Explanation of Key Casino Business Broker Terms – A DEFINITIVE GUIDE TO BUSINESS TERMINOLOGY
If you’re new to the online business world, you’re likely to hear a lot of unfamiliar terms and phrases. The following are some of the words and their definitions.
A.)
APA (Asset Purchase Agreement)
The APA is a legally enforceable bilateral contract between a seller and a buyer. It is typically composed of the terms and conditions governing the sale of property, in which the buyer promises to purchase and the seller agrees to sell through the execution and delivery of the deed. Additionally, an APA is signed to avoid liability issues between sellers and buyers.
Add Backs
An add back is a cost that is deducted from profits. For example, if you spend \$10,000 on airline tickets to Hong Kong to attend a business conference, this expense will not be considered an actual operational expense.
Asset Sale
Sale of business assets without altering the parent company’s ownership structure; these assets may include the domain name, customer lists, and tools. The objective of an asset sale is typically to increase cash flow and liquidate the business.
B.)
Balance Sheet
It is a statement that details the business’s assets, liabilities, expenditures, and equity, among other things. The balance sheet summarizes the financial position of the business from its inception to the present.
Business Appraisal
A business’s estimated value. Unlike valuation, Business Appraisal is not a legally binding document and is only used as a temporary valuation. (For instance, the business appraisal estimated the classified listing website’s value at \$12 million.)
Bill of Sale
A written instrument issued by a seller to the buyer following the completion of the sale that serves as proof of ownership, assets, or money transfer.
C.)
Cash Flow
Profitability is calculated as net operating income minus expenditures. Cash flow is calculated by deducting all expenses from net revenue, such as salary, interest, taxes, and subscriptions.
Closing Statement
A closing statement is generated once all necessary documents have been signed by all parties involved, the buyer has assumed control of the new business, and the seller has received payment.
Copyright
It is an exclusive right granted to an individual or business that protects the original creator of works involving content, literature, art, performance, sound, film, or music from legal liability.
Commission
The fee agreed upon between the broker and the seller for facilitating the sale of a business. It is frequently expressed in terms of a percentage of the total asset sale value.
Covenant
It is a promise made as part of a contract. For instance, a contract was signed between buyer and seller agreeing not to disclose the transaction’s price to the public.
D.)
Due Diligence
Due Diligence is a systematic examination of a business by a prospective buyer. Due Diligence is typically conducted to verify asserted financials, books, records, user base, and traffic, among other things.
At CasinosBroker, due diligence is conducted in two stages: 1. Prior to the business being listed on the exchange, by “CasinosBroker”
2. By “Potential Buyer,” following the execution of the letter of intent and prior to the execution of the APA agreement.
Deal Flow
It is the total number of transactions occurring through a broker at any given time. Small brokers typically have a low deal flow, whereas large brokers typically have a high deal flow.
E.)
Earnest Money Deposit
A refundable token payment made by a potential buyer to a seller to demonstrate the buyer’s serious intent to negotiate.
Escrow
In this situation, a neutral third party holds the financial instrument, money, or asset on behalf of two other parties involved in the transaction.
For CasinosBroker, funds are typically held at a third-party service called escrow.com until the seller receives the business’s assets. Once the seller’s assets are transferred to the buyer and confirmed by the escrow.com team, money is released from escrow’s account to the seller.
Exclusivity
It is a contract that grants the broker the exclusive right to receive a commission if the business is sold during the exclusivity period by anyone, including the seller. During the exclusivity period, a seller is legally required to refrain from listing his business for sale with any other broker. Most brokers include an exclusivity clause in their “Representation Agreement.”
H.)
Hours to Manage
Weekly hours required to effectively manage an online business. It is critical to consider when determining the business’s value.
L.)
Listing Price
The price at which your online business will be listed for sale on our marketplace.
LOI (Letter of Intent)
A Letter of Intent is an agreement between a buyer and a seller outlining the terms of the buyer’s purchase of the business. The letter of intent serves as a road map for both the buyer and seller in the transaction. It includes all terms and conditions, the purchase price, the due diligence period, and any other baseline condition necessary to complete the transaction.
After the letter of intent is signed, the period of due diligence can begin.
N.)
NDA (Non-Disclosure Agreement)
Occasionally referred to as a Confidentiality Agreement, this is a legal contract between two parties that defines the business’s confidentiality. The parties to this agreement agree not to disclose any confidential information they have shared with one another.
A potential buyer is required to sign a non-disclosure agreement (NDA) before obtaining any information about a business listed on the CasinosBroker. This protects business owners from disclosing competitive information to competitors.
Non-Compete Agreement
It is a legally enforceable contract between the buyer and seller. A seller agrees in this agreement not to compete with the buyer in the same business for a specified period of time or in a specified geographic location. The majority of non-compete agreements are two or three years in duration.
P.)
Partnership
A legal structure for conducting business between two or more individuals.
P&L Statement (Profit & Loss Statement)
The profit and loss statement, alternatively called the income statement, summarizes a business’s financial performance over a specified time period. The profit and loss statement summarizes the business’s current and historical performance and assists in the preparation of the business appraisal.
S.)
SaaS (Software as a Service)
Unlike traditional desktop installations, cloud-based software applications are typically hosted over the internet and licensed on a subscription basis. For instance, Shopify and Dropbox.
T.)
TM (Trailing Twelve Months)
The financial report of a business is measured over a twelve-month period beginning on the date of the report. Occasionally, it is referred to as LTM (Last Twelve Months).
V.)
Valuation
The valuation of your business is the estimated price for which it is listed on our marketplace. The value of a business is determined by a variety of factors, including but not limited to the following:
- Business Trend (Increased/decreased/stable)
- Profitability during the TTM
- Traffic volume, Source of traffic, Duration of the business
- Customer base size
- Complexity of business management
A manual human valuation is typically recommended rather than relying on automated tools to obtain the correct valuation.