Thirty-six terms, defined for a deal this size.

Money and valuation 10

• SDE (seller's discretionary earnings)Annual net profit plus the owner's own salary, plus one-off and personal costs run through the business.
• Total owner benefitThe full annual value an owner extracts from a business: retained profit, salary, distributions and any personal or discretionary spending the business carries.
• Add-backsA cost in the accounts that a buyer accepts is not part of running the business, added back to net profit to reach SDE.
• Trailing twelve months (TTM)The most recent twelve completed months of actual results, not the best twelve months and not a forecast.
• Profit multipleThe number applied to a business's trailing twelve-month profit to reach a price, always stated annually.
• Revenue multipleA method that prices a business as a multiple of trailing twelve-month revenue rather than profit.
• MRR and ARRMRR is the recurring subscription revenue a business bills in a month, excluding one-off charges, and ARR is MRR multiplied by twelve.
• Net revenue retentionWhat an existing group of customers is worth after twelve months as a percentage of what they were worth at the start, counting upgrades, downgrades and cancellations but no new customers.
• ChurnThe share of customers, or of recurring revenue, lost over a period.
• Customer concentrationThe share of revenue coming from one customer or a small group of them.

Deal mechanics 8

• Letter of intent (LOI)A short document recording the price, structure and timetable a buyer and seller have agreed in principle, before diligence begins.
• Asset purchase agreement (APA)The contract that transfers named assets of a business from seller to buyer.
• Due diligenceThe period after an offer is accepted in which the buyer checks that the business is what the seller says it is.
• Asset saleA transfer of the individual assets of a business, such as code, domains, customer records and accounts, while the seller keeps the legal entity that owned them.
• Share saleA transfer of ownership in the company itself rather than its individual assets, so the buyer acquires everything the entity owns and everything it owes.
• EscrowAn arrangement where an independent, regulated third party holds the buyer's funds while the agreed assets transfer, then releases the full amount to the seller once the buyer confirms everything has arrived.
• Handover periodThe defined stretch of time after completion in which the seller helps the buyer take over running the business.
• Representations and warrantiesThe statements of fact a seller makes about the business in the purchase agreement, together with the promise that those statements are true.

Asset quality 8

• TransferabilityHow completely a business can change hands without losing the revenue, systems and customers that made it worth acquiring.
• Owner dependencyThe share of a business's revenue, operations and relationships that exists because of the specific person who owns it.
• Platform riskThe exposure a business carries when its traffic, distribution, payments or hosting sit on a third party that can change its rules without notice.
• Single-channel dependencyWhen one acquisition channel supplies most of a business's new customers, so the whole revenue line moves whenever that channel moves.
• Technical debtThe accumulated cost of shortcuts in a codebase and its infrastructure, meaning the work that has to be done before the product can change without breaking.
• Stack transferThe movement of every technical and commercial account a business runs on, from domain and hosting to code repository, payment processor, email and third-party APIs, into the buyer's control.
• Operating documentationThe written record of how a business actually runs day to day, covering the recurring tasks, the accounts, the suppliers, the standard support answers and the things that break.
• IP assignmentThe legal transfer of ownership in everything a business is made of, including code, designs, copy, trade marks, domains and data, from the seller to the buyer.

Market and Indiemaker 4

• Micro-SaaSA subscription software product built and run by one person or a very small team, solving a narrow problem for a defined group of customers.
• Digital assetThe full bundle a buyer acquires when they take over an online business, made up of intellectual property, distribution, data, operating history and the options the business creates.
• Small exitThe complete sale of a profitable online business for a figure most commonly between $50,000 and $150,000, to a buyer who intends to keep running it.
• The Ownership ShiftIndiemaker's term for what happens as AI collapses the cost of building, when the advantage moves from doing the work to owning the asset the work produces.

Pre-revenue valuation 6

Terms for assets with users or traffic and no earnings, where a multiple does not apply.

• Asset-based valuation– Asset-based valuation prices a business on what its component parts would be worth to a buyer assembling them from scratch, rather than on a multiple of earnings.
• Replacement cost– Replacement cost is what it would take in time and money to build the same asset again from nothing, using current tools and knowing in advance what to make.
• Monthly active users (MAU)– Monthly active users is the count of distinct people who take a meaningful action inside a product within a rolling thirty-day window.
• Cost per user– Cost per user is the purchase price divided by the number of active users or monthly sessions acquired with it.
• Monetisation path– A monetisation path is the specific sequence by which a buyer turns existing usage into revenue, named and costed before the purchase rather than after it.
• Traffic quality– Traffic quality is the difference between sessions that can be turned into revenue and sessions that merely register in analytics.