How To Create A Selling Memorandum That Will Have An Impact On Your Buyer

The Selling Memorandum is an important sales tool that you will give to the buyer early in the process (but only after they have signed a confidentiality agreement). It should be a detailed and truthful overview of your business.

It should also be positive and compelling.

Consider it a brochure for your business. It is the first written thing you give the buyer after they respond to your business-for-sale ad and it is the key to making a good first impression.

It will also serve as a reference guide that the buyer may refer back to again and again over the course of the selling process.


We will discuss two types of Selling Memorandum - a highly detailed, Full-length Selling Memorandum that is appropriate for most businesses with sales over $200,000 and a Summary Version or Mini Selling Memorandum that is shorter and appropriate for many single proprietorships, most single-location restaurants and retail businesses and most simple service businesses with few employees.

There are no hard and fast rules about what must be in your memorandum. If some of what we discuss below doesn't apply to you, feel free to skip over it.

We will also touch on ways you can explain and minimize any negatives about the business.

As you will see, the full-length version of the memorandum can be very detailed - it is not something you throw together in half an hour.

You should take your time and put plenty of thought into what you will say and how you will say it.

A Selling Memorandum should serve two important purposes:

  1. It should raise the buyer's enthusiasm level for your business.
  2. It should justify the asking price.

Full Length Selling Memorandum

Here are the 9 sections you may want to include in your Selling Memorandum:

Executive Summary

This section gives the reader a thumbnail sketch of your business. It can be as short as a few paragraphs but need not be longer than two pages.

The executive summary should answer the following questions:

  1. What products do you sell or what service do you provide? If you have a large product line you may want to only mention the products/services that produce most of your revenue.
  2. For how long have you been in business?
  3. What exactly is for sale? Is real estate included? Vehicles? Or is it simply your client list and inventory. If it is a retail business, how many locations are included?

You will include actual financial statements later, but in this section at least include the total sales and profits figures for the last 3-5 years. You should use your recast financial statements for these figures and you should label them that way.

I recommend that you also address why the business is for sale. (That question will certainly be on the mind of the buyer) Try to be as positive as possible. It can be as simple as one sentence: "Owner wishes to sell the company in order to pursue other business ventures".

It can even be covered with one word: "Retirement".

Company History

Who started the company? What was the founder's vision at that time and how has it evolved? What are some of the growth milestones that the business has reached along the way? If new partners or investors have come on board since the beginning, who are they and how have they contributed to the company's growth?

Marketing & Advertising

What advertising and marketing activities are you undertaking? If positive word of mouth plays a big part in attracting customers, mention that. If you get a lot of walk-ins due to heavy traffic outside your store, mention that.

Are there any new and exciting marketing/advertising opportunities that you would pursue if you were to continue to run the business? Mention them here and say why you think this avenue can boost sales.

Does your company occupy (or dominate) a specific niche or position within your industry or local market?

Company Strengths

What advantages do you have over the competition? Are you known among your customers for being particularly good at something? Do you have exclusive or unique products? Indicate if you have any patents, copyrights or intellectual property.

If you are a retail outlet, is the surrounding area growing, or the demographic you serve growing? Are there any new hot products coming out that will improve sales?

If it is a franchised business, what plan does the Parent Company have that will grow the business? Is the franchisor a recognizable name with a good reputation and financial strength?

List any positive changes going on in the industry: breakthroughs in technology, pending legislation, growth in a particular demographic.

3 Years Of Historical Financial Performance

You don't need to include complete financial statements, just some highlights that show in numerical terms that the business is growing. If sales, profits and the owner's benefit have been trending upward you can list them here. Show 3-5 years worth of information from your Income Statements. Use pretax numbers and don't include interest as the taxes and interest the new owner pays will be different.

Projected Future Financial Performance

If you can make compelling and fact-based projections of what the business can do in the future, you may want to include this section. Be conservative and base your projections on facts about your market and industry. Explain fully how you arrived at your projections.

Making pie in the sky projections can ruin your credibility. And throwing the word "Guarantee" around can get you sued. But, if you can make a credible case for solid future growth then you want to include it.

Price & Terms

Explain how you arrived at your asking price. Anything about your valuation that is conservative should be pointed out. Also, discuss any financing terms you are willing to offer. Even if you are open to negotiating the terms, set down the minimum requirements so you eliminate those people who have no money. For example, "The owner is willing to negotiate the exact financial terms of the sale, but will require at least 30% down and a financing term of no more than 60 months".

Review Of The Opportunity

In just a few sentences, reiterate why this is a great opportunity. List the top 3 or 4 most attractive features of the business and why you think the future of the business is even better than it's past.

If you like, you can include a few words about why you are proud of this business. What it has meant to you and your family. And why you are committed to helping the new owner successfully take over what you have started.


Here you would include any brochures or other product literature, any press clippings that mention the business favorably and any photos of the facilities. Any information on industry trends or research can be included in this section. If your business is a franchise, any literature from the Franchisor should be included here.

Dealing With Negative Information


Address any weaknesses the business has or has had that are now fixed. If last year the sales and profits dipped, explain why and what has been done to fix things. If the business has been down for the past couple of years, it's a good idea to put the blame on yourself instead of the industry, the economy or any other reason.

No need to go into great detail now, just a single sentence stating that you are burned out or past due for retirement. You don't want to turn the buyer off at this point but you can't hide the obvious if sales have been decreasing. Acknowledge any such problems simply and then when you meet face to face with the buyer you can give a more detailed argument for why the business' future can be brighter than it's recent past.

Possible Buyer Concerns

Don't be afraid to be honest about what talent the buyer should bring to the table - if there is a lot of customer contact, travel or technical knowledge required, say so. Better to have an incompatible buyer find out now than latter.

This can be addressed in the Executive Summary when describing the business. For example, you can say something like, "This is a great business for someone who thrives on a lot of customer contact".

A buyer who is new to your industry may have unnecessary fears that there is too much to learn or that they are not qualified. You may want to mention how easy it will be for someone outside your industry to get up to speed and if applicable, what training you are willing to provide.

Related: 12 Factors That Make a Business Easy To Sell

Some Tips To Help You Write Your Selling Memorandum

Does the thought of sitting down and putting this information on paper make you uncomfortable? Don't worry, you are not alone. Lots of business owners can talk a person's ear off about their business. But asking them to write that same information down and they break out in a cold sweat.

Here are a few simple things you can do to get what you know in your head down on paper.

  1. Take a separate sheet of paper for each of the 9 categories above and brainstorm each of the facts about your business that belong in that section.
  2. Write everything down that comes into your mind - don't edit yourself (not yet anyway).
  3. When you have a good list for each section, combine things that are similar and cross things off the list that are redundant.
  4. For each feature/element you've listed, write a few sentences about the feature. Don't feel like you have to discuss every last detail of your business - that's impossible to do and it will result in a very tedious memorandum. No matter how much detail you give you will get follow-up questions from the buyer. This is a good thing. It gives the buyer a reason to pick up the phone and call you which is what you want.
  5. Put things in the form of a list or bullet points if it is easier.
  6. Set aside what you have created so far and come back to it in 2-3 days. You will think of things you hadn't thought of before that you will want to include. And you may want to delete anything from the previous draft that seems trivial or less important. You will also want to rewrite anything that upon rereading it, seems unclear, misleading or unnecessary
  7. Give it to your spouse or partner to read. Is it clear, does it make sense to them? Have you left anything out? Could some things be said in fewer words? Or said with more positive language?
  8. Proof read it for typos and spelling errors several times.

An Added Benefit Of The Selling Memorandum

Putting in the effort to create a Selling Memorandum will crystallize in your mind what is truly special about your business, from the standpoint of the business buyer, not your customers. Putting things down on paper will force you to clarify what are the real keys to your success, and what are the opportunities for growth, both in your business and in your industry.

And you will begin to see the strengths and weaknesses of your competition more objectively.

Of course, you know your business inside and out. But do you know how to explain it to a perfect stranger in a way that will get him excited about owning the business. You may be great at selling your company's products, but selling the company itself is a different sale pitch altogether.

Can you anticipate the fears and concerns a buyer who doesn't know anything about your business may have? Can you paint an enticing picture of the industry's future and your company's place within it?

After you have put together your Selling Memorandum you will be able to do all this much more effectively.

Next: Follow Up and Deal With Buyer Feedback To Your Selling Memorandum

About the author:William S Andrews, a personal development coach. He likes helping people cope with their problems. In this case, William has his own section on the website Moreover, he takes part in various conferences to improve his knowledge and develop new skills.

Published by ExitAdviser


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