Selling a business: the sales memorandum

A sales memorandum is a marketing document used to generate interest in a business for sale. 

If a seller has a corporate finance adviser or business broker they will help produce the sales memorandum as a priority when they have decided to sell a business. However, when selling a business independently it’s important to know what facts to include in the sales memorandum, and how best to inform potential purchasers about the company and what they are buying. 

A sales memorandum should consist of:

• Information on the industry the business is involved in and how long it has been trading

• How many employees the business has, their job titles and the location of premises

• Key financial figures such as profit, cash flow, value of assets and total debts

• Financial figures for the previous year of trading

• A preferred sale structure, for example assets and goodwill or share transfer

• Any unique business qualities

Effectively a means of marketing your business for sale, the sales memorandum should be honest but present the business in a positive light. As well as explaining the facts about the business as presently constituted you can also speculate on the business’s potential, backed up of course with a credible argument. 

The main aim of the document is to entice potential purchasers and make them want to know more. 

Confidential information, such as pricing structures or client names, should not be included. This should only be revealed at a later stage when the vendor has determined that a buyer is serious about making a purchase.

In regards to presentation, sellers should use clear and concise language. It is also desirable to present financial information in a visually appealing format, for example by using charts and tables.

Read Seller finance, capital gains tax & tips for overseas buyers