Creating a Selling Memorandum

Last Updated: July 21, 2010

4c) Selling Memorandum

Another key element in selling the business is producing a sales memorandum (sometimes known as a Selling Book) which basically is a detailed (but short) document that describes your business inside and out.

The main objective of a selling memorandum is to sell your business by building the interest of potential buyers. The memorandum should give enough information to eliminate a majority of the questions that potential buyers will have and consequently save you the time providing the answers in person.

You should put a lot of time and effort into producing the memorandum so that your business is given the best appraisal as possible and that it shouts out to potential buyers that this is the right business for them. Remember that this is one of the first (and main) sources of information that a potential buyer will receive and so it is important that you grip their interest within this document.

If you are using a business broker, they will have the responsibility of producing the memorandum with your assistance to make sure the information is relevant and appealing (using their own writing skills and experience). Alternatively, a solicitor can be used to help you produce such documentation.

Potential buyers do not want to read a 300-page novel only to find out that your business is not what they are looking for: a large memorandum will also be off-putting to begin reading.

Consequently, get straight to the point that you are trying to make with as much emphasis as possible (unless it is a comment that is not too favourable). If your business does posses issues that may not be favoured by potential buyers (possibly influencing your decision to sell), it is wise to acknowledge them as they will always be discovered later on. On doing so, give them at least two feasible solutions that could rectify the situation.

Before you attempt to produce a selling memorandum, it will cause no harm in reading others to get a feel for the desired content and design. You may be asked to sign a confidentiality agreement before you do so – just like people will be asked to sign one before reading yours including any accountants and solicitors.