One of the best ways to boost your appeal to prospective buyers is by creating an effective memorandum of sale. This document, prepared by the seller and presented to the buyer, contains a summary of key information about your business and your sale terms – information your prospective buyer will need to consider before deciding whether to make an offer.
Envision a sale memorandum as the powerful marketing tool it is. What better way to get persuasive data about your business into the hands of someone who is looking for a lucrative business opportunity? Sellers may meet with 50 prospects before they find the one who will make a proposal. Offering each of these prospects this document will save you time. It is an efficient means of communication and will show buyers you are committed to making a sale. The sales memorandum is a valuable resource guide prospective buyers can refer to as they search business listings. The memorandum will highlight your business’s positives and will likely increase the selling price of your business.
While you could hire a professional to create a memorandum for you, be prepared to pay them handsomely — possibly thousands of dollars. It is possible to write a good sale memorandum yourself, as long as you are willing to do the necessary legwork and follow these basic suggestions.
Start with a brainstorm session. Jot down every category of information you plan to include and every descriptor you can think of that highlights that particular facet of your business. Although there are no hard and fast rules for what to include, the memorandum should serve two purposes – to raise a buyer’s enthusiasm for your business and to justify your asking price. Most small businesses will need only a few pages of information. Some of the most common categories included in a sales memorandum are: the industry you are in, how long you have been in business and where you are located; financial figures such as profit, cashflow, value of assets and total debts – including figures for past years and any changes that have occurred; and number of employees. You should never keep negative information, such as dropping sales, from prospective buyers; however, you can present it in a positive way. Include a detailed strategy on how you alleviated the problem in the past or how the new owner can avoid or solve similar problems in the future.
Once all the information is down, it’s time to edit. Cross out redundant statements and make sure each one is brief and to the point. You want your memorandum to be comprehensive, but not tedious for a buyer to read. It’s also a good idea to set the project aside for a few days, and then re-read your draft. Rewrite anything that is unclear, misleading or unnecessary to include. Could the information be said with fewer words? Is it written in a positive way? While you don’t want to speculate or use false claims, you do want to spark the buyer’s interest with business-based facts. Ask your attorney or accountant to review facts and figures to ensure its accuracy.
While you’re working on your sales memorandum, check out DealBacker.com, an Internet marketplace for business owners to buy and sell businesses and franchises. The site offers classified listings of business sales, and is in the process of developing dataroom services, document exchange and business valuation tools. DealBacker.com will give you the motivation you need to create a great sales memorandum, knowing that a buyer could be just a click away!