CBB Marketing & Deal Structuring 4

Question 1

A retail business has $300,000 in inventory. During due diligence, the buyer discovers 20% is obsolete. How should the broker handle this in deal negotiations?

Accepted Answer

Adjust the purchase price to reflect only saleable inventory value

Answer

Purchase price adjustments based on verified inventory quality are standard practice; only saleable inventory should be included in the valuation.

Question 2

Which marketing approach BEST protects employee morale during a business sale process?

Accepted Answer

Maintain strict confidentiality and limit disclosure to key employees only when necessary

Answer

Premature employee disclosure can cause turnover and operational disruption, so limiting disclosure to essential personnel protects business value.

Question 3

A franchisor's approval is required to transfer a franchise business. The broker should address this by:

Accepted Answer

Disclosing the requirement to buyers upfront and building approval time into the timeline

Answer

Franchisor approval is a material contingency that affects deal timing and outcome, so buyers must understand this requirement before making offers.

Question 4

In preparing marketing materials, the broker notices the business's revenue has grown 30% annually for three years. How should this be presented?

Accepted Answer

Show the three-year trend with a CAGR calculation to demonstrate growth trajectory

Answer

Presenting a consistent growth trend with a compound annual growth rate gives buyers confidence in the trajectory and supports premium valuation.

Question 5

A buyer wants to structure 30% of the purchase price as an earnout. The seller should insist that the earnout include:

Accepted Answer

Specific, measurable milestones with defined calculation methods and payment timelines

Answer

Earnouts must have precise, objective metrics and timelines to be enforceable and to protect the seller from buyer-influenced underperformance.

(CBB) Certified Business Brokers Practice Test

(CBB) Certified Business Brokers Practice Test

CBB Marketing & Deal Structuring 4