary defines the finance, market and strategy terms most often used in Canadian business plans. Each definition explains the term in plain language and why it matters to a lender, investor or management team.
Business plan and strategy definitions
| Term | Plain-language definition | Why it matters |
|---|---|---|
| Business plan | A documented explanation of a business model, market, strategy, operations, management, risks and expected financial results. | Gives a decision-maker one coherent case to assess. |
| Executive summary | A concise overview of the business, purpose, request, evidence and expected outcome; normally finalized after the rest of the plan. | Helps a reader identify the decision and central case quickly. |
| Business model | How a business creates value for customers and converts that value into revenue and cash. | Connects the offer, customer, delivery method and economics. |
| Value proposition | The specific reason a defined customer would choose the offer instead of an alternative. | Supports positioning, pricing and customer-acquisition assumptions. |
| Competitive advantage | A meaningful capability or position that helps a business perform better than alternatives and is not easily copied. | Tests whether differentiation is durable rather than promotional. |
| Milestone | A dated, observable result such as securing a lease, completing a pilot or reaching capacity. | Turns strategy into an accountable implementation sequence. |
Market research definitions
| Term | Definition | Use in a plan |
|---|---|---|
| Target market | The specific group of customers the business intends to serve. | Define geography, need, buyer characteristics and purchase behaviour. |
| TAM | Total addressable market: the broad revenue opportunity if every relevant buyer could be served. | Provides context, not a sales forecast. |
| SAM | Serviceable available market: the portion of the total market reachable by the offer and geography. | Narrows a broad market to a relevant opportunity. |
| SOM | Serviceable obtainable market: the share the business can plausibly capture given capacity, competition and sales resources. | Should reconcile with customer counts and forecast volume. |
| Primary research | Evidence collected directly, such as interviews, surveys, observations or tests. | Can validate local behaviour when method and sample limits are disclosed. |
| Secondary research | Existing information produced by governments, associations, researchers or companies. | Supports industry, demographic and economic claims. |
Financial planning definitions
| Term | Plain-language definition | Important distinction |
|---|---|---|
| Revenue | Income earned from selling goods or services before expenses. | Revenue is not cash flow or profit. |
| Gross profit | Revenue less the direct cost of producing or delivering what was sold. | Gross margin is gross profit expressed as a percentage of revenue. |
| Operating expenses | Costs of running the business that are not treated as direct cost of sales. | Classification should remain consistent across periods. |
| EBITDA | Earnings before interest, taxes, depreciation and amortization. | It is not the same as cash available for debt payments. |
| Working capital | Current assets less current liabilities; operationally, the cash tied up in receivables, inventory and payment timing. | Profitable growth can still consume cash. |
| Cash-flow forecast | An estimate of when cash is expected to be received and paid. | Timing differences make it different from an income statement. |
| Break-even point | The sales volume or revenue at which the defined contribution covers the included fixed costs. | State whether financing, tax and owner compensation are included. |
| Debt-service coverage ratio | A comparison between a defined measure of cash available for debt service and required principal and interest payments. | Definitions and lender thresholds vary; show the exact formula used. |
| Sensitivity analysis | A test that changes one or more important inputs to see how results respond. | It reveals which assumptions drive the outcome. |
| Scenario analysis | A coherent set of assumptions describing a base, upside or downside operating case. | Unlike a single-variable sensitivity, several connected inputs may change. |
| Sources and uses of funds | A schedule matching every funding source with its planned use. | Total sources must equal total uses. |
How to use financial terms responsibly
Define formulas inside the plan, label forecasts, state units and time periods, and avoid presenting a ratio as universally acceptable. Accounting classification and lender calculations can differ. Consult the relevant accountant, lender or adviser for the application.
Primary Canadian sources
Requirements change. Verify current details with the decision-maker and use the latest first-party material.
- Innovation, Science and Economic Development Canada — Canada Small Business Financing Program
- Business Development Bank of Canada — How to write a business plan
- Government of Canada — Business and industry research
- Statistics Canada — official economic, industry and demographic data
Source links reviewed 29 July 2026. A link is a research reference, not an endorsement of The Biz Plans.