A

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – A profitability measure that adjusts EBITDA to reflect the true earning potential of a business.

Asset Sale – A type of business sale where individual assets (equipment, inventory, etc.) are transferred, rather than company stock or ownership shares.

Asking Price – The price at which a business is listed for sale.

B

Balance Sheet – A financial statement showing a company’s assets, liabilities, and equity at a given point in time.

Broker Opinion of Value (BOV) – An estimate of business value provided by a business broker based on financials and market comparisons.

Buyer Qualification – The process of assessing a buyer’s financial ability and intent to purchase a business.

C

Cash Flow – The net amount of cash being transferred in and out of a business, often used to measure financial health.

CIM (Confidential Information Memorandum) – A detailed document outlining key business details provided to qualified buyers under NDA.

Closing – The final step in a business sale where legal documents are signed, and ownership is transferred.

Confidentiality Agreement (Non-Disclosure Agreement - NDA) – A legal agreement requiring parties to keep sensitive business sale information private.

D

Deal Structure – The terms and conditions outlining how a business sale is financed and executed.

Due Diligence – A thorough investigation of a business by a buyer before finalizing a purchase.

E

Earnout – A financing arrangement where part of the purchase price is contingent on future business performance.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – A measure of a business’s profitability before certain expenses.

Escrow – A neutral third-party account used to hold funds until the transaction is complete.

Exclusive Right to Sell – A listing agreement where only one broker has the right to sell the business.

F

Fair Market Value (FMV) – The price a business would sell for on the open market under normal conditions.

Franchise Resale – The sale of an existing franchise location to a new owner.

G

Goodwill – The intangible value of a business, including brand reputation, customer relationships, and intellectual property.

Gross Revenue – The total revenue a business generates before expenses are deducted.

I

Initial Strategy Session – The first meeting between a broker and a potential seller to discuss their business and selling goals.

Inventory – The goods and materials a business holds for resale.

L

Letter of Intent (LOI) – A non-binding document outlining the buyer’s intent to purchase a business and key proposed terms.

Listing Agreement – A contract between a broker and seller outlining the terms for selling a business.

M

Multiple – A valuation metric used to determine a business’s worth based on a multiple of earnings (e.g., 3x EBITDA).

N

Non-Compete Agreement – A contract preventing a seller from starting a competing business after the sale.

Non-Disclosure Agreement (NDA) – A confidentiality agreement that protects sensitive business information.

P

Pre-Qualification – The process of determining whether a business or buyer meets financial or lender requirements.

Profit and Loss Statement (P&L) – A financial statement summarizing revenues, costs, and expenses over a specific period.

Promissory Note – A financial agreement where the buyer promises to pay a portion of the purchase price over time.

R

Recapitalization – Restructuring a business’s debt and equity to prepare for a sale or investment.

Retention Period – A period where the seller stays involved in the business post-sale to assist with the transition.

S

Seller Discretionary Earnings (SDE) – The total financial benefit an owner derives from a business, often used for small business valuations.

Stock Sale – A type of sale where ownership shares in a company are transferred, rather than individual assets.

Strategic Buyer – A buyer looking to acquire a business for operational synergy rather than just financial investment.

T

Term Sheet – A non-binding document outlining the key terms of a potential deal before drafting a formal agreement.

Transition Period – The time after a business sale where the seller assists the buyer in taking over operations.

U

Upside Potential – The future growth opportunities a business presents to a buyer.

V

Valuation – The process of determining the value of a business using various financial metrics and market comparisons.

W

Working Capital – The amount of liquidity available to a business for daily operations (Current Assets - Current Liabilities).