Every industry has its own shorthand, and online business acquisitions are no exception. The problem is that misunderstanding a single term — like the difference between SDE and EBITDA, or asset purchase versus stock purchase — can cost you tens of thousands of dollars. Here are the 50 terms that actually matter, defined the way a working buyer uses them.
Deal Alert AI is reader-supported. We earn commissions from affiliate links at no cost to you.
This post is based on a video from our Deal Alert AI YouTube channel. Watch the original or read the full breakdown below.
I have watched first-time buyers lose good deals because they did not understand what a broker meant by "add-backs." I have watched others overpay by 40% because they took a seller's "revenue multiple" at face value without asking what the profit looked like. The vocabulary of acquisitions is not academic. It is the operating language of every conversation you will have with a broker, a lender, an escrow agent, and eventually a seller who is trying to protect their own number.
This glossary covers the 50 terms that come up most often in real deals. I have grouped them by where they appear in the process — general deal terms, financial terms, revenue metrics, traffic and SEO terms, deal structure terms, and platform terms — so you can use this as a reference rather than a wall of definitions. Where a term has a number attached to it in the real world, I have included the number.
When you email a broker at a firm like Empire Flippers or Quiet Light and ask a question using the wrong term, two things happen. First, you get a slower reply, because the broker has to figure out what you actually meant. Second — and this matters more — you get sorted into a mental bucket labeled "tire kicker." Brokers work on commission and their time is finite. They prioritize buyers who sound like they have closed a deal before.
The second reason vocabulary matters is that terminology is where sellers hide things. A listing that leads with "$1.2M in annual revenue" and buries the $84,000 in SDE is using a technically true number to create a false impression. A seller who describes a $45,000 owner salary as an "add-back" when they work 40 hours a week in the business is inflating the earnings figure that your purchase price is calculated from. If you do not know what these words mean precisely, you cannot catch the manipulation.
The third reason is speed. Good online businesses at fair multiples get multiple offers within days of listing. If you have to stop and Google "what does TTM mean" while reading a CIM, you are already behind the buyer who read the same document, ran the DSCR in his head, and submitted an LOI that afternoon. Fluency is not showing off. It is a competitive advantage measured in hours.
Key insight: The most expensive misunderstanding in small business acquisitions is confusing revenue with earnings. A content site doing $300,000 in revenue with $220,000 in content and hosting costs is an $80,000 SDE business, not a $300,000 business. At a 3.5x multiple that is a $280,000 asset — not the $1M+ some first-time buyers assume.
We scan Empire Flippers, Flippa, Acquire.com and Quiet Light daily — scoring every listing. Start free.
Acquisition entrepreneur is someone who builds wealth by buying and operating existing profitable businesses rather than starting from zero. The core logic is that you are paying 2.5x to 4x annual earnings for something that already has customers, revenue, and proven demand — instead of spending 18 months and $50,000 finding out whether an idea works at all.
Arbitrage in this context means buying at one multiple and selling at a higher one. A $150,000 SDE business bought at 3x costs $450,000. If you grow SDE to $250,000 and the business now qualifies for a 4x multiple because of its size, it sells for $1,000,000. That $550,000 gain comes from two sources: earnings growth and multiple expansion. Understanding both is how experienced buyers think about exit before they even close.
Broker is a professional who represents the seller. This is worth repeating: the broker is not your advocate. They are paid a percentage of the sale price, typically 10% to 15% on small deals. A buy-side advisor is the opposite — someone you retain to help you find, evaluate, and negotiate. CIM stands for Confidential Information Memorandum, the packet the broker assembles describing the business, its financials, operations, and asking price. Treat the CIM as a marketing document, because that is exactly what it is.
The rest of the general vocabulary follows the timeline of a deal. Due diligence (DD) is the period where you independently verify every claim. Data room is the shared folder of documents — P&Ls, bank statements, analytics access, supplier contracts — you review during DD. Earnest money is the good-faith deposit you put down when your offer is accepted, usually 5% to 10% of purchase price. Escrow is the neutral third party holding funds between signing and closing. Earn-out is a portion of the price tied to future performance. Closing is the moment documents are signed and money moves. Asset purchase means you buy specific listed assets rather than the legal entity.
SDE — Seller Discretionary Earnings — is the single most important number in small online business acquisitions. It is the annual profit available to a single owner-operator after all operating expenses but before that owner's own compensation and before genuinely non-recurring expenses. If a business generated $400,000 in revenue, spent $260,000 on real operating costs, and paid the owner a $60,000 salary, the SDE is $140,000, not $80,000. The owner's salary comes back because you, the buyer, will be that owner.
Add-back is any expense added back to net profit to reach SDE. Legitimate add-backs include the owner's salary, one-time legal fees for trademark registration, a personal vehicle run through the business, or a $12,000 rebrand that will not repeat. Illegitimate add-backs are the ones that will absolutely recur under your ownership: the virtual assistant who handles customer service, the freelance writer producing four articles a month, the $800/month SEO retainer. Every dollar of fake add-back inflates the price by the multiple — so a $20,000 bad add-back on a 3.5x deal costs you $70,000.
TTM means Trailing Twelve Months, the most recent 12 months of financial data, and it is the standard period for calculating SDE. Always ask whether the SDE quoted is TTM or a calendar year, because a business that peaked in Q4 of last year and has been declining since will look much healthier on a calendar-year basis. Multiple is the number you multiply SDE by to reach price — 3x on $100,000 SDE equals $300,000. EBITDA (earnings before interest, taxes, depreciation and amortization) is the term you will hear in larger, private-equity-style deals; below roughly $2M in earnings, SDE is the standard because the owner's labor is a material part of the equation.
DSCR — Debt Service Coverage Ratio — is SDE divided by total annual debt payments. If a business produces $180,000 SDE and your acquisition loan requires $95,000 a year in principal and interest, your DSCR is 1.89. SBA lenders in the US typically want to see 1.25 or better, and I personally will not sign on anything below 1.5 because it leaves no room for a bad quarter. Run this number before you fall in love with a listing, not after.
Watch out: Sellers sometimes present "adjusted SDE" or "pro forma SDE" that includes projected improvements — a planned price increase, a new ad network, a product launch that has not happened. You do not buy projections. Insist on SDE calculated from actual TTM bank deposits and expenses, and price only on that number. If the seller wants credit for future upside, that belongs in an earn-out, not the base price.
MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) are the core SaaS metrics. MRR is the current monthly snapshot of subscription revenue; ARR is that figure annualized. A SaaS with $18,000 MRR has $216,000 ARR. Note that SaaS businesses are often priced on a revenue multiple rather than an SDE multiple, especially above $500,000 ARR, which is why a SaaS with modest profit can still carry a seven-figure price tag.
Churn is the percentage of subscribers who cancel in a given period, and it is the number that determines whether a SaaS is an asset or a treadmill. At 3% monthly churn you lose roughly 31% of your customer base per year and must replace it just to stand still. At 8% monthly churn — which I see constantly on small listings — you lose about 63% annually, and the business is effectively re-acquiring its entire customer base every 18 months. Ask for cohort-level churn, not blended churn, because blended numbers hide a collapsing recent cohort behind loyal legacy customers.
RPM (Revenue Per Mille) is revenue per 1,000 pageviews, the defining metric for display-ad content sites. A finance site might run $35 to $60 RPM; a general lifestyle site might sit at $12 to $22; a site heavy on non-US traffic could be under $6. If a seller shows you 400,000 monthly pageviews and $4,000 in ad revenue, that is a $10 RPM — and it tells you the traffic quality and the geography before you even open analytics. GMV (Gross Merchandise Value) is the total transaction value flowing through a marketplace or store before fees, refunds, and cost of goods. Marketplace sellers love quoting GMV because it is the biggest number available; it tells you almost nothing about profit.
Organic traffic means visitors arriving from unpaid search results. For content sites and most affiliate businesses, this is the entire asset. If 90% of traffic is organic and 70% of that comes from ten URLs, you are not buying a business — you are buying ten rankings, and Google can revalue them overnight. I look for sites where no single page drives more than 15% of sessions and where the top 20 pages account for less than 60%.
Domain Authority (DA) is Moz's 0–100 predictive score for ranking ability. Domain Rating (DR) is Ahrefs' equivalent, weighted more heavily toward backlink profile strength. Neither is a Google metric and neither should be used as a valuation input on its own. What they are useful for is comparison: a site with DR 12 that ranks for competitive commercial terms is either sitting on an aged domain with hidden authority or is about to lose those rankings. A site with DR 60 built on link-scheme backlinks is a liability, not an asset.
The practical diligence work here is verifying that the traffic is real and durable. Get direct read-access to Google Analytics and Google Search Console — not screenshots, not a PDF export. Check the 36-month trend, not the 6-month trend that the seller chose to display. Overlay the known Google core update dates against the traffic chart. If every recent update produced a step down, you are buying a declining asset and the multiple should reflect that. Businesses on Flippa in particular require this level of verification because listing standards are minimal compared to curated marketplaces.
Key insight: DA and DR are third-party estimates, but Google Search Console impressions are Google's own data. When a seller's DR is impressive and their GSC impressions have been falling for nine months, believe the impressions. Impression decline almost always precedes traffic and revenue decline by one to two quarters — which means you can spot a deteriorating site before it shows up in the P&L.
LOI — Letter of Intent — is the non-binding document laying out the key terms of your proposed acquisition: price, structure, deposit, diligence period, exclusivity window, and financing contingencies. Non-binding does not mean casual. Once an LOI is signed, most brokers pull the listing from active marketing, which gives you 14 to 45 days of exclusivity to complete diligence. This is your leverage window; use it.
Asset purchase vs. stock purchase is the fundamental structural choice. In an asset purchase you buy specific enumerated assets — the domain, the code, the customer list, the trademarks, the supplier agreements — and leave the legal entity behind with the seller. That means you generally leave behind the entity's liabilities too: old tax obligations, pending lawsuits, unpaid vendors. In a stock purchase you buy the entity itself, and everything comes with it, good and bad. For online businesses under $5M, the asset purchase is standard and it is almost always the buyer-friendly choice.
Escrow and Escrow.com handle the money transfer. Escrow.com is the most widely used service for online business deals; larger transactions often move to a law firm's trust account or a specialized escrow provider. Seller financing means the seller carries a promissory note for part of the purchase price — say, 25% of a $600,000 deal paid over 36 months at 7%. This matters more than most buyers realize. A seller willing to carry paper is a seller who believes the business will still be generating cash three years from now. A seller who insists on 100% cash at close may be telling you something.
Earn-outs tie a portion of the price to future performance — for example, an additional $80,000 paid if TTM SDE stays above $200,000 twelve months post-close. Earn-outs are useful for bridging valuation gaps, but they create alignment problems: the seller wants short-term revenue, you want long-term durability. Define the measurement precisely in the purchase agreement, including who calculates it and what happens if you change the business model.
Empire Flippers is the premium marketplace known for rigorous pre-vetting. They verify financials and traffic before a listing goes live, which is why their listings carry higher multiples — typically 35x to 45x monthly net profit, or roughly 2.9x to 3.75x annual SDE. You pay a premium for reduced diligence risk, but you should still do full diligence.
Flippa is the largest marketplace by listing count with the lightest vetting. That combination is both the opportunity and the risk. There are genuinely mispriced assets on Flippa that never appear elsewhere, and there are listings with fabricated screenshots and traffic bought from bot networks. The buyers who do well on Flippa are the ones with a hard, repeatable verification process and the discipline to walk away from 95% of what they look at.
FE International is the leading marketplace for SaaS and technology acquisitions, generally in the mid-six to eight figure range, and their process resembles traditional M&A more than online business brokerage. Quiet Light is a boutique brokerage focused on larger, high-quality online businesses, staffed largely by brokers who have themselves bought and sold companies. Each platform has a different profile, and serious buyers monitor all of them rather than committing to one — which is exactly the problem Deal Alert AI was built to solve.
Before you send an LOI on any listing, you should be able to answer all of the following in writing. If you cannot, you do not understand the deal well enough to price it. This is the exact sequence I run on every listing that clears my initial screen.
Knowing these 50 terms is necessary but not sufficient. The real constraint on most buyers is not knowledge — it is time. There are thousands of active listings across Empire Flippers, Flippa, FE International, Quiet Light, Acquire, and a dozen smaller marketplaces at any given moment. Checking them manually takes hours a week, and the good listings at fair multiples move in days.
Deal Alert AI monitors those marketplaces continuously and parses every new listing using exactly the vocabulary in this glossary. It extracts SDE, TTM revenue, asking multiple, business model, traffic profile, and platform, then scores each listing against the criteria you define — your maximum multiple, your minimum SDE, your target DSCR at your financing assumptions, the asset classes you actually want to own. What arrives in your inbox each morning is a short list, not a firehose.
The point is not to replace your judgment. The point is to make sure your judgment gets applied to the right 5 listings instead of being exhausted on the wrong 500. Every term defined above corresponds to a field the system reads, normalizes across platforms, and filters on — so you spend your time on diligence and negotiation, the two parts of the process where a human buyer actually creates value. Start with the glossary, build your criteria, and let Deal Alert AI handle the monitoring.
We scan Empire Flippers, Acquire, Flippa, and Quiet Light daily. The best sub-$500K businesses are gone within 48 hours.