Broker’s Commission/Fee: The remuneration paid to the business broker for their services, typically a percentage of the sale price.
Business Appraisal: An assessment of a business’s likely market position and value drivers, usually informed by financial performance, buyer demand, industry conditions, and comparable transactions.
Business Broker: An agent who facilitates the sale and purchase of businesses.
Business Valuation: The process of determining the economic value of a business.
Business Value Insight: Practical insight into how a business may be viewed by buyers, including factors that can influence pricing, demand, risk, and negotiation strength.
C
Capital Gains Tax (CGT): A tax on the profit made from the sale of an asset, including a business.
Chattels: Movable items of personal property, often referring to plant and equipment within a business context.
Conditions Precedent: Specific events or actions that must occur before the Contract of Sale becomes unconditional (e.g., finance approval, lease approval).
Confidentiality Agreement/Non-Disclosure Agreement (NDA): A legal document signed by a prospective buyer to protect sensitive business information shared during due diligence.
Contract of Sale (Business): The legally binding agreement between the vendor and purchaser for the sale and purchase of the business.
D
Deposit: A sum of money paid by the purchaser to secure the business, held in a trust account until settlement – typically 10% of purchase price.
Disclosure Document (Franchising Code of Conduct): A document required by Australian law for franchisors to provide to prospective franchisees, outlining key information about the franchise system.
Division 135 (of GST Act): Refers to the specific GST law regarding the sale of a going concern, which can be GST-free if certain conditions are met.
Due Diligence: The process undertaken by a prospective buyer to investigate and verify the financial, legal, and operational aspects of a business before committing to a purchase.
Due Diligence Checklist: A comprehensive list of documents and information a buyer needs to review during due diligence.
E
Escrow: A financial arrangement where a third party holds and regulates payment of funds and documents required for two parties involved in a transaction.
Exclusive Listing: An arrangement where only one broker has the right to sell the business for a specified period.
Expression of Interest (EOI): A non-binding indication from a potential buyer expressing interest in acquiring the business, often including a proposed price range.
F
Formal Valuation: A valuation prepared by an appropriately qualified business valuer. Where a formal valuation is required, this can be arranged separately.
Franchise Agreement: A contract outlining the terms and conditions under which a franchisee operates a business under the franchisor’s brand and system.
Franchisee: The individual or entity operating a franchised business.
Franchisor: The owner of the franchise system.
Freehold Business: A business that owns its premises (real estate) in addition to the business operations.
G
Going Concern: A business that is actively operating and is expected to continue operating indefinitely. Sale of a business as a “going concern” often has GST implications.
Goodwill: The intangible asset of a business representing its reputation, customer base, brand recognition, and other non-physical attributes that contribute to its value.
GST (Goods and Services Tax): A broad-based consumption tax of 10% on most goods, services, and other items sold or consumed in Australia.
H
Heads of Agreement (HOA)/Letter of Intent (LOI): A non-binding document outlining the key terms and conditions agreed upon between the vendor and purchaser before the formal Contract of Sale is drafted.
I
Indemnity: A contractual agreement where one party agrees to compensate another for a loss or damage.
Information Memorandum (IM)/Business Profile/Sales Prospectus: A document prepared by the broker providing detailed information about the business for sale, including financials, operations, and key features.
L
Lease Assignment: The process of transferring the existing commercial lease agreement from the vendor to the purchaser.
Leasehold Business: A business that operates from leased premises, where the lease forms a significant asset.
M
Market Appraisal: An estimate of the likely selling price of a business, often provided by a broker.
Market-Based Appraisal: An appraisal informed by current market conditions, buyer demand, business performance, portfolio quality, and relevant transaction evidence.
Market-Informed Appraisal Guidance: Guidance that helps business owners understand their position in the market using sector knowledge, buyer behaviour, and transaction experience.
Memorandum of Understanding (MOU): Similar to an HOA or LOI, a non-binding agreement outlining the intentions of the parties.
N
Net Business Income (NBI)/Seller’s Discretionary Earnings (SDE)/Addbacks: The profit of a business before certain discretionary expenses (e.g., owner’s salary, personal expenses) are deducted, used to assess the true profitability for a buyer.
Non-Binding Indicative Offer (NBIO): Similar to an EOI, a preliminary offer to purchase a business that is not legally enforceable.
O
Open Listing: An arrangement where multiple brokers can attempt to sell the business, and only the one who procures the successful buyer earns commission. Less common in business sales due to complexity.
P
Plant & Equipment (P&E): Tangible assets used in the operation of the business, such as machinery, tools, vehicles, and furniture.
PPSR (Personal Property Securities Register): A national online register of security interests in personal property. Buyers should check this to ensure assets are not encumbered.
Post-Settlement Adjustments: Any final financial adjustments made after settlement, often for things that could not be precisely calculated at settlement.
Pricing Guidance: Guidance used to help establish a realistic asking price or price expectation based on business performance, buyer demand, and market conditions.
Pre-Settlement Inspection: A final inspection of the business by the purchaser before settlement to ensure everything is as agreed in the contract.
Purchaser/Buyer: The individual or entity acquiring the business.
R
Restrictive Covenant/Restraint of Trade: Clauses in the Contract of Sale preventing the vendor from competing with the sold business for a specified period within a defined geographical area.
Return on Investment (ROI): A performance measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments.
S
Sales Process: The structured steps involved in selling a business, from initial contact to settlement.
Search fund strategy: A Private Equity term for a fund that raises capital before it has found an asset to acquire.
Settlement: The final stage of the business sale process where ownership is transferred, and all financial transactions are completed.
Solicitor/Conveyancer: Legal professionals who handle the legal aspects of the business sale transaction.
Stamp Duty (Transfer Duty): A state or territory government tax levied on certain transactions, including the transfer of business assets and property.
Succession Planning: The process of identifying and developing new leaders and employees to take over positions in the business when current employees leave or retire, often relevant in family-owned businesses being sold.
T
Training Period: A period, often stipulated in the Contract of Sale, where the vendor provides training and handover assistance to the purchaser.
Transfer of Title and Risk: The point at which the legal ownership of the business assets and the associated risks pass from the vendor to the purchaser, typically at settlement.
Trust Account: A special bank account where a broker or solicitor holds client funds (like deposits) in trust.
U
Unconditional Contract: A Contract of Sale where all conditions precedent have been met, and the sale is legally binding.
V
Vendor: The current owner of the business who is selling.
Vendor Finance: A situation where the vendor provides a loan to the purchaser to help fund the acquisition of the business.
W
Warranty: A promise or guarantee made by the vendor about the business, its assets, or its operations, often included in the Contract of Sale.
Working Capital: The difference between current assets and current liabilities, indicating a business’s short-term liquidity.