See cash flow.
Refers to adjustments made to the Income Statement
by adding back line items and dollar amounts which would be available
to a new owner.
The sale of certain named assets of a corporation, partnership
or sole proprietorship. Usually the seller retains ownership of
the cash and cash equivalents (such as Accounts Receivable) and
the liabilities of the entity. The seller then will pay the liabilities
with the cash, any down payment and the cash equivalents as they become
cash. Assets named are typically trade name,
trade fixtures, inventory,
leasehold rights,
telephone number rights and goodwill. Assets sold can be tangible or
intangible.
An acronym for Common Area Maintenance. This is the charge for maintaining
the "common area" of a mall (walkways, parking, etc.) The cost is often
allocated to the tennants based on square footage leased.
The cash generated by a business which is available to a new owner to
pay owners salary, retire debt incurred by the purchase of the business
and give a reasonable return on the down payment. Components of
cash flow are often the current owners' salary, pretax profit, interest
which will not paid by a new owner, all or part of depreciation and expenses
a new owner may elect to forgo (contributions, dues and subscriptions).
A term used in real estate sales companies. It is equivalent to
gross profit in other entities. It is the gross sales less the commissions
paid to real estate agents of the firm.
An agreement by one party not to disclose information provided by
the other party, in exchange for receiving information considered
confidential by the second party. These agreements are usually used
by business brokers when they are about to disclose both the name and
business information of a seller to a potential purchaser. This allows
the purchaser and broker to freely discuss the information so that the purchaser
can have access to information for making buying decisions without
the seller being concerned that it will get in the hands of competitors,
customers, or employees.
We have a standard form that we use.
An agreement that the seller will be obligated to consult at reasonable times and places upon the request of the purchaser. Usually a value is assigned to the agreement as part of the purchase price. Such an agreement can be important where the seller has key knowledge that may be important to future operations.
An expression often seen in offers to purchase. It means that some part of the offer is conditioned upon the occurrence of some future event which itself is uncertain.
The quality of being contingent with the possibility of coming to pass. A passage in an offer to purchase that refers to some event being contingent is referred to as a contingency. A contingency is "removed" (no longer impedes the progress of the agreement) when the event actually occurs.
A term that covers the process of discovery into the risks and value of a business that is to be purchased. The usual application of the term is in confirming that the financial and record keeping aspects of the business are as represented. Sometimes called the "book check." This process usually takes place after an offer has been made and accepted, but prior to closing. But, more broadly speaking, it refers to the complete analysis of a business to assist a buyer in making decisions about the purchase. Examples could be review of corporate records, agreements, financing arrangements, employment issues, insurance information and legal matters. This term can also be applied to the seller evaluating the buyer. If the payment is deferred or contingent, the seller should investigate the buyer's business reputation, financial strength, credit history and plans for the business.
Funds paid by the purchaser of a business to the seller to indicate good faith in completing the negotiations and the subsequent transaction. Usually the broker will hold the funds in a Clients Trust Account until instructed by the escrow officer how to disperse them. If the negotiations result in a failed transaction, the broker will return the earnest money to the purchaser. In some negotiations, the earnest money is non-refundable and must be paid to the seller upon failure of the negotiations.
A document that combines the acknowledgement of receipt of earnest money for the purchase and sale of a business with the specific terms and conditions of the Agreement. Signatures by both the purchaser (who made the offer) and seller indicate that the price, terms and conditions of the Agreement are acceptable to both parties, subject to successful resolution of any contingencies noted in the Agreement. This document serves as a guide to the attorneys preparing and negotiating the final Sales Agreement and to the escrow officer.
An acronym for Earnings Before Interest, Taxes, Depreciation and Amoritization. It is similar to adjusted cash flow in that it expresses the cash available to a new owner to pay for the purchase of a business. This term is usually applied to "larger" businesses.
This refers to the use of a neutral third party to receive and distribute all necessary instruments and funds to complete the transaction of purchasing a business and/or real estate, or other assignable interests. Escrow instructions and closing statements are usually assembled by an escrow agent and signed by both the seller and purchaser as part of the transaction. Escrow agents will typically conduct searches for liens on the assets to be transferred, calculate the allocation of prepaid costs (such as utilities) between the seller and purchaser and perform any other tasks necessary to closing the transaction. Usually this cost is shared equally by the purchaser and seller.
An acronym for Furniture, Fixtures and Equipment, which often is the majority of the "hard" assets of a business. Can be used interchangeably with the term trade fixtures.
The intangible assets of a business, but
generally regarded as a combination of those factors that attract
continued patronage. Location and reputation are two examples. Any
value of a business over the net tangible asset value (depreciated value
of plant and equipment) is often considered goodwill, if the business
value is based on earnings. See blue sky.
An attribute of a web site: Total hits are the total number of files that
are requested from the server. This includes all graphics, audio/video files
and other supporting files, as well as the actual html page itself. And,
whether or not the files were successfully retrieved.
The property of a business, but without physical substance, such as
copyrights and patents. Their value lies in their ability to generate
profits. Both goodwill and
blue sky are intangible assets.
The rights that a lessee enjoys as a result of holding a lease.
The right to assume the unexpired term of a lease (provided that the
lease is assumable and that the landlord is agreeable).
A method of presenting an offer to purchase a business that outlines the general provisions of the offer and the intent of the parties, until a more complete, definitive agreement can be formalized that is based on the letter and subsequent negotiations. Non-binding provisions will generally address negotiable issues, while binding features will typically discuss exclusive dealing between the buyer and seller, the return of confidential materials, the non-solicitation of employees, the duty to negotiate in good faith, and the like. Often used in larger, more complex transactions.
An agreement between the seller and purchaser that the seller will not compete in any manner, for a stated period of time and within a stated geographical area, with the purchaser once the business has been purchased. It is intended to prevent the seller from operating in another firm and taking the customer base from the old business. These agreements should be reasonably limited in time and the area covered.
An attribute of a web site: the measure of how many times a complete page
of the web site is displayed to a viewer and does not include the supporting
graphic files. Every time a complete page is displayed it is counted as one
page view. Also known as page impressions.
An entity receiving the protection of the corporate form, but
being taxed as a partnership. Basically, the profits flow directly
to the stockholders, where they are taxed as personal income. Formerly
known as "Sub Chapter S."
The sale of a corporation in which the entire balance sheet
is sold. The purchaser assumes ownership of all assets of the
corporation as they appear on the balance sheet. Plus, assumes
responsibility for all liabilities, including those arising
from past acts of the corporation and possibly unknown at the
time of sale. Purchaser also takes ownership of the stockholders'
equity in the corporation.
