Exit Desk · Mikeye.com
Exit Desk Glossary
M&A and exit-readiness vocabulary, defined for small business owners. Every term includes the standard definition, what it means for you as the seller, and the buyer's lens on the same term — written from 25 years and 75+ transactions across $500K to $2B+ deals, applied to businesses from sub-$1M owner-operated to lower-middle-market platforms.
The Money
EBITDA
The earnings number buyers use to value mid-sized businesses. Stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.
SDE (Seller's Discretionary Earnings)
The earnings number that matters for most small businesses. Includes the owner's salary, benefits, and personal expenses.
SDE vs EBITDA
Which earnings number applies to your business — and why most small businesses use SDE, not EBITDA.
Add-backs
Expenses on your books that don't really belong to the business — added back to show your true earnings.
Disallowed Add-backs
The add-backs buyers refuse to accept — and how they cost you more than the line item.
Quality of Earnings (QoE)
A formal report that rebuilds your earnings from scratch — what serious buyers commission before they close.
The Mechanics
Earnout
A piece of your sale price you only get paid if the business hits future targets after closing.
Earnout vs Cash at Close
A higher headline price with an earnout often beats a lower all-cash offer — until you do the math.
Holdback
Money the buyer keeps from your sale price for a set period — in case something goes wrong after closing.
Escrow
A neutral third-party account that holds money during a deal — so neither side can grab it if things go sideways.
Working Capital Peg
The amount of operating cash and inventory you have to leave in the business at closing — often a surprise to sellers.
Re-trade
When a buyer lowers the price after the LOI is signed — usually citing something they "found" during diligence.
Rep and Warranty Insurance
A policy that covers the buyer if they discover problems after closing — and lets you keep more of your sale price up front.
Asset Sale vs Stock Sale
The two ways a business changes hands — and one of them usually saves the buyer hundreds of thousands in taxes at your expense.
Seller Financing
When you, the seller, lend the buyer part of the purchase price — common in small-business deals, and not always optional.
Rollover Equity
When the seller keeps a piece of the business by reinvesting some of the sale proceeds into the new ownership structure.
Management Buyout (MBO)
When your existing management team buys the business from you — sometimes the cleanest exit, sometimes the most complicated.
Management Buy-In (MBI)
When an outside executive (or team) buys the business and steps in to run it — common with search funders and turnaround buyers.
PE Roll-Up
A private equity strategy that buys many small businesses in the same industry and combines them into one larger company — often the buyer behind small-business sales today.
DSO and Vertical Roll-Ups
Industry-specific roll-up vehicles — DSO for dental, MSO for medical, others for HVAC, plumbing, vet, and accounting — increasingly the dominant buyer for small practices.
ESOP vs Strategic Sale
Selling to your employees through an Employee Stock Ownership Plan vs. selling to an outside buyer — different tax treatment, different price, different legacy.
Indemnification
Your contractual promise to make the buyer whole if something you said about the business turns out to be wrong.
Material Adverse Change (MAC)
A clause that lets the buyer walk away from the deal if something really bad happens to your business between LOI and closing.
Recasting Financials
Restating your financial statements to show what the business really earns — the work behind every credible add-back.
Value Drivers
The specific characteristics of your business that make buyers willing to pay a higher multiple — and what to invest in before going to market.
Value Drags
The structural features of your business that knock down what buyers will pay — the exact opposite of value drivers, and usually fixable.
Recurring Revenue
Revenue that automatically continues each period under contract or subscription — the highest-quality form of revenue for valuation purposes.
Transferability
How easily your business — its customers, operations, contracts, and relationships — can move to a new owner.
The People
Customer Concentration
How much of your revenue depends on your biggest customers — and why buyers care more than you'd expect.
Customer Concentration Discount
The amount buyers knock off your price because they're worried about losing a key customer after the sale.
Owner Dependency
How much the business needs you personally to keep running — the single biggest valuation killer in small-business sales.
Owner Dependency Discount
The price cut buyers apply when the business depends too much on you — usually 20%–40% off the multiple.
Strategic Buyer
A company in your industry buying yours for synergy, not just financial return — usually pays the highest price.
Financial Buyer
An investor (usually a private equity firm) buying your business as an investment — pays based on return, not strategic fit.
Strategic vs Financial Buyer
The two big categories of business buyers — and why knowing which one you're talking to changes everything.
Family Office
A private investment vehicle for one wealthy family — increasingly buying small and mid-sized businesses directly.
Search Fund Buyer
An entrepreneur-investor pair raising capital specifically to buy and run one small business — a fast-growing buyer type for $1M–$10M deals.
Independent Sponsor
A buyer who finds the deal first, then raises the capital to do it — flexible, often credible, but harder to validate than a traditional PE buyer.
Value Gap
The difference between what your business is worth today and what you need it to be worth to fund your retirement — and the work required to close it.
Sellability / Exit Readiness
The measure of how prepared your business is to be sold — and what buyers will see when they evaluate it.
Buyer-Ready Business
A business that's been deliberately prepared for sale — clean financials, documented systems, transferable customer relationships, a real management team.
Key-Person Risk
The risk that the business depends too heavily on one person — usually the owner, sometimes a key employee — to keep functioning.
The Process
LOI (Letter of Intent)
The non-binding document where a buyer puts their offer in writing — and where most of the deal actually gets decided.
CIM (Confidential Information Memorandum)
The marketing document that sells your business to qualified buyers — your story, your numbers, your case for the price you want.
Due Diligence (What Kills the Deal)
The 30–90 day period where the buyer verifies everything you said about the business — and where the most deals fall apart.
NDA (Non-Disclosure Agreement)
The first document a buyer signs before seeing your numbers — and the only thing protecting your business from competitive damage.
Pre-Market Preparation
The work done before going to market to maximize valuation, attract better buyers, and reduce the risk of a deal falling apart in diligence.
Going to Market
The point at which a business actively starts engaging buyers — and the moment the seller's leverage peaks or collapses depending on preparation.
Deal Fatigue
The exhaustion that sets in during a long deal process — and one of the most common reasons sellers accept worse terms than they should.
The Frameworks
Pre-Market Action Plan
A ranked, sequenced list of the specific work to do before going to market — one of the four core deliverables of an Exit Desk report.
Buyer-Lens Analysis
The methodology behind Exit Desk — looking at your business the way a serious buyer will, before you sit down with one.
Diligence Pressure Map
A buyer-perspective view of where due diligence will focus first on your business — one of the four core deliverables of an Exit Desk report.
AI Exposure Assessment
A buyer-perspective evaluation of how artificial intelligence is reshaping your industry — and what that means for the value of your business at exit.
Founder Dependence
The specific form of owner dependency unique to founder-led businesses — where the founder is also the original visionary, the relationship hub, and the operational center.
Apply This To Your Business
Find out what a buyer would see in your business — before you talk to one.
The Exit Desk free assessment takes 2 minutes. If you'd rather see what a full report looks like first, read a sample.
Glossary
Exit Desk
Mike Ye