Glossary
What SDE, MRR, churn and payback mean in a business-for-sale listing
Short answer: listings use a small set of terms. Payback is the months of profit needed to recover the price, the annual multiple is the price divided by a year of profit, SDE is profit plus the owner's pay, MRR and ARR are recurring revenue per month and per year, churn is revenue or customers lost each month, and an earnout is part of the price paid later.
Payback period
The number of months of profit it takes to earn back the price you paid.
Formula: Payback in months = price ÷ monthly profit
Used in: What is a good payback period?
Annual profit multiple
The price divided by one year of profit; the usual way online businesses are priced.
Formula: Multiple = price ÷ (monthly profit × 12); payback in months = multiple × 12
Used in: How many times profit do online businesses sell for?
Asking multiple and sale multiple
The asking multiple uses the listed price; the sale multiple uses the price a deal actually closed at, which is often lower.
Used in: Listing benchmarks, October 2026
Median
The middle value when figures are sorted, so half are above and half below; less affected by a few extreme listings than an average.
Used in: Listing benchmarks, October 2026
Top quartile
The highest quarter of a set of figures; a top-quartile multiple is the level only the best quarter of sales reached.
Used in: What multiple should I pay for a $50k content site?
Net profit
Revenue minus every cost of running the business, before tax.
Formula: Net profit = revenue − all costs
Used in: SDE or net profit?
SDE (seller's discretionary earnings)
Pretax profit with the owner's pay and benefits, personal or one-off costs, interest and depreciation added back; what the business pays one owner-operator.
Formula: SDE = pretax profit + owner pay + add-backs
Used in: SDE or net profit?
Add-back
A cost the seller adds back to profit because they say a new owner would not pay it, such as their own salary or a one-off expense.
Used in: SDE or net profit?
EBITDA
Earnings before interest, taxes, depreciation and amortisation; for most small online businesses, close to net profit.
Used in: SDE or net profit?
Profit margin
Profit as a share of revenue; margins above about 90% usually mean costs are missing.
Formula: Margin = profit ÷ revenue × 100
Used in: Red flag: margin above 90%
Owner time cost
What it would cost to pay someone for the hours the owner works; subtract it from profit to compare businesses fairly.
Formula: Owner time per month = hours a week × hourly rate × 52 ÷ 12
Used in: True payback calculator
TTM (trailing twelve months)
The most recent twelve months of a figure, such as revenue or profit, rather than a calendar year.
MRR (monthly recurring revenue)
Subscription revenue a SaaS or membership expects to collect each month from active plans.
Used in: How to verify Stripe revenue
ARR (annual recurring revenue)
Recurring revenue expressed for a year; normally about twelve times MRR.
Formula: ARR ≈ MRR × 12
Used in: Red flag: ARR and MRR disagree
Churn
The share of revenue or customers lost each month; revenue churn matters more for price than customer churn.
Formula: Revenue left after 12 months with no new sales = (1 − monthly churn)^12
Used in: What churn rate is acceptable?
Customer concentration
How much revenue depends on the largest customers, sponsors or partners; one above a quarter of revenue is a risk.
Used in: Red flag: top customer over 25%
All-in multiple
Everything you pay at closing, including inventory bought on top of the price, divided by a year of profit.
Formula: All-in multiple = (price + inventory) ÷ (monthly profit × 12)
Used in: FBA value with inventory
Months of stock cover
How many months the inventory on hand lasts at the current rate of sales.
Formula: Months of cover = inventory at cost ÷ monthly cost of goods sold
Used in: FBA price check with inventory
Earnout
Part of the price paid later as a share of future profit or revenue, so the seller receives more only if the business performs.
Used in: How seller financing works
Seller financing (seller note)
A loan from the seller for part of the price, repaid monthly with interest after the assets transfer.
Formula: Coverage = monthly profit ÷ monthly note payment
Used in: Seller financing calculator
Letter of intent (LOI)
A short, mostly non-binding document setting out the price, terms and remaining checks before the final agreement.
Used in: How to buy a SaaS business
Asset purchase agreement
The binding contract that lists every asset being sold, the price and how it is paid, and what each side promises.
Used in: How to buy an online business
Escrow
A neutral service that holds the buyer's payment until the assets have transferred and the buyer approves.
Used in: How escrow works
Inspection period
The agreed time after the assets transfer during which the buyer checks them before escrow releases the money.
Used in: How escrow works
Read-only access
Access to the seller's revenue, payment or analytics accounts that lets you see data but not change anything, such as Stripe's View Only role.
Used in: How to verify website traffic
Core update
A broad change to how Google ranks results, announced on the Search Status Dashboard with a start date and rollout period.
Used in: Was the site hit by a Google update?
Brand Account
A Google account type that lets a YouTube channel have several owners, which is what makes a change of ownership possible.
Used in: How much is a YouTube channel worth?
Platform dependence
Reliance on one outside platform, such as Google, Amazon or YouTube, whose rule changes can cut revenue overnight.
Used in: Red flag: depends on a platform
Definitions are ours, written for buyers of small online businesses; formulas match the calculators and the red-flag checker. More context in the answers.