As a business valuer I often come across enterprises for sale and when I do it is always interesting to go through the Selling Memorandum. This document contains crucial business information and is provided to potential buyers whether they be sourced through succession planning or someone from outside the organisation.
Such information will assist these groups to make an informed decision about the purchase and the price. It should therefore ensure that it is both up to date and accurate.
A Confidentiality Agreement should also be prepared and signed by the potential successors and buyers before giving the Selling Memorandum to them.
Figure 1: With a Selling Memorandum, you need it to contain information that will have potential buyers asking for more.
Scolari Comerford Business Valuers Sydney & Dubbo
1: Why Is A Selling Memorandum Important?
If a Selling Memorandum is accurate and informative, it will give buyers more confidence when assessing to whether to pursue the business opportunity further.
It is also a simple tool that can be used to show the level of uniqueness in your business.
The more professional this document is, the more likely you will find interested buyers which will also increase the chance you will get your asking price.
A business for sale document that contains only sketchy details will invoke suspicion and decrease levels of curiosity.
2: What Should It Include?
A Selling document should include:
- What products or services you provide;
- History of your business;
- Details of clients;
- Details of employees and agreements;
- Business achievements;
- Company policy documents;
- Business alliance agreements;
- Unique selling points/propositions (USPs);
- Financial information;
- Business & Marketing Plans;
- Licences & Accreditations;
- Register of information for buyer due diligence;
Figure 2: Just like real estate, does your business have any unique features that many others don't?
Grangewood Estate on the magnificent Dubbo Golf Course
3: Why You Must Include Unique Selling propositions
Having your USPs in the document is critical as these features distinguish your business from your competitors.
These may include:
- Your high value client base;
- Your business specialisations;
- Your business culture;
- Your subscription base customers (recurring);
- Your high level of cash flow;
4: Next Steps Whether You Are Thinking Of Selling Or Not
Whether you are thinking of selling or not, it is always a good exercise to prepare a Selling Memo as if you are. Why? Well it may just highlight some of the areas that you need to improve in your business now so that when the time comes to sell you will have your ducks in a row so you can get your business valuation up much higher.
As business valuers and advisors, we find that by going through this process we can provide a road map for higher business valuations for our clients. It might even start with a SWOT Workshop (Strengths, Weaknesses, Opportunities & Threats).
If you were to sell tomorrow, what would your Selling Memorandum look like? Put yourself in the shoes of a prospective buyer. Would you buy your business and for the asking price?
If you are not sure or what like a second opinion, please do not hesitate to contact us.
Better to ensure you are not leaving any money on the table!