CBI key terms

A professional who helps owners sell or buy small and mid-sized businesses, often handling valuation, marketing, negotiation, and the transfer of assets or ownership interests.

The practice of facilitating the sale, purchase, or transfer of privately held businesses and their assets, typically for companies smaller than those handled by investment banks.

A written contract between a business owner and a broker that sets out terms for marketing the business, including price, duration, commission, and the broker's authority to act.

A listing arrangement in which the broker earns a commission regardless of who produces the buyer, including the owner's own efforts, during the listing period.

A listing in which one broker is appointed as the sole agent, but the owner keeps the right to sell the business personally without owing a commission.

A non-exclusive arrangement allowing the owner to engage multiple brokers, with commission paid only to the broker who actually brings the successful buyer.

The broker whose efforts started an uninterrupted chain of events leading to the completed transaction, which usually determines who is entitled to compensation.

Compensation paid to a broker, usually a percentage of the sale price or a flat fee, agreed in writing before the broker performs services.

An arrangement where the seller names a minimum acceptable amount and the broker keeps any proceeds above it; widely restricted because it can create conflicts of interest.

An agreement in which a broker acts on behalf of a purchaser, providing services such as sourcing opportunities, valuation guidance, and negotiation support.

A written contract defining the scope, duration, and compensation terms under which a broker represents a business buyer rather than a seller.

A situation where one broker represents both buyer and seller in the same transaction, requiring full written disclosure and informed consent from both parties.

The legal obligation of a broker to act in the client's best interest, encompassing loyalty, confidentiality, disclosure, obedience to lawful instructions, and accounting for funds.

The duty to protect sensitive client information, such as financial records, sale motives, and negotiation positions, from unauthorized disclosure during and after the engagement.

A circumstance where a broker's personal, financial, or other interests could improperly influence professional judgment, requiring disclosure and often written consent.

A client's agreement to a proposed course of action after receiving a clear explanation of material facts, risks, and alternatives, given without coercion.

The affirmative duty to reveal material facts to clients and, where required, to other parties, so they can make decisions based on accurate information.

Information that a reasonable party would consider important when deciding whether to buy or sell, including known defects, liabilities, and significant financial circumstances.

A false or misleading statement of fact made to induce another party to act, which may create liability even when made without intent to deceive.

Intentional deception for personal gain, such as knowingly concealing material facts or falsifying financial records during a business sale.

A contract requiring a prospective buyer to keep confidential information about the business, such as financials and customer data, and to use it only for evaluation.

A marketing document prepared for qualified buyers that summarizes the business, its operations, financial performance, and growth opportunities without revealing the seller's identity.

A document describing an investment or business opportunity, including risks, terms, and financial details, used to inform prospective purchasers before they commit.

The process of screening prospective purchasers for financial capacity, relevant experience, and seriousness before sharing confidential information or arranging meetings.

Documentation, such as bank statements or a lender letter, showing that a buyer has the financial resources to complete a proposed acquisition.

A non-binding document outlining the proposed price, structure, timeline, and key conditions of a transaction before definitive agreements are drafted.

The buyer's investigation of a business before closing, covering financial records, contracts, liabilities, operations, and legal compliance to confirm assumptions and uncover risks.

A secure physical or virtual repository where sellers organize documents, such as financial statements and contracts, for review by qualified buyers during due diligence.

A deposit paid by the buyer to demonstrate commitment, typically held in escrow and applied to the purchase price or forfeited under specified conditions.

A neutral third-party arrangement that holds funds or documents until contractual conditions are met, protecting both buyer and seller during the transaction.

The binding contract that finalizes the terms of a business sale, including price, assets or shares transferred, representations, warranties, and closing conditions.

The final stage of a transaction when ownership transfers, funds are disbursed, and documents are executed, completing the sale.

A transaction in which the buyer purchases specific business assets, such as equipment, inventory, and goodwill, rather than the entity's ownership interests.

A transaction in which the buyer acquires the seller's ownership interests in the entity, taking the company with its assets and liabilities intact.

An intangible asset representing the value of a business's reputation, customer relationships, and brand beyond its tangible assets and liabilities.

The process of estimating a business's worth using methods such as income, market, and asset approaches, considering risk, growth, and comparable transactions.

A measure of small-business cash flow that adds back owner compensation, discretionary expenses, and non-recurring items to normalized net income.

A valuation factor applied to a business's earnings or cash flow, derived from comparable sales, to estimate an indicative selling price.

Data on prices paid for similar businesses in similar markets, used as a benchmark when estimating value and testing asking prices.

The price at which property would change hands between a willing buyer and seller, neither under compulsion, both having reasonable knowledge of relevant facts.

The specific point in time as of which a business's value is determined, since value changes with market conditions and company performance.

A written schedule describing how the seller will hand over operations, training, and customer relationships to the buyer after closing.

A long-term strategy for transferring ownership and leadership of a business, whether to family, employees, or outside buyers, to preserve continuity of operations.

A plan for how an owner will eventually leave the business, including timing, desired proceeds, and the method of sale or transfer.

A small, owner-operated enterprise serving a local market, typically valued on seller's discretionary earnings and sold to individual buyers.

A segment of companies larger than Main Street businesses but below institutional deal sizes, often attracting private equity and strategic buyers.

A written agreement defining the scope of a broker's services, fees, responsibilities, and the client's obligations before work begins.

Ongoing learning required or encouraged to maintain competence, covering changes in law, valuation methods, ethics, and transaction practice.

The duty to provide services only within one's knowledge and skill, or to disclose limitations and seek assistance when a matter exceeds one's expertise.

A formal set of principles and standards governing professional conduct, including honesty, fairness, confidentiality, and avoidance of deceptive practices.

The conduct expected of a business broker, including integrity, competence, courtesy, timely communication, and respect for clients, colleagues, and the public.

The practice of directing a client to another qualified professional, such as an attorney or accountant, with disclosure and without improper compensation unless permitted.

The improper mixing of client funds with a broker's personal or business funds, generally prohibited where funds must be held in a separate trust account.