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CBI: Business Brokerage Practice

CBI · Work through your exam, one topic at a time.

All guide sections

Business Brokerage Practice

The Business Brokerage Practice domain tests the transaction workflow: engagement, valuation, marketing, buyer qualification, confidentiality, offers, due diligence, and closing. Questions often ask what the broker should do next, so know the sequence and the purpose of each document. The exam assumes you understand that a business sale is a confidential, evidence-heavy process, not a listing that sells itself.

Core workflow

  • Engagement: use a written agreement covering scope, fee, term, and confidentiality.
  • Valuation: normalize financial statements; use SDE for smaller owner-operated businesses and EBITDA for larger or manager-run companies; support adjustments.
  • Marketing: prepare a blind profile first; release detailed information only after an NDA.
  • Buyer screening: verify funds available, relevant experience, and fit before sharing sensitive data.
  • Offers: compare price, terms, financing, earnest money, contingencies, and closing certainty-not price alone.
  • Due diligence: coordinate documents, keep disclosures accurate, and respect exclusivity or no-shop terms.
  • Closing: track escrow, prorations, transfer consents, and commission disbursement.

Worked example

A seller reports revenue of $2.0 million and seller’s discretionary earnings of $300,000. The broker identifies $40,000 of personal expenses that are legitimately added back, raising adjusted SDE to $340,000. Market evidence for comparable businesses supports a 2.5x to 3.0x multiple. The indicated range is $850,000 to $1,020,000. The broker does not multiply revenue by a rule of thumb; revenue without margin tells little about transferable cash flow. The broker also checks whether the price includes inventory and whether working capital is adequate, because those terms change the effective value.

Reasoning: the multiple applies to adjusted, supportable cash flow. Add-backs must be documented and defensible. The final price also depends on financing, earn-outs, and risk.

Traps

  • Using a revenue multiple without comparing margins.
  • Treating unsustainable add-backs as real earnings.
  • Sending the CIM before an NDA.
  • Presenting an offer as “best” based only on headline price.
  • Ignoring working capital, inventory, and escrow terms.
  • Letting a buyer inspect the business before financial qualification.

Know the document sequence and the economic logic behind each step.