 4d) Writing a Selling Memorandum The following is a brief guide to how you would create a selling memorandum: 1. Executive Summary Start with a few paragraphs that emphasises the stronger aspects of your business and a brief overview of the content within the memorandum. 2. Your Company Information The first point you should make is your reason for selling. Be careful how you write this, as it could be the last thing potential buyers will read before losing all interest. Other information in this section will cover your brief history, business form details (limited, partnership, etc), operation details/achievements (production quantities, number of web site visitors, etc), and reasons for why your business is successful (low prices, branding, etc). 3. Asking Price and Selling Terms Give the price that you are asking for your business and justify how you have made this valuation (a working calculation of the valuation method). Although some terms of sale will be up for negotiation, you should highlight terms that you are strict to.
4. The Industry Give a brief overview of the industry including the history and what can be expected in the future. Does your business have significant market share that is worth highlighting? How big is the competition? 5. Your Products/Service If your business is a service, give the main details of how it operates and what it achieves. For products, explain each (or range of) product that you have and their contributions to revenue and profit. How do you market them? Which products are new and do you intend to launch any in the near future? 6. Customers This section should not go into detail about individual customers, just give an overview of the type of customers that you attract, say, home owners or department stores, etc. 7. Personnel How is management broken down in the business and who are key members of staff in terms of responsibility? You should create some sort of hierarchical chart to illustrate management if there is more than one level i.e. manager, assistant manger, supervisor, etc. Again, it is not a case of describing each individual Give a brief introduction to the different departments stating the number of staff and responsibilities in each. 8. Major Assets Give details (age, condition, value) of any assets that are considered important to the business such as premises, vehicles, machinery, etc. Provide photos of any assets where you feel appropriate. 9. Future Plans Although when the business changes hands, the new owner may compile a new business plan, you should include a plan for at least the next three years to show that the business does have direction. Be specific as to how to achieve these goals and what the business hopes to achieve from doing so. Remember, if your business does not get sold, at least for now, you will need a future plan to keep your business pushing forward. 10. Financial Statements Although financial statements will be reviewed in full by the potential buyer, you should provide enough information that can give them a clear picture of the financial position of the business. Such information should summarise a three-year history broken down into quarterly statements where possible. Further, you should provide a forecast for the next three years to show expected cash flow and profits. This section may require assistance from your accountant. 11. Appendix Finally, you should place any material such as photographs, diagrams, product specifications, etc into an appendix. This material can then be referred to in the text to prevent interruptions in reading, although it would be wise to include images here and there (with relevance) to liven up the memorandum. 4e) The Summarized Memorandum Once you have completed the sales memorandum, you should create a separate summarized document in, say, no more than three pages. Contribute a couple of key points from each section and turn it into a summary of your full memorandum. You may be thinking why, but it will all come clear in the next chapter: Finding Potential Buyers.
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