Venturu

Business acquisition dictionary

The Venturu Business Dictionary

Business, translated with no jargon and confusion, just plain English explanations.

Popular terms

Most Popular Terms

Legal

Non-Compete Agreement

A contract where one party agrees not to compete with another party for a set period and within a specific geographic area.
Legal

Letter of Intent (LOI)

A Letter of Intent (LOI) is a non-binding document outlining the preliminary terms of an agreement between a buyer and seller before a formal contract is drawn up.
Financing

SBA 7(a) Loan

A government-backed loan program for small businesses, offering favorable terms and lower down payments.
Valuation

Add-backs

Add-backs are expenses that are added back to a business’s net income to show its true profitability to a new owner.
Valuation

EBITDA

EBITDA shows a company's operating performance before non-operating expenses and non-cash charges. It helps compare businesses by removing financing and accounting decisions.
Valuation

SDE (Seller's Discretionary Earnings)

SDE is the total financial benefit an owner gets from their business before taxes and non-business expenses. It shows the true profit available to a single owner.

Browse A-Z

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Tech

2FA (Two-Factor Authentication) Handoff

2FA Handoff is the process of securely transferring two-factor authentication control from a seller to a buyer during a business acquisition.
A
Process

Absentee Owner

An absentee owner is a business owner who does not actively manage the day-to-day operations of their business.
Valuation

Accounts Receivable Aging

A report that categorizes unpaid customer invoices by the length of time they have been outstanding.
Valuation

Accrued PTO (Paid Time Off)

Accrued PTO is the paid time off employees have earned but not yet used. It represents a liability for the business.
Marketing

Active Patient Count

The number of unique patients who have received care from a healthcare practice within a specific timeframe, usually the last 12-18 months.
Valuation

Add-backs

Add-backs are expenses that are added back to a business’s net income to show its true profitability to a new owner.
Valuation

Adjusted Net Income

Adjusted Net Income is the profit a business makes before certain owner-related expenses and non-recurring costs are subtracted. It shows the true earning power.
Tech

Admin Access Handoff

The process of transferring administrative control of digital assets and accounts to a new owner after a business sale.
Tech

Admin Privileges

Admin privileges give users full control over a system, allowing them to manage settings, install software, and access all data.
Valuation

Aging of Accounts Payable

A report that categorizes a company’s outstanding invoices by the length of time they have been due.
Legal

Allocation of Purchase Price

The process of assigning the total purchase price of an acquired business to its individual assets and liabilities for tax and accounting purposes.
Financing

Amortization Period

The total time it takes to pay off a loan, including both principal and interest.
Tech

Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR) is the predictable, recurring revenue a business expects to generate from subscriptions or contracts over a 12-month period.
Tech

API Keys

API keys are unique codes that let applications talk to each other securely. They control access and track usage.
Legal

Articles of Organization

A legal document filed with the state to officially form a Limited Liability Company (LLC).
Legal

Asset Purchase Agreement (APA)

A legal contract used when a buyer purchases specific assets and liabilities from a seller, rather than the entire company.
Legal

Asset Sale vs Stock Sale

An Asset Sale is when a buyer purchases individual assets of a business. A Stock Sale is when a buyer purchases the shares of the selling entity.
Legal

Assumption Agreement

A legal document where one party takes over the debt or obligations of another party.
Legal

Assumption Fee

A fee charged by a lender when a new buyer takes over an existing loan.
Financing

Assumption of Debt

When a buyer takes over the seller’s existing business debt, becoming responsible for its repayment.
Marketing

Average Order Value (AOV)

Average Order Value (AOV) is the average amount of money a customer spends per order in your business.
B
Tech

Backup Recovery Plan

A plan to restore business operations and data after a disruption.
Valuation

Bad Debt Expense

Bad debt expense is the money a business loses from customers who can’t or won’t pay their bills.
Valuation

Balance Sheet

A financial statement showing a company's assets, liabilities, and owner's equity at a specific point in time.
Financing

Balloon Payment

A large, one-time payment due at the end of a loan term, often after a series of smaller, regular payments.
Marketing

Barriers to Entry

Factors that make it hard for new businesses to enter a market and compete with existing ones.
Financing

Basis Step-Up

Basis Step-Up adjusts the cost basis of inherited assets to their market value at the time of death, reducing capital gains taxes for heirs.
Legal

Bill of Sale

A legal document that transfers ownership of an asset from a seller to a buyer.
Marketing

Blind Ad

A Blind Ad is an advertisement for a business sale that hides the business’s identity to protect confidentiality.
Legal

Blue Sky Laws

State laws that protect investors from fraud by regulating the sale of securities.
Valuation

Book Value

The net worth of a company based on its accounting records. It is calculated as total assets minus total liabilities.
Marketing

Brand Equity

Brand equity is the value a brand adds to a product or service beyond its functional benefits. It’s built on customer perception, loyalty, and recognition.
Legal

Breach of Contract

When one party in a contract fails to meet their agreed-upon obligations.
Valuation

Break-Even Analysis

A calculation to determine the point at which total costs and total revenues are equal, meaning there is no net loss or gain.
Legal

Break-Up Fee

A fee paid by one party to another if a merger or acquisition agreement is terminated under specific conditions.
Financing

Bridge Loan

A short-term loan used to cover immediate costs until a more permanent financing solution is secured.
Process

Bring-Down Certificate

A Bring-Down Certificate confirms that facts about a business are still true at a later date, often right before a deal closes.
Legal

Bring-Down Letter

A document confirming that facts previously certified remain true as of a later date, often used in legal and financial transactions.
Valuation

Broker's Opinion of Value (BOV)

A Broker's Opinion of Value (BOV) is an informal estimate of a business's worth, provided by a business broker.
Legal

Bulk Sales Act

A law protecting buyers from hidden debts when purchasing a business by requiring public notice of the sale.
Valuation

Burn Rate

The speed at which a company spends its cash reserves, especially before it generates positive cash flow.
Process

Business Broker vs. M&A Advisor

A business broker helps sell smaller businesses, while an M&A advisor handles larger, more complex deals.
Financing

Business Credit Score

A numerical rating that shows a business’s creditworthiness, similar to a personal credit score but for companies.
Process

Buy-Side Advisor

A Buy-Side Advisor helps buyers find and acquire businesses. They represent the buyer’s interests throughout the acquisition process.
C
Legal

CAM Charges (Common Area Maintenance)

CAM Charges cover the costs of maintaining shared spaces in commercial properties, passed on to tenants.
Valuation

Cap Rate (Capitalization Rate)

The Cap Rate is a ratio that shows the potential return on an investment property. It helps buyers compare different properties quickly.
Financing

Cash Injection

A cash injection is when new money is put into a business. It can come from owners, investors, or lenders to cover costs or fund growth.
Valuation

Cash vs. Accrual Accounting

Two methods for recording financial transactions: cash accounting records income/expenses when cash changes hands, accrual accounting records them when earned/incurred.
Valuation

Cash-on-Cash Return

Cash-on-Cash Return measures the annual pre-tax cash flow an investor receives from a property, relative to the amount of cash invested.
Marketing

Catchment Area

The geographic area from which a business draws its customers. It helps businesses understand their market reach and customer base.
Marketing

Churn Rate

The rate at which customers stop doing business with a company over a given period.
Process

CIM (Confidential Information Memorandum)

A document that provides detailed information about a business for sale, used to attract potential buyers.
Legal

Clawback Provision

A clawback provision allows a buyer to recover money from a seller if certain conditions are not met after a business sale.
Process

Closing Agenda

A Closing Agenda is a checklist of tasks and documents needed to finalize a business sale, ensuring all steps are completed efficiently.
Legal

Closing Conditions

Requirements that must be met by both buyer and seller before a business sale can be finalized. They ensure all agreed-upon terms are satisfied.
Process

Closing Costs

Fees paid at the end of a business sale, covering legal, escrow, and other services.
Process

Closing Statement (Settlement Statement)

A document detailing all financial transactions between buyer and seller at closing.
Process

Closing Table

The final meeting where a business sale is completed, documents are signed, and ownership is transferred.
Process

Co-Brokering

When two brokers work together on a business sale, sharing the commission.
Tech

Code Freeze

A point in the development cycle where no new code changes are allowed, only bug fixes.
Financing

Collateral

An asset pledged by a borrower to a lender as security for a loan. If the borrower defaults, the lender can seize the collateral.
Financing

Commitment Letter

A formal document from a lender outlining the terms and conditions for a loan.
Valuation

Comparable Sales (Comps)

Comparable sales are recent sales of similar businesses used to estimate the value of another business.
Marketing

Competitive Landscape

The Competitive Landscape is the environment where businesses compete for customers, market share, and resources.
Process

Conditions Precedent

Conditions Precedent are requirements that must be met before a contract or agreement becomes legally binding or before a specific action can take place.
Process

Confidential Business Review (CBR)

A document that gives potential buyers detailed information about a business for sale, while keeping the business identity private.
Process

Confidentiality Breach

A confidentiality breach happens when private business information is shared without permission. This can hurt a business badly.
Legal

Consent to Assignment

Permission from a third party to transfer a contract from one party to another.
Legal

Consulting Agreement

A contract where a business hires an external expert for advice or services.
Financing

Contingent Liability

A potential future obligation that depends on whether a specific event happens. It is not a current debt but could become one.
Financing

Conventional Commercial Loan

A traditional business loan from a bank, often used for real estate or equipment, with specific collateral and repayment terms.
Legal

Corporate Resolution

A formal document recording a decision made by a company’s board of directors or shareholders.
Valuation

Cost of Goods Sold (COGS)

The direct costs of producing the goods a business sells. This includes materials and labor directly used.
Financing

Credit Memo

A document issued by a seller to a buyer, reducing the amount the buyer owes or refunding money already paid.
Tech

CRM (Customer Relationship Management)

CRM helps businesses manage customer interactions and data throughout the customer lifecycle.
Financing

Cross-Collateralization

Using one asset as collateral for multiple loans, or using multiple assets as collateral for a single loan.
Marketing

Customer Acquisition Cost (CAC)

The total cost of acquiring a new customer, including all marketing and sales expenses.
Marketing

Customer Concentration

Customer concentration is when a large portion of a business’s revenue comes from a small number of customers. This can be risky for a business.
Valuation

Customer Concentration (Whale Client)

Customer concentration is when a large portion of a business’s revenue comes from one or a few customers. This can be risky.
Marketing

Customer List Quality

How good a business’s customer list is, based on factors like engagement, purchase history, and how likely customers are to buy again.
D
Tech

Data Migration

Moving data from one system to another, often during a business sale or system upgrade.
Legal

DBA (Doing Business As) Transfer

A DBA (Doing Business As) Transfer is the legal process of changing ownership of a business name that is different from the legal name of the business owner.
Process

Deal Breaker

A deal breaker is a specific condition or issue that, if not met or resolved, will cause a buyer to walk away from a business acquisition.
Process

Deal Fatigue

Deal fatigue is when buyers or sellers get tired and frustrated during a long or complex business sale, often leading to deals falling apart.
Process

Deal Flow

Deal flow is the rate at which new investment opportunities are presented to an investor or firm.
Financing

Debt Schedule

A detailed list of all outstanding debts, including principal, interest, and payment dates.
Financing

Debt Service

The cash needed to cover interest and principal payments on a loan.
Valuation

Deferred Maintenance

Deferred maintenance is necessary repairs or upkeep that has been postponed, often due to budget constraints or other priorities.
Legal

Definitive Agreement

A Definitive Agreement is the final, legally binding contract between a buyer and seller in a business acquisition.
Valuation

Depreciation Schedule

A document listing assets, their costs, and how their value decreases over time for accounting and tax purposes.
Tech

Digital Assets

Digital assets are electronic records of ownership or value, like cryptocurrencies, NFTs, or even domain names. They are stored and transferred using digital technology.
Legal

Disclosure Schedules

Documents that list exceptions to representations and warranties made in a purchase agreement.
Process

Discovery Call

A discovery call is an initial conversation to understand a potential client’s needs and determine if there’s a good fit for a product or service.
Valuation

Discretionary Expenses

Costs a business owner chooses to pay, which are not essential for the business to operate.
Legal

Dispute Resolution Clause

A clause in a contract that outlines how disagreements between parties will be resolved, avoiding court when possible.
Tech

Domain Authority

Domain Authority (DA) is a search engine ranking score developed by Moz that predicts how well a website will rank on search engine result pages (SERPs).
Tech

Domain Registrar Transfer

Moving your website’s domain name from one registrar to another. This changes who manages your domain’s registration and settings.
Valuation

Double Dipping (Valuation Error)

Double dipping in business valuation means counting the same benefit or risk twice, leading to an inaccurate value.
Process

Double Lehman Scale

A commission structure for M&A brokers that doubles the standard Lehman Scale percentages.
Financing

Draw Period

The time when a borrower can access funds from a line of credit or loan.
Process

Dry Close

A Dry Close is when all legal documents for a business sale are signed and held in escrow, pending the transfer of funds.
Financing

DSCR (Debt Service Coverage Ratio)

DSCR measures a business's ability to cover its debt payments with its operating income. Lenders use it to assess risk.
Process

Dual Agency

Dual agency is when one real estate agent represents both the buyer and the seller in the same transaction. This can create conflicts of interest.
Process

Due Diligence

Due diligence is the process a buyer undertakes to verify all information about a business before buying it. It ensures everything is as it seems.
E
Financing

Earn-out

An earn-out is a deal structure where part of the purchase price is paid to the seller over time, based on the business meeting specific performance goals after the sale.
Legal

Earnest Money Deposit (EMD)

A deposit made by a buyer to show serious intent to purchase, held until closing or contract termination.
Valuation

EBITDA

EBITDA shows a company's operating performance before non-operating expenses and non-cash charges. It helps compare businesses by removing financing and accounting decisions.
Process

Employee Retention Plan

A plan to keep key employees after a business sale, often involving incentives.
Legal

Employment Agreement

A contract between an employer and an employee outlining the terms and conditions of employment.
Legal

Employment Practices Liability (EPLI)

Employment Practices Liability Insurance (EPLI) protects businesses from claims made by employees regarding wrongful termination, discrimination, harassment, and other employment-related issues.
Process

Engagement Letter

A formal agreement between a service provider and a client, outlining the scope of work, fees, and responsibilities.
Valuation

Equipment List

A detailed record of all physical assets a business owns, used in operations.
Financing

Equity Injection

Cash or assets an owner puts into a business to fund operations or growth.
Legal

Escrow Agreement

A legal document that outlines the terms and conditions under which an asset or money is held by a neutral third party until specific conditions are met.
Legal

Escrow Holdback Agreement

An Escrow Holdback Agreement sets aside part of the sale price after closing to cover potential future issues.
Valuation

Excess Compensation

The amount of salary or benefits a business owner takes above what a market-rate employee would earn for the same job.
Legal

Excluded Assets

Assets a seller keeps and does not include in the sale of their business. These are typically personal items or assets not essential to the business operations.
Process

Exclusive Right to Sell

An Exclusive Right to Sell agreement gives a broker the sole right to sell a property and receive a commission, regardless of who finds the buyer.
Legal

Exclusivity Period

An exclusivity period is a set timeframe where a seller can only negotiate with one potential buyer, preventing them from talking to others.
Process

Exit Planning

Exit planning is the process of preparing a business and its owner for sale or transition to new ownership.
F
Financing

Factoring (Accounts Receivable Financing)

Factoring is when a business sells its unpaid invoices (accounts receivable) to a third party at a discount to get immediate cash.
Valuation

Fair Market Value (FMV)

The price a business would sell for in an open market, assuming both buyer and seller are willing, informed, and not under pressure.
Valuation

Fee-For-Service vs. PPO (Dental)

Fee-For-Service means you pay for each dental service. PPO is a network plan with negotiated rates.
Valuation

FF&E (Furniture, Fixtures, and Equipment)

FF&E refers to the movable assets used in a business, like desks, chairs, and machinery, that are not part of the real estate.
Legal

Fictitious Name Statement

A Fictitious Name Statement, also known as a DBA, is a legal document that registers a business name that is different from the legal name of the business owner.
Valuation

Fixed vs. Variable Expenses

Fixed expenses stay the same regardless of sales volume, while variable expenses change with sales volume.
Valuation

Food Cost Percentage (COGS - Restaurant)

The percentage of revenue spent on ingredients and supplies for a restaurant. It shows how much it costs to make the food you sell.
Legal

Force Majeure

A contract clause that frees both parties from liability or obligation when an extraordinary event beyond their control prevents them from fulfilling their duties.
Legal

Franchise Disclosure Document (FDD)

A legal document that provides detailed information about a franchise offering to potential franchisees.
Valuation

Free Cash Flow (FCF)

Free Cash Flow (FCF) is the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.
Process

Funds Flow Memorandum

A Funds Flow Memorandum (FFM) is a document that outlines how money will move between parties in a business sale.
G
Financing

Gift Letter

A document confirming money received as a gift, often used in business acquisitions to show funds are not a loan.
Financing

Global Cash Flow

Global Cash Flow is a lender’s full review of all cash flows for a business and its owners, including personal income and debts.
Valuation

Going Concern Value

The value of a business as an operating entity, including its assets, liabilities, and future earnings potential.
Legal

Good Standing Certificate

A document proving a business is legally registered and compliant with state requirements.
Valuation

Goodwill

Goodwill is the intangible value of a business beyond its physical assets, often including its brand reputation, customer relationships, and intellectual property.
Marketing

Google Business Profile (GMB)

A free tool from Google that helps businesses manage their online presence across Google Search and Maps.
Legal

Governing Law

The specific laws of a jurisdiction that will be used to interpret and enforce a contract.
Legal

Grandfather Clause

A grandfather clause lets old rules apply to existing situations while new rules apply to future ones. It avoids making changes retroactive.
Valuation

Green Waste Disposal Fees

Costs associated with removing and disposing of organic waste materials from a business operation.
Valuation

Gross Profit Margin

Gross Profit Margin shows how much money a business makes from sales after paying for the direct costs of making its products or services.
Valuation

Gross Rent Multiplier (GRM)

A valuation method for income-producing properties, comparing the property’s price to its annual gross rental income.
H
Process

Handover Checklist

A Handover Checklist is a document that lists all the tasks and information needed to transfer responsibilities from one person to another, ensuring a smooth transition.
Tech

Hard Assets vs. Soft Assets

Hard assets are physical items a business owns, like buildings or equipment. Soft assets are non-physical, like patents or brand reputation.
Financing

Hard Money Loan

A short-term loan from a private lender, often used for real estate investments, with higher interest rates and fees than traditional bank loans.
Tech

Hardware Inventory

Hardware inventory is a detailed list of all physical computer equipment a business owns, including servers, computers, and networking devices.
Financing

HELOC (Home Equity Line of Credit)

A HELOC is a revolving credit line secured by your home equity, allowing you to borrow funds as needed up to a set limit.
Legal

Holdback

A portion of the purchase price held back by the buyer until certain conditions are met after closing.
Tech

Hosting Account Transfer

Moving a website and its files from one web hosting provider to another.
Valuation

Hurdle Rate

The minimum acceptable rate of return on an investment or project.
Valuation

Hygiene Production (Dental)

Hygiene Production in a dental practice refers to the revenue generated from services performed by dental hygienists, such as cleanings, X-rays, and fluoride treatments.
I
Legal

Indemnification

Indemnification is a promise by one party to cover the losses of another party in specific situations, often outlined in a contract.
Legal

Indemnification Basket

An indemnification basket sets a minimum threshold for damages before a buyer can claim against a seller after a business sale.
Legal

Indemnification Cap

A limit on how much a seller has to pay for future problems after a business sale.
Process

Indication of Interest (IOI)

An Indication of Interest (IOI) is a non-binding document from a potential buyer, showing they are interested in acquiring a business.
Valuation

Intangible Assets

Assets that are not physical, like brand reputation, patents, and customer lists. They add value but can’t be touched.
Process

Integration Plan

A detailed strategy for combining two businesses after an acquisition, covering operations, culture, and systems.
Financing

Intercreditor Agreement

An agreement between two or more creditors outlining their respective rights and priorities when lending to the same borrower.
Financing

Interest-Only (I/O) Period

A set time at the start of a loan where you only pay the interest, not the principal.
Valuation

Internal Rate of Return (IRR)

IRR is the discount rate that makes the net present value (NPV) of all cash flows from a project or investment equal to zero.
Valuation

Inventory at Value

Inventory at Value refers to the method of valuing a business’s inventory at its current market price rather than its original cost.
Valuation

Inventory Obsolescence

Inventory obsolescence is when inventory loses value because it is outdated, damaged, or no longer in demand.
Valuation

Inventory Turnover Ratio

Measures how many times a business sells and replaces its inventory over a period. It shows how efficiently a business manages its stock.
Tech

IP Address Transfer

Moving an IP address from one server or network to another, often needed when changing hosting providers or restructuring networks.
Legal

IP Assignment Agreement

A legal document transferring intellectual property rights from one party to another.
Legal

IRS Form 8594 (Asset Acquisition Statement)

A tax form used to report the sale and purchase of business assets, allocating the purchase price among them.
J
Legal

Joint and Several Liability

Joint and several liability means each party is fully responsible for the entire obligation, and the obligation as a whole.
K
Financing

K-1 Statement

A tax document used by partnerships and S corporations to report each partner’s or shareholder’s share of income, losses, deductions, and credits.
Process

Key Man Insurance

Insurance that protects a business from financial loss if a crucial employee dies or becomes disabled.
Valuation

Key Person Risk

Key Person Risk is the danger a business faces if it relies too much on one person. If that person leaves, the business could struggle or fail.
Process

Kick-Off Call

A meeting to start a project or process, setting goals and assigning tasks.
Tech

Knowledge Base

A centralized online library of information about a product, service, or topic.
L
Legal

Landlord Estoppel Certificate

A document from a landlord that confirms the terms of a lease agreement between the landlord and a tenant.
Marketing

Lead Source

A Lead Source is where a potential customer first heard about your business or product.
Legal

Lease Assignment

Transferring a lease agreement from the original tenant to a new tenant, often in a business sale.
Tech

Legacy Systems

Legacy systems are old computer systems, hardware, or software that are still in use but are outdated or no longer supported.
Financing

Lender's Legal Fees

Costs a buyer pays for the lender's attorney to draft loan documents. These are separate from the buyer's own legal fees.
Legal

Letter of Intent (LOI)

A Letter of Intent (LOI) is a non-binding document outlining the preliminary terms of an agreement between a buyer and seller before a formal contract is drawn up.
Legal

Lien Release

A document that removes a legal claim on an asset, like property or equipment, after a debt is paid.
Financing

Life Insurance Assignment

Life insurance assignment is when a business owner transfers policy ownership to a lender as collateral for a loan.
Marketing

Lifetime Value (LTV)

Lifetime Value (LTV) is the total revenue a business expects to earn from a single customer over their entire relationship.
Valuation

Liquidation Value

The estimated value of a business’s assets if they were sold off quickly, rather than as part of an ongoing operation.
Legal

Liquor License Transfer

The legal process of moving a liquor license from one business owner to another, requiring approval from state or local authorities.
Process

Listing Broker

A Listing Broker is a real estate agent who represents the seller of a business or property.
Financing

Loan Covenants

Conditions a borrower must meet to keep a loan in good standing. They protect lenders by setting rules for the borrower.
Financing

Loan-to-Value (LTV) Ratio

The Loan-to-Value (LTV) ratio compares the loan amount to the asset’s value. It shows how much of an asset is financed versus owned outright.
M
Valuation

Maintenance CapEx

Money spent to keep assets running, not to grow the business.
Process

Management Interview

A meeting with a target company’s management team to learn about their operations, financials, and future plans.
Marketing

Market Share

Market share is the percentage of total sales in a market that a single company or product controls.
Legal

Material Adverse Change (MAC)

A Material Adverse Change (MAC) clause lets a buyer back out of a deal if something big and bad happens to the target business before closing.
Legal

Membership Interest Purchase Agreement (MIPA)

A legal contract used when buying or selling ownership in a limited liability company (LLC).
Tech

Merchant Services Transfer

The process of moving a business’s credit card processing account from one provider to another.
Financing

Mezzanine Financing

Mezzanine financing is a hybrid of debt and equity financing, giving the lender rights to convert to an ownership interest in the company if the loan is not paid back in time and in full.
Tech

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is the predictable total revenue a business expects to receive every month from its subscriptions or recurring services.
Valuation

Multiple

A multiplier used in business valuation to estimate a company's value based on its earnings or revenue.
N
Legal

NDA (Non-Disclosure Agreement)

A legal contract that creates a confidential relationship between two or more parties, typically to protect sensitive information.
Marketing

Net Promoter Score (NPS)

A metric that measures customer loyalty and satisfaction by asking how likely customers are to recommend a company.
Valuation

Net Working Capital (NWC)

Net Working Capital is the difference between current assets and current liabilities, showing a business’s short-term liquidity.
Legal

No-Shop Clause (Exclusivity)

A No-Shop Clause prevents a seller from negotiating with other buyers once a Letter of Intent is signed.
Legal

Non-Compete Agreement

A contract where one party agrees not to compete with another party for a set period and within a specific geographic area.
Legal

Non-Poach Agreement

A Non-Poach Agreement stops a buyer from hiring your employees after they buy your business. It protects your team and the business value.
Legal

Non-Solicitation Agreement

A contract clause preventing someone from poaching employees or customers after leaving a business.
Valuation

Normalization Adjustments

Changes made to a company's financial statements to show its true economic performance, removing owner-specific or non-recurring items.
O
Valuation

Occupancy Cost Ratio

The Occupancy Cost Ratio measures how much of a business’s revenue is spent on rent and other occupancy-related expenses.
Legal

Operating Agreement

A legal document for LLCs that outlines the business’s financial and operational decisions, including rules, regulations, and provisions.
Valuation

Operating Expenses (OpEx)

Operating Expenses are the costs a business incurs from its normal operations, excluding the cost of goods sold.
Marketing

Organic Traffic

Organic traffic refers to visitors who land on your website as a result of unpaid search results, rather than through paid advertisements.
Financing

Origination Fee

A fee charged by a lender for processing a new loan application.
Process

OSHA Compliance

OSHA Compliance means following the safety and health rules set by the Occupational Safety and Health Administration to protect workers.
Valuation

Owner Benefit

Owner Benefit, or Seller’s Discretionary Earnings (SDE), is the total financial benefit an owner gets from a business before taxes and non-business expenses.
Valuation

Owner's Draw

Money an owner takes from their business's profits, not as a salary, but as a distribution of earnings.
Process

Owner-Operator

An owner-operator is a business owner who also works in the business, often managing daily operations.
P
Financing

Pari Passu

Pari passu means that all parties in an agreement are treated equally, without preference.
Process

PEO (Professional Employer Organization)

A PEO handles HR tasks like payroll, benefits, and compliance for businesses.
Legal

Percentage Rent

Percentage rent is a type of commercial lease where a tenant pays a base rent plus a percentage of their gross sales.
Legal

Permits and Licenses Transfer

The process of legally transferring necessary permits and licenses from a seller to a buyer during a business acquisition.
Financing

Personal Guarantee (PG)

A Personal Guarantee (PG) makes you personally responsible for a business debt if the business cannot pay it back.
Financing

Phantom Income

Income that is taxable but not received in cash, often due to debt restructuring or partnership agreements.
Process

Phase I Environmental Assessment

A Phase I Environmental Assessment checks a property for environmental contamination before a sale. It helps buyers know if there are risks.
Valuation

Physical Inventory Count

A physical inventory count is the process of manually counting all items in a business’s inventory to verify records and identify discrepancies.
Process

Pocket Listing

A pocket listing is a property for sale that is not publicly advertised on the Multiple Listing Service (MLS) or other public platforms.
Tech

Point of Sale (POS) Transfer

Moving ownership of a Point of Sale system from seller to buyer during a business sale.
Process

Post-Closing Transition Agreement

A Post-Closing Transition Agreement outlines the support and training a seller provides to a buyer after a business sale.
Process

Post-Closing True-Up

An adjustment to the purchase price after a business sale, based on final financial figures.
Legal

Power of Attorney

A legal document giving one person the power to act for another in specified matters.
Financing

Pre-Qualification Letter

A letter from a lender stating that a buyer is likely to qualify for a loan up to a certain amount, based on an initial review of their finances.
Financing

Preferred Lender Program (PLP)

The Preferred Lender Program (PLP) is an SBA initiative that speeds up loan approvals for small businesses through pre-qualified lenders.
Financing

Prepayment Penalty

A fee charged by a lender if a borrower pays off a loan earlier than scheduled.
Valuation

Prime Cost (Restaurant)

Prime cost in a restaurant is the total of your cost of goods sold (COGS) and your labor costs. It’s the biggest expense for most restaurants.
Financing

Prime Rate

The interest rate banks charge their most creditworthy customers, used as a base for other loan rates.
Valuation

Pro Forma Financials

Pro forma financials are projected financial statements that show how a business might perform under different assumptions or future scenarios.
Valuation

Profit and Loss Statement (P&L)

A financial report showing a company's revenues, costs, and profits over a period.
Financing

Promissory Note

A written promise to pay a specific amount of money by a certain date, often with interest.
Financing

Proof of Funds (POF)

A document showing a person or company has enough money to complete a transaction.
Process

Proprietary Search (Cold Calling)

Proprietary search, or cold calling, is when a buyer directly contacts business owners to find acquisition targets that are not publicly listed for sale.
Process

Prorations (Rent/Utilities)

Prorations adjust rent and utility payments between a buyer and seller at closing, ensuring each party pays for their share.
Q
Process

Quality of Earnings (QofE)

An analysis of a company’s financial records to assess the sustainability and accuracy of its earnings.
R
Process

Re-Trading

Re-trading is when a buyer changes the terms of an agreed-upon deal before closing, often asking for a lower price or different conditions.
Valuation

Recast Financials

Recast financials adjust a business’s financial statements to show its true operational profitability, removing owner-specific or non-recurring expenses.
Valuation

Recurring Revenue

Recurring revenue is income that a business can reliably expect to receive at regular intervals, often from subscriptions or long-term contracts.
Marketing

Referral Network

A system where businesses or individuals recommend clients to each other, often for a fee or mutual benefit.
Financing

Refinancing Risk

Refinancing risk is the chance that a borrower cannot replace an existing debt with new debt under favorable terms, or at all.
Legal

Release of Claims

A legal document where one party gives up the right to sue another party.
Valuation

Rent Roll

A document listing all tenants, their lease terms, and the rent they pay for a property.
Valuation

Replacement Cost

The cost to replace an asset with a new one of similar utility, without accounting for depreciation.
Legal

Representations and Warranties

Promises made by the seller about the business, backed by legal guarantees.
Marketing

Reputation Management

Reputation management is how a business controls and influences its public image and perception.
Legal

Restrictive Covenants

Rules that limit what a property owner can do with their land or what an employee can do after leaving a company.
Financing

Retainer Fee (Advisor)

A retainer fee is an upfront payment to an advisor for their services, securing their availability and commitment to a project or a period of time.
Marketing

Return on Ad Spend (ROAS)

ROAS measures the revenue generated for every dollar spent on advertising. It helps businesses understand the effectiveness of their ad campaigns.
Legal

Right of First Refusal (ROFR)

A contractual right giving a party the first opportunity to buy something before it is offered to others.
Financing

ROBS (Rollover for Business Startups)

ROBS lets you use your retirement funds to buy or start a business without paying early withdrawal penalties or taxes.
Process

Roll-Up Strategy

A business strategy where a company acquires and merges multiple smaller companies in the same industry to create a larger, more dominant entity.
Financing

Rollover Equity

When a business owner sells most of their company but keeps some ownership in the new, larger entity.
Marketing

Route Density

Route density measures how many customers or deliveries are along a specific route or within a geographic area. It helps businesses plan efficient travel.
Valuation

Route Density (Landscaping)

Route density in landscaping means how close together a service business’s customers are. Higher density means less travel time and more profit.
Valuation

Rule of Thumb

A general principle or guideline based on experience, not strict accuracy. It offers a quick way to estimate something without complex calculations.
S
Tech

SaaS (Software as a Service)

SaaS is a software distribution model where a third-party provider hosts applications and makes them available to customers over the internet.
Legal

Sales Tax Audit

An official review of a business’s sales tax records by a government agency to ensure compliance with tax laws.
Financing

SBA 504 Loan

A government-backed loan program for small businesses to buy or improve real estate and equipment.
Financing

SBA 7(a) Loan

A government-backed loan program for small businesses, offering favorable terms and lower down payments.
Financing

SBA Express Loan

A streamlined loan program from the Small Business Administration (SBA) designed to provide quick access to capital for small businesses.
Financing

SBA Form 1919 (Borrower Information)

SBA Form 1919 collects borrower information for SBA loan applications, ensuring eligibility and proper use of funds.
Financing

SBA Form 413 (Personal Financial Statement)

A document required by the Small Business Administration (SBA) that details an individual's assets, liabilities, and net worth.
Financing

SBA Form 4506-C (Tax Transcript Request)

A form used to request tax transcripts directly from the IRS, often required for SBA loans.
Financing

SBA Guarantee Fee

A fee charged by the Small Business Administration (SBA) for guaranteeing a portion of a loan made by a lender to a small business.
Financing

SBA SOP (Standard Operating Procedures)

The SBA SOPs are the rules and guidelines the Small Business Administration uses for its loan programs. They cover everything from eligibility to loan servicing.
Valuation

Scrap Value

The worth of a physical asset if it were to be broken down and sold for its individual components or materials.
Valuation

SDE (Seller's Discretionary Earnings)

SDE is the total financial benefit an owner gets from their business before taxes and non-business expenses. It shows the true profit available to a single owner.
Process

Search Fund

A Search Fund is an investment vehicle where an entrepreneur raises money from investors to acquire and operate a single private company.
Marketing

Seasonality

Seasonality refers to predictable changes in a business’s sales or activity levels that happen at certain times of the year.
Financing

Seller Carry

Seller Carry is when the seller of a business acts as the bank, providing a loan to the buyer for a portion of the purchase price.
Financing

Seller Note

A loan made by the seller to the buyer to cover a portion of the purchase price.
Legal

Set-Off Rights

Set-off rights allow a party to deduct a debt owed to them from a debt they owe to another party, simplifying settlements.
Legal

Severability Clause

A clause in a contract stating that if one part is found illegal or unenforceable, the rest of the contract remains valid.
Marketing

Share of Wallet

Share of Wallet measures the percentage of a customer’s total spending in a category that goes to your business.
Valuation

Shrinkage

Shrinkage is the loss of inventory due to theft, damage, or errors. It reduces a business’s profit.
Process

Simultaneous Sign and Close

Simultaneous Sign and Close means signing all legal documents and closing the deal at the same time. It speeds up the sale process.
Process

Site Visit

A site visit is when a potential buyer physically inspects a business location to assess its operations, assets, and overall condition.
Valuation

Snow Contracts (Seasonality)

Snow contracts are agreements for snow removal services, often seasonal, impacting a business’s cash flow and valuation due to their periodic nature.
Tech

Social Media Admin Rights

Social Media Admin Rights give someone full control over a business’s social media pages, allowing them to post, manage content, and change settings.
Process

Soft Offer

A non-binding offer for a business, usually made early in the sales process.
Tech

Software License Compliance

Ensuring that all software used within a business is properly licensed and adheres to the terms of those licenses.
Tech

Source Code Ownership

Source Code Ownership defines who legally owns the underlying code of a software product, impacting rights to use, modify, and sell it.
Financing

Source of Equity

Where the money comes from to buy a business, like personal savings, investors, or loans.
Legal

Specific Performance

A court order forcing a party to fulfill the terms of a contract, often used when monetary damages are insufficient.
Process

Standard Operating Procedures (SOPs)

Step-by-step instructions for routine tasks in a business.
Financing

Standby Creditor Agreement

A Standby Creditor Agreement is a legal document where one creditor agrees to take a secondary position to another creditor, especially if the business faces financial trouble.
Financing

Standstill Agreement

A standstill agreement is a contract that prevents parties from taking certain actions for a set period, often used in mergers or debt negotiations.
Financing

Stay Bonus

A payment to an employee to encourage them to stay with the company during a sale or transition period.
Legal

Stock Power

A legal document used to transfer ownership of stock from one party to another, often without needing the actual stock certificate.
Valuation

Strategic Premium

An extra amount a buyer pays for a business due to specific advantages it offers them, beyond its standalone market value.
Financing

Subordination Agreement

A legal document that ranks one debt behind another in terms of repayment priority.
Financing

Success Fee (Broker)

A fee paid to a broker only if a business sale successfully closes. It’s typically a percentage of the sale price.
Legal

Successor Liability

Successor liability means a buyer can be held responsible for a seller’s past debts or legal issues after buying their business.
Valuation

Supplier Concentration

Supplier Concentration is when a business relies heavily on one or a few suppliers for its goods or services.
Legal

Survival Period

The time after a deal closes when certain promises made by the seller can still be enforced by the buyer.
T
Legal

Tail Coverage (Insurance)

Tail Coverage is an insurance policy that covers claims made after a claims-made policy has expired, for incidents that occurred while the policy was active.
Process

Tail Period (Broker Contract)

A tail period in a broker contract extends the broker’s right to a commission even after the contract ends, for buyers introduced during the contract term.
Legal

Tax Clearance Certificate

A document from the government showing a business has paid all its taxes. It’s needed for selling a business to prove good standing.
Process

Teaser Profile

A short, anonymous document used to gauge buyer interest in a business without revealing its identity.
Tech

Tech Debt

Tech debt is the cost of choosing an easy, limited solution now instead of a better, more complex one that would take longer.
Tech

Tech Stack

The collection of technologies a business uses to build and run its products or services.
Legal

Tenant Improvement (TI) Allowance

Money a landlord gives a tenant to customize a rental space.
Marketing

Territory Rights

Exclusive rights granted to a business to operate within a specific geographic area, preventing others from selling the same product or service there.
Financing

Third-Party Business Valuation

An independent appraisal of a business’s value, performed by an unbiased expert.
Tech

Ticketing System

A ticketing system helps businesses manage customer support requests and internal tasks efficiently.
Process

Tire Kicker

A “tire kicker” is someone who shows interest in buying a business but isn’t serious about making an offer.
Marketing

Traffic Sources

Traffic sources are the channels that bring visitors to a website or business, like search engines, social media, or direct links.
Process

Transfer Fee

A fee charged when ownership of an asset or property is transferred from one party to another.
Process

Transition Period

The time after a business sale when the old owner helps the new owner take over operations.
Legal

Triple Net Lease (NNN)

A Triple Net Lease (NNN) is a commercial real estate lease where the tenant pays for rent, property taxes, insurance, and maintenance.
Valuation

TTM (Trailing Twelve Months)

TTM refers to the past 12 consecutive months of a business's financial performance, regardless of the fiscal year end.
Process

Turnkey Business

A business set up to operate immediately with existing systems, staff, and customer base.
U
Legal

UCC-1 Financing Statement

A legal form a creditor files to give notice that it has a claim on a debtor’s assets.
Legal

UCC-3 Termination Statement

A UCC-3 Termination Statement removes a lien from a business asset, showing the debt is paid off.
Valuation

Unearned Revenue (Deferred Revenue)

Money received for goods or services not yet delivered. It is a liability until the service or product is provided.
Valuation

Unreported Income

Income a business earns but does not report to tax authorities. This can be added back to profit for valuation purposes.
Tech

Uptime / SLA

Uptime is how long a system is working. SLA is a promise about that uptime.
Financing

Use of Proceeds

Use of Proceeds explains how a business plans to spend the money it raises from a sale or investment.
Marketing

Utilization Rate

The percentage of an asset’s maximum potential output that is actually being achieved.
V
Marketing

Value Proposition

A statement that explains why a customer should buy a product or service from a particular company.
Financing

Variable Interest Rate

An interest rate that changes over time based on a benchmark rate, affecting loan payments.
Legal

Vendor Contracts

Agreements between a business and its suppliers for goods or services, outlining terms, pricing, and responsibilities.
Process

Vetting Process

The Vetting Process is how buyers check out a business before buying it. It covers everything from finances to legal stuff.
Financing

VTB (Vendor Take-Back Mortgage)

A VTB is when the seller of a business acts as the lender for part of the purchase price, allowing the buyer to pay them back over time.
W
Valuation

W-2 vs. 1099 Employees

W-2 employees are traditional employees with taxes withheld. 1099 contractors are self-employed, responsible for their own taxes.
Valuation

Weighted Average Margin

A method to calculate an average profit margin for a business with multiple products or services, considering each product’s sales volume.
Valuation

Weighted Average SDE

A method to calculate a business's average annual profit, giving more importance to recent years.
Valuation

WIP (Work in Progress)

WIP refers to partially finished goods waiting for completion. It is an asset on the balance sheet, representing costs incurred for products not yet sold.
Process

Wire Cut-Off Time

The deadline set by banks for submitting wire transfer requests for same-day processing.
Valuation

Workers' Comp Mod Rate

A factor used by insurance companies to adjust workers' compensation premiums based on a business's claims history.
Valuation

Working Capital Peg

A specific target amount of working capital a seller must leave in the business at closing.
Y
Valuation

Year-over-Year (YoY) Growth

Measures the percentage change in a financial metric compared to the same period in the previous year.
Z
Legal

Zoning Compliance

Zoning compliance means a property or business meets local land use rules. These rules cover how land can be used, building size, and other development standards.

Frequently Asked Questions

Straight answers to common business-acquisition terms and concepts.

Why are there so many acronyms in buying a business?

Brokers, accountants, and lenders use acronyms like SDE, EBITDA, and LOI to standardize how they talk about money and deals. It helps them compare different businesses quickly, but it can feel like a secret language if you haven't seen it before. This dictionary translates that "broker speak" into plain English so you can understand exactly what you're buying.
A-Z index: Browse all glossary terms.Need context? Try the free valuation tool.