The Language of
Selling a Business

Money the business owes to vendors, suppliers, or creditors for goods and services already received. Buyers examine accounts payable aging to assess whether the business pays its obligations on time and to identify any overdue liabilities that could affect working capital at closing.

Money owed to the business by customers for products or services already delivered. Buyers and lenders review AR aging reports to evaluate the quality of revenue — whether invoices are being collected, how long they're outstanding, and whether any receivables are at risk of going uncollected.

Expenses added back to net income during the recasting process to show a buyer the true earning power of the business. Common add-backs include the owner's salary, personal vehicle expenses, one-time legal fees, and non-recurring costs. Each add-back must be documented and defensible — unsupported add-backs are a frequent source of buyer pushback.

A transaction structure in which the buyer purchases specific assets of the business — equipment, inventory, customer lists, intellectual property — rather than the legal entity itself. Most Main Street business sales are structured as asset sales. The seller retains the legal entity and its liabilities; the buyer gets a clean start.

The two primary transaction structures for a business sale. In an asset sale, the buyer acquires specific business assets. In a stock sale, the buyer acquires the legal entity — including all its liabilities, contracts, and obligations. Buyers generally prefer asset sales; sellers often prefer stock sales for tax reasons. Structure is negotiated and has significant implications for both parties.

The system a business uses to record revenue and expenses — either cash basis or accrual basis. Cash basis records transactions when money changes hands. Accrual basis records them when they are earned or incurred, regardless of payment. The accounting method affects how financials look to a buyer and lender, and switching methods during preparation can create inconsistencies that raise questions during due diligence. Most SBA lenders require accrual-basis statements for underwriting.

A financial statement showing what the business owns (assets), what it owes (liabilities), and the difference between the two (equity) at a specific point in time. Buyers and lenders examine the balance sheet to assess financial health, working capital, debt levels, and whether the assets on paper match the reality of the business.

The legal document that transfers ownership of business assets from seller to buyer at closing. In an asset sale, the bill of sale is the primary instrument of transfer. It itemizes the specific assets being conveyed and is signed by both parties at or before closing.

The net value of a business's assets as recorded on the balance sheet — original cost minus accumulated depreciation. Book value is rarely what a business sells for. Most transactions are priced based on earnings (SDE or EBITDA multiples), not the accounting value of assets. A business with low book value can still command a high sale price if earnings are strong.

A licensed intermediary who represents a business seller in finding a buyer, marketing the business, and facilitating the transaction. Brokers are compensated by commission at closing — typically 8–12% for Main Street businesses. A broker's job begins after a decision to sell. Exit readiness preparation happens before a broker is engaged.

A formal assessment of what a business is worth, typically performed by a certified business appraiser. Valuation methods vary by business size and type — Main Street businesses are most often valued on an earnings multiple basis (SDE × multiple). A valuation reflects the business as it exists at the time of assessment; improving exit readiness before a valuation can increase the result.

A legally binding agreement between business co-owners that governs what happens to an ownership interest if a partner dies, becomes disabled, retires, or wants to exit. Relevant during due diligence — buyers want to confirm there are no ownership disputes or unresolved buyout obligations that could complicate the transaction.

The core deliverable of a Mahoney Road engagement. A comprehensive written report that evaluates a business's preparedness for sale across the seven strategic dimensions, provides a 0–100 readiness score, identifies gaps ranked by deal impact, documents areas of genuine strength, and delivers a three-tier action plan — Quick Wins, Foundation Builders, and Long-Term Improvements. The report belongs entirely to the client and remains valid as a preparation roadmap for one to three years after delivery.

This is a Mahoney Road-specific term.

A structured workbook provided to every Mahoney Road client during the engagement. The client populates it with critical business continuity information — vendor contacts, account numbers, login credentials, operational access details, and key relationships. It functions as an owner's manual for the business and becomes a transferability asset that gives a buyer confidence that operational continuity is documented and organized.

This is a Mahoney Road-specific term.

A state of preparation in which a business's financials, documentation, operations, and risk profile can withstand the scrutiny of a serious buyer and their lender without producing surprises. A buyer-ready business does not need to be perfect — it needs to be defensible. Gaps that are known, documented, and addressed before going to market are far less damaging than gaps discovered under pressure during due diligence.

A valuation metric more common in real estate than business sales, but occasionally applied to businesses with predictable, asset-backed revenue streams. Calculated by dividing net operating income by the value of the asset. A lower cap rate implies higher value and lower risk; a higher cap rate implies higher risk and lower relative value.

The actual movement of money into and out of a business over a period of time. Positive cash flow means the business generates more than it spends. Buyers and SBA lenders focus on free cash flow — what's left after operating expenses and debt service — as the primary measure of a business's ability to sustain itself and service acquisition financing under new ownership.

The final step in a business sale transaction, at which point documents are signed, funds are transferred, and ownership officially changes hands. The period leading up to closing typically involves final due diligence, financing approval, and resolution of any conditions or contingencies outlined in the purchase agreement.

Fees and expenses incurred at the time of closing — including attorney fees, transfer taxes, broker commissions, escrow fees, and filing costs. How closing costs are allocated between buyer and seller is negotiated as part of the purchase agreement. Sellers should account for these costs when calculating net proceeds.

Exposure to legal or regulatory liability resulting from failure to meet applicable laws, permits, licenses, or industry requirements. During due diligence, buyers look for unlicensed operations, expired permits, unresolved tax obligations, labor law violations, and environmental issues. Unresolved compliance risk can reduce price, require escrow holdbacks, or end a transaction.

The risk that the business will be disrupted during or after the ownership transition. Sources of continuity risk include owner dependency, undocumented processes, key employee departures, customer relationships tied to the seller, and vendor agreements that may not survive a change of ownership. Buyers price continuity risk into their offers.

Financial records that are accurate, consistent, and explainable across tax returns, profit and loss statements, and bank statements. Clean financials do not mean perfect financials — they mean financials a buyer and lender can understand and trust. The most common problem is inconsistency between what the tax return shows and what the P&L shows, without a clear explanation for the difference. That inconsistency is what buyers and lenders flag first.

Whether a business's contracts — with customers, vendors, suppliers, or partners — can be transferred to a new owner without requiring the other party's consent or triggering termination rights. Non-assignable contracts are a due diligence risk: if key revenue relationships are tied to contracts that require consent to transfer, a buyer may not be able to count on that revenue continuing after the sale. Reviewing contract assignability before going to market is a core part of exit preparation.

A risk condition in which a significant portion of revenue flows from a small number of customers. When one or two customers represent 30% or more of total revenue, buyers and lenders treat this as a material risk — the business is vulnerable if those relationships don't survive the ownership transition. High concentration can reduce a valuation multiple, require contract assignments, trigger escrow holdbacks, or result in a lower offer.

The average number of days it takes a business to collect payment after making a sale. A rising DSO can signal collection problems or customer financial stress. Buyers and lenders review DSO trends in accounts receivable aging to evaluate the quality and reliability of reported revenue.

A finding during due diligence serious enough to halt or significantly restructure a transaction. Common deal killers include undisclosed liabilities, financial records that don't reconcile, extreme owner dependency with no transition plan, unresolved legal matters, and customer concentration without binding contracts. Most deal killers are discoverable — and fixable — before a buyer is at the table.

The total amount of principal and interest payments required on outstanding debt over a given period. In the context of a business acquisition, debt service refers to the loan payments a buyer will owe on acquisition financing. SBA lenders evaluate whether business cash flow is sufficient to cover these payments — a key factor in financing approval.

A ratio used by SBA lenders to measure whether a business generates enough cash flow to cover required loan payments. Calculated by dividing net operating income by total debt service obligations. A DSCR of 1.25 is the typical minimum for SBA loan approval — meaning the business must earn $1.25 for every $1.00 of debt service. If DSCR falls short, the buyer may be unable to obtain financing, which ends the transaction.

An accounting method that spreads the cost of a tangible asset over its useful life. Depreciation reduces taxable income but is a non-cash expense — meaning the business hasn't actually spent that money during the period. In recasting, depreciation is often added back to show a buyer the business's true cash earnings before accounting adjustments.

Expenses run through the business that are personal, non-recurring, or at the owner's discretion rather than necessary for operations. During recasting, documented discretionary expenses are added back to net income to show the business's true earning power. Common examples include personal travel, vehicle payments, family member salaries, club memberships, and one-time purchases.

Necessary repairs or upkeep on equipment, facilities, or physical assets that have been postponed. Buyers and lenders conduct physical inspections during due diligence — deferred maintenance is visible, quantifiable, and used as negotiating leverage. A buyer who identifies $50K in deferred maintenance will typically reduce their offer by at least that amount, or require the seller to address it before closing. Addressing obvious deferred maintenance before going to market protects both valuation and deal terms.

A business's overall footprint across digital channels — its website, Google Business Profile, online reviews, social media, and search visibility. Buyers research businesses online before making contact, and lenders assess digital presence as part of underwriting for certain business types. A weak, inconsistent, or negative digital presence raises questions about business health and reputation — and can affect buyer confidence and offer strength before a conversation even starts.

An organized collection of the core documents a buyer and lender will request during due diligence. Built during a Mahoney Road engagement and owned entirely by the client. A complete, organized document vault signals operational maturity, accelerates due diligence, and reduces the friction that causes deals to slow down or fall apart. Key categories include corporate and legal documents, financial records, customer and sales documents, employee and HR documents, operational documents, and asset and facility records.

A detailed audit of a business's existing documentation against a comprehensive checklist of what buyers and lenders require during due diligence. Identifies what's present, what's missing, what's outdated, and what's at risk of being a problem. Included in the Optimization track engagement. Findings are reflected in the Business Exit Readiness Report.

This is a Mahoney Road-specific term.

The formal investigation a buyer and their team conduct after signing a letter of intent but before closing. The purpose is to verify the accuracy of everything the seller has represented about the business — financials, operations, legal compliance, customer relationships, contracts, and liabilities. Most deals that fall apart do so during this phase. The more prepared the business is before this process begins, the less friction and fewer surprises arise.

The window of time — typically 30 to 90 days — granted to the buyer after a letter of intent is signed to complete their investigation. The seller is usually required to provide access to records, answer questions, and cooperate with the buyer's advisors during this period. Issues discovered during due diligence frequently result in renegotiated terms, price reductions, or deal termination.

A transaction structure in which a portion of the purchase price is paid to the seller over time, contingent on the business hitting agreed-upon performance targets after the sale. Earn-outs are often proposed when a buyer believes the business's value depends heavily on future performance, owner involvement post-sale, or when there's a valuation gap between buyer and seller. They introduce risk for the seller — performance targets may not be met for reasons outside the seller's control.

A portion of the purchase price held back at closing — typically by a third-party escrow agent — pending satisfaction of specific conditions or the resolution of potential claims after the sale. Common in transactions with indemnification provisions, earnout structures, or unresolved due diligence issues. Escrow holdbacks protect the buyer; sellers should understand the amount, duration, and release conditions before agreeing to them.

The strategic question of when to begin exit preparation relative to a planned sale. The most common mistake business owners make is starting too late. Most exit preparation work — cleaning up financials, reducing owner dependency, documenting operations, addressing compliance gaps — requires 12 to 36 months to implement and demonstrate to a buyer. Owners who begin two to three years before their target exit date have significantly more options than those who start when they're already ready to sell.

Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of operating performance used to value larger businesses — typically those generating $2M or more in annual revenue. EBITDA multiples are standard in transactions involving institutional buyers, private equity, and strategic acquirers. For Main Street businesses below $2M, SDE is the more applicable metric.

The legal documents that establish and govern a business entity — articles of incorporation, articles of organization, operating agreements, bylaws, and related filings. Buyers review these documents during due diligence to confirm ownership structure, identify restrictions on transfer, and verify that the entity is in good standing with the state. Missing or outdated formation documents are a common due diligence problem.

How prepared a business is to withstand buyer and lender scrutiny during a sale process. A business with strong exit readiness has clean, defensible financials; documented processes; a team that can operate without the owner; stable, diversified customer relationships; and no unresolved compliance or legal issues. Exit readiness is about removing the gaps that give buyers leverage — before they find them.

One of the seven strategic dimensions evaluated in a Mahoney Road engagement. Refers to the accuracy, consistency, and defensibility of a business's financial records across tax returns, profit and loss statements, and bank statements. Financial integrity is the foundation of a credible transaction — buyers and lenders cannot make a confident offer or underwrite a loan on financials that don't reconcile.

An assessment of a business's financial record quality, documentation gaps, and clarity issues that could raise red flags during buyer due diligence. Conducted during the engagement to identify likely add-backs, accounting method issues, and inconsistencies between statements. The findings inform the Business Exit Readiness Report and the prioritized action plan.

This is a Mahoney Road-specific term.

A legal contract between a franchisor and franchisee that governs the right to operate under a franchise brand. For franchised businesses, the franchise agreement is one of the most critical documents in a sale — it dictates whether the franchise can be transferred, what approval process is required, what fees apply to a transfer, and whether the franchisor has right of first refusal. Buyers and lenders require review of the franchise agreement before proceeding with any franchised business acquisition.

An assessment of the distance between a business's current state and the standard a buyer or lender will apply during due diligence. A gap analysis identifies what's missing, what's weak, and what's at risk across financials, operations, documentation, team structure, and compliance. In a Mahoney Road engagement, the gap analysis is a core component of the Business Exit Readiness Report — gaps are ranked by deal impact so the owner knows what to fix first.

A free business listing on Google that controls how a business appears in Google Search and Maps — including its name, address, hours, photos, and customer reviews. Buyers routinely check a business's Google Business Profile as part of early-stage research. An unclaimed, incomplete, or negatively reviewed profile can raise questions about business health and reputation before a buyer ever contacts the seller.

The intangible value of a business beyond its physical assets — brand reputation, customer relationships, trained employees, and established systems. In a business sale, goodwill is the difference between the purchase price and the fair market value of the hard assets. Most Main Street business value is goodwill, which is why transferability matters so much — goodwill that's tied to the owner personally doesn't survive the sale.

The total income generated by the business before any expenses are deducted. Gross revenue is a starting point, not a valuation metric — a business with $2M in gross revenue and thin margins may be worth less than a business with $800K in revenue and strong profitability. Buyers look past gross revenue to understand margin, consistency, and what's actually left after costs.

One of the seven strategic dimensions evaluated in a Mahoney Road engagement. Refers to whether the business has the systems, processes, staffing, and market positioning to sustain and grow under new ownership. A business with strong growth infrastructure is more attractive to buyers who are paying a premium for future potential — not just past performance.

A contractual obligation by the seller to compensate the buyer for losses arising from breaches of representations and warranties made in the purchase agreement. Indemnification provisions define what the seller is on the hook for after closing — for how long, up to what dollar amount, and under what conditions. Negotiated carefully by both parties' attorneys.

The structured assessment used by Mahoney Road to establish a baseline readiness profile for an owner's business across all seven strategic dimensions. The survey identifies early risk signals, transferability gaps, and potential deal-killing issues — and determines which engagement track is the right fit. Results are provided to the owner immediately upon submission.

This is a Mahoney Road-specific term.

An examination of a business's active insurance coverage — general liability, property, workers' compensation, professional liability, and any industry-specific policies. Buyers and lenders verify that the business is adequately insured and that coverage is current. Gaps in insurance coverage, lapsed policies, or claims history can raise red flags during due diligence and may affect deal terms or financing approval.

Legally protected intangible assets of a business — trademarks, service marks, trade names, patents, copyrights, proprietary processes, and trade secrets. Buyers review IP ownership and registration during due diligence to confirm the business actually owns what it appears to own. Unregistered trademarks, informal licensing arrangements, or IP held personally by the owner rather than by the business entity are common due diligence problems.

A form of owner dependency or employee dependency in which the business's performance, relationships, or operational continuity depends critically on one or two individuals. If the departure of a single person — the owner, a top salesperson, or a technical specialist — would materially harm the business, buyers and lenders treat this as a material risk. Key man risk is quantified during due diligence and often addressed through employment agreements, transition periods, or escrow holdbacks.

Written permission from a landlord to allow a commercial lease to be assigned to a new owner. Required in most asset sales where the business leases its operating location. If the landlord has the right to deny consent or increase rent upon transfer, this can become a significant negotiating point — or a deal blocker — during the transaction process.

The transfer of a commercial lease from the current tenant (the seller) to the incoming tenant (the buyer). For businesses that operate from a leased location, the lease is often one of the most important assets being transferred. Buyers want favorable lease terms with sufficient remaining term and options to renew. A short remaining lease or an uncooperative landlord can significantly affect deal structure and value.

The conditions of a commercial lease agreement — including monthly rent, lease duration, renewal options, rent escalations, permitted use, and assignment rights. Buyers and SBA lenders examine lease terms carefully. A lease with less than three to five years remaining (without options to renew) can reduce a business's value or make it difficult to finance, because the buyer's ability to continue operating from the location is uncertain.

A non-binding document in which a buyer formally expresses intent to purchase a business at a stated price and on stated terms. Signing an LOI typically triggers an exclusivity period — during which the seller agrees not to negotiate with other buyers — and the formal due diligence process. Terms agreed in an LOI often shift once due diligence findings come in. A seller who enters due diligence with gaps already identified and addressed has significantly more leverage to hold the original terms.

The extent to which a business has capable people — beyond the owner — who can make decisions, manage employees, and sustain operations. Buyers, particularly at the Optimization tier, look for management depth as evidence that the business isn't dependent on the owner's presence. A business with a capable management layer is more transferable and commands a higher multiple than one where all decisions flow through the owner.

Two 30-minute advisory sessions included at the end of every Mahoney Road engagement — one at 30 days post-delivery and one at 60 days. The 30-day call focuses on progress against Quick Wins identified in the Business Exit Readiness Report. The 60-day call reviews Foundation Builder progress and serves as the bridge to continued advisory support if needed. Both calls are designed to maintain preparation momentum after the report is delivered.

This is a Mahoney Road-specific term.

See Valuation Multiple.

Revenue minus all operating expenses, taxes, interest, and depreciation. The bottom line of the profit and loss statement. For Main Street business valuations, net profit is the starting point for calculating SDE — not the end point. Buyers look at net profit in context of what was run through the business and how financials compare to tax returns.

A contractual provision in which the seller agrees not to open or operate a competing business for a defined period and within a defined geographic area after the sale. Non-competes are standard in business sale transactions — buyers are purchasing goodwill that includes customer relationships and market position, and they want assurance the seller won't immediately compete for that business. Terms are negotiated as part of the purchase agreement.

A legal agreement that prohibits a party from sharing confidential information received during the sale process. Executed before a seller provides detailed financial or operational information to a prospective buyer. An NDA is the first formal document exchanged in most business sale processes — no sensitive information should be shared without one in place.

A contractual provision preventing the seller from soliciting the business's employees or customers after the sale. Often included alongside a non-compete. Protects the buyer from a scenario in which the seller, while not directly competing, attempts to take key employees or customer relationships to another venture. Terms, duration, and scope are negotiated in the purchase agreement.

Financial statements adjusted to remove anomalies, one-time events, and personal expenses — reflecting the ongoing, sustainable performance of the business. Buyers and lenders use normalized financials as the basis for valuation and financing decisions. Raw tax returns are the starting point; normalized statements are what actually drive the offer. Inconsistencies between tax returns and normalized financials must be explainable and documented.

The governing document of a limited liability company (LLC) that establishes ownership percentages, member rights, management structure, and procedures for ownership transfers. Reviewed during due diligence to confirm ownership, identify transfer restrictions, and verify that a sale is permitted under the agreement's terms. Missing or outdated operating agreements are a common documentation gap.

The ability of a business to function, make decisions, and sustain performance without requiring the current owner's daily involvement. Operational independence is the practical expression of low owner dependency. Buyers at all levels value it; institutional and PE-backed buyers require it. A business that runs because of documented systems and a capable team — not because of one person's presence — is fundamentally more valuable.

The degree to which a business relies on the current owner's relationships, institutional knowledge, technical skills, or daily presence to function. High owner dependency is one of the most common deal-killers in Main Street business transactions. When buyers assess owner dependency, they're asking: what happens to this business the day after I take over? A business where the answer is uncertain is a business with a discount built into the offer.

The portion of a business's value that is attributable specifically to the owner — their personal relationships, reputation, expertise, or sales ability — rather than to the business as a standalone entity. Personal goodwill doesn't transfer in a sale. When a significant portion of a business's value is personal goodwill, buyers discount accordingly. Reducing personal goodwill — by documenting processes, transitioning relationships, and developing team capability — directly improves business value.

Written records of how a business's core operations are performed — step-by-step instructions, workflows, and standard operating procedures that allow someone other than the owner to run the business. Process documentation is one of the most direct ways to reduce owner dependency. A business with documented processes is more transferable, easier to finance, and more valuable than one where critical knowledge lives only in the owner's head.

An investment firm that acquires businesses using a combination of equity and debt, typically with the goal of improving performance and selling at a profit within a defined time horizon (usually 3–7 years). PE buyers are common in the Optimization tier ($1.5M–$5M revenue) and expect enterprise-level transferability, management independence, and documented operations. They conduct the most rigorous due diligence of any buyer type.

A financial statement that summarizes revenues, costs, and expenses over a specific period — showing whether the business is profitable. Also called an income statement. Buyers and lenders request P&Ls for the trailing three years as a baseline. Inconsistencies between P&Ls and tax returns — without clear explanation — raise immediate red flags during due diligence.

The definitive legal contract governing the sale of a business — signed by buyer and seller at or before closing. Sets out the final purchase price, payment structure, asset schedules, representations and warranties, indemnification provisions, non-compete terms, conditions to closing, and post-closing obligations. The purchase agreement is the document that makes the sale official and binding. Every provision in it reflects the outcome of due diligence and negotiation.

A third-party financial analysis — typically commissioned by the buyer — that examines the reliability, sustainability, and accuracy of a business's reported earnings. Common in transactions above $2M in revenue. A QoE looks at whether revenue is recurring, whether margins are sustainable, whether add-backs are defensible, and whether the financial statements tell the full story. Surprises in a QoE frequently trigger price renegotiation or deal termination. Having clean, well-documented financials before a QoE is ordered is the best preparation.

The process of adjusting a business's financial statements to reflect true, sustainable owner benefit. Also called normalization. Involves adding back the owner's compensation, personal expenses, one-time costs, and non-recurring items to show what the business actually earns under normal operating conditions. Recast financials are what buyers use to build an offer and what lenders use to underwrite a loan. The strength and documentation of your add-backs directly affects how credibly a buyer can make their offer.

A 0–100 numerical score produced by a Mahoney Road engagement that reflects a business's overall exit readiness across the seven strategic dimensions. Each dimension is scored independently and contributes to the composite score. The score gives the owner a clear, quantified picture of where the business stands — and provides benchmark context so they understand what the number means relative to what buyers and lenders typically require.

This is a Mahoney Road-specific term.

The three-tier action plan delivered as part of the Business Exit Readiness Report. Organizes findings into Quick Wins (low-effort, high-impact items to address immediately), Foundation Builders (structural fixes that take time but significantly improve exit readiness), and Long-Term Improvements (items worth starting now that compound over the preparation period). The roadmap is the practical output the owner acts on after the report is delivered.

This is a Mahoney Road-specific term.

Factual statements made by the seller in the purchase agreement — assertions about the accuracy of financials, absence of undisclosed liabilities, compliance status, and other material facts. If a representation or warranty turns out to be false after closing, the seller may be liable for resulting damages. Representations and warranties are negotiated carefully and tie directly to indemnification provisions.

A valuation method that prices a business as a multiple of its annual gross revenue rather than its earnings. Less common for Main Street businesses, which are typically valued on an earnings basis. Revenue multiples are occasionally applied in high-margin or subscription-based businesses where top-line revenue is a reliable proxy for value. For most independently owned businesses, earnings-based multiples (SDE or EBITDA) are more appropriate and more common.

The most common financing vehicle for Main Street business acquisitions. A government-backed loan program administered through SBA-approved lenders, allowing buyers to finance up to 90% of a purchase price with as little as 10% down. SBA 7(a) loans are subject to strict underwriting requirements — including DSCR minimums, business financial review, and lender due diligence. Most Foundations-tier transactions are financed this way.

A transaction structure in which the seller accepts a portion of the purchase price as a promissory note, paid by the buyer over time from business earnings. Often used to bridge a valuation gap, supplement SBA financing, or signal the seller's confidence in the business's future performance. SBA lenders sometimes require seller financing as a condition of approval for Main Street transactions.

The total financial benefit an owner-operator derives from a business in one year. Calculated by starting with net profit and adding back the owner's salary, personal benefits, one-time expenses, depreciation, and other discretionary items. SDE is the primary valuation basis for independently owned businesses generating under $2M annually. A business earning $250K in SDE at a 3x multiple is typically valued at approximately $750K. The quality and documentation of SDE add-backs directly affects how defensible the valuation is under buyer scrutiny.

The term used to describe the wave of Baby Boomer business owners approaching retirement age who will be looking to exit their businesses over the next decade. Estimates suggest trillions of dollars in business value will change hands as this generation exits. For sellers, the Silver Tsunami means increased competition — more businesses will come to market simultaneously, and buyers will have more options and more selectivity. Prepared businesses will stand out; unprepared businesses will struggle to find qualified buyers at acceptable prices.

A documented, step-by-step set of instructions for performing a specific business process or task. SOPs are the practical output of process documentation — they allow employees to perform critical functions consistently without the owner's involvement or oversight. A business with written SOPs for its core operations is meaningfully more transferable than one without them. Buyers see SOPs as evidence that the business runs on systems, not on people.

A transaction structure in which the buyer purchases the ownership interest (stock or membership units) of the legal entity itself — rather than individual assets. The buyer inherits all assets and all liabilities, including any unknown or contingent liabilities. Sellers often prefer stock sales for tax treatment reasons; buyers generally prefer asset sales to avoid inheriting unknown liabilities. Structure is negotiated.

A buyer — typically an existing business or competitor — that acquires a company to achieve strategic objectives: expanding market share, gaining capabilities, eliminating competition, or accelerating growth. Strategic acquirers may pay above-market prices when an acquisition provides strategic value beyond standalone financials. Common in the Optimization tier.

Physical assets of a business — equipment, inventory, vehicles, furniture, and real estate. Tangible assets have a determinable market value and are itemized in an asset sale. Buyers and lenders verify the condition and value of tangible assets during due diligence. Overvalued or poorly maintained assets can reduce the agreed purchase price.

One of the seven strategic dimensions evaluated in a Mahoney Road engagement. Refers to the strength, stability, and independence of the business's people — whether key roles are filled, whether employees can operate without constant owner direction, and whether the team is likely to remain through a transition. Team instability is a significant source of buyer concern, particularly in service businesses where relationships and capabilities walk out the door with departing employees.

The prioritized recommendation structure delivered in every Business Exit Readiness Report. Tier 1 — Quick Wins: high-impact items that can be addressed immediately with relatively low effort. Tier 2 — Foundation Builders: structural improvements that take time to implement but materially strengthen the business's exit readiness. Tier 3 — Long-Term Improvements: items worth beginning now that compound over the preparation period. The three-tier structure helps owners act on findings without feeling overwhelmed.

This is a Mahoney Road-specific term.

The most recent twelve-month period of a business's financial performance, regardless of fiscal year. Buyers use TTM financials as the most current picture of how the business is performing. If TTM results are stronger than prior-year tax returns, TTM can support a higher valuation. If TTM is declining, buyers will scrutinize the trend and may discount accordingly.

The agreed-upon period after closing during which the seller remains available to assist the buyer — training them on operations, introducing them to key customers and employees, and transferring institutional knowledge. The length, structure, and compensation (if any) of the transition period are negotiated in the purchase agreement. A longer or more structured transition period can increase buyer confidence and support a stronger offer, particularly in owner-dependent businesses.

A formal contract that governs the seller's involvement with the business after closing — defining the scope, duration, compensation, and boundaries of post-sale assistance. Used when the seller's continued involvement is material to the transition and the buyer wants legally defined terms rather than informal arrangement. Common in transactions where the seller is providing training, customer introductions, or temporary operational support.

The ability of a business to continue operating and performing under new ownership, without the current owner's ongoing involvement. Transferability encompasses documented processes, trained employees, assignable contracts and leases, stable customer relationships, and systems that aren't dependent on institutional knowledge held only by the owner. Transferability is what buyers are ultimately paying for — a business that cannot transfer its value to a new owner has less value than one that can.

Critical business information — processes, customer preferences, vendor relationships, technical know-how — that exists only in the minds of specific individuals and has never been written down. Tribal knowledge is invisible to a buyer until something goes wrong. When the person who holds it leaves, it leaves with them. Buyers treat high levels of tribal knowledge as a transferability risk, and lenders see it as an operational risk that affects the business's ability to sustain itself post-sale.

A Uniform Commercial Code filing made by a lender to establish a security interest in a business's assets as collateral for a loan. UCC filings are public record and are searched by buyers and their attorneys during due diligence. Outstanding UCC filings must be resolved — typically by paying off the underlying debt — before or at closing, as they represent claims against the assets being transferred.

The number applied to a business's earnings to arrive at an estimated value. For Main Street businesses, multiples are applied to SDE; for larger businesses, to EBITDA. Multiples vary by industry, business size, profitability, growth trend, and risk profile. A business with low owner dependency, recurring revenue, documented operations, and diversified customers commands a higher multiple than a comparable business with unresolved risks. Exit readiness preparation directly influences the multiple a business can support.

The difference between a business's current assets (cash, receivables, inventory) and current liabilities (payables, short-term debt). Working capital measures a business's ability to meet near-term obligations and fund day-to-day operations. In many transactions, a working capital target is negotiated as part of the purchase agreement — requiring the seller to leave a defined amount of working capital in the business at closing. This affects net proceeds and is frequently a source of post-closing disputes when not addressed carefully.