Why is Information Memorandum important when selling your business?

| 1 min read

Sometimes also known as a sales memorandum, an information memorandum will essentially function as your opening pitch to your prospective buyers.

Read on to find out what it contains and why it is important to take your time with it.

What information does it contain?

Generally, an information memorandum will contain positive aspects of the business because its' purpose is to attract people to either invest in the business or purchase it. To be specific, it should contain the following:

  • A short overview of the business's history; where it started and where it currently stands.
  • Particulars of how your business operated; what you sell or which services do you provide? Where do you source your raw materials from and the process of production, and the end result?
  • Overview of the competitors of the business and how do you stand out from them.
  • Reasons for selling your business
  • Details of the premises from where you operate; is it leased or own or do you work from multiple locations?
  • Outline of your customer base, including details of your regular customer and the key customers.
  • General financial health of the business, including turnover and profit figures, details of business assets and liabilities.
  • Projection for the business such as profit forecast.
  • Expected sale price of the business, terms of the sale and desired time scale for completion.

Your information memorandum's length and intricacy will mostly depend on the size of your business and how valuable your business is.

You should also note that while you want to portray your business in the best light possible to capture potential investors or purchasers' interest, you do not want to divulge too much information or information that is sensitive and could be of use to your competitors.

Before you distribute an information memorandum

Typically, information memorandums are distributed after signing a non-disclosure agreement. Click here to find out more about NDA. To download an NDA, click here.

Click here if you are interested in know the other steps involved in the process of selling you business.

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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