Glossary

Industry glossary

Key terms to understand the online business buying & selling market.

Multiple

Ratio between the sale price and monthly net profit. A 30x multiple means the price = 30 months of profit. It's the primary metric to evaluate a deal.

MRR (Monthly Recurring Revenue)

Monthly recurring revenue, typically used for SaaS. Represents active subscriptions billed each month.

ARR (Annual Recurring Revenue)

Annual recurring revenue. Equals MRR x 12. Used to gauge the size of a SaaS business.

Net Profit

Monthly net profit after all expenses (hosting, ads, tools, contractors). The multiple is calculated on this basis.

Churn Rate

Monthly customer cancellation rate. A 5% churn means 5% of customers leave each month. Critical for SaaS.

Due Diligence

In-depth audit process before buying: verifying finances, traffic, contracts, tech stack and legal structure.

Escrow

A holding account used during the transaction. Funds are locked until the asset transfer is finalized.

SDE (Seller's Discretionary Earnings)

Seller's discretionary earnings. Includes the owner's salary + net profit. Often used by Empire Flippers.

TTM (Trailing Twelve Months)

The last 12 rolling months. Used to calculate annualized revenue or profit on a recent basis.

Conversion Rate

Percentage of visitors who complete a purchase or action. A typical e-commerce converts between 1% and 3%.

Content Site

A site monetized through content (articles, guides) via display ads (AdSense) or affiliate marketing. Often passive income.

FBA (Fulfillment by Amazon)

E-commerce business where logistics are handled by Amazon. The seller ships inventory to Amazon, which manages storage, shipping and customer service.