How to Create an Offering Memo

Offering MemoAlmost every week here at Apex, we meet to discuss new businesses that we will be listing soon or which have just been listed. Instead of getting into the nitty-gritty of each business, we go through key information which isn’t just important for brokers to know to share with their clients who are looking to buy, but is a fast and simple way for any potential buyer to understand a business that’s for sale. While every brokerage may have its own way of creating an offering memo, there are some key components that should always appear.

Key Business Activities

This is pretty straightforward. What are the products and/or services offered by your company? What’s your target market? Where are you located?

The Reason for Selling

This is one of the very first questions we ask our clients whenever we begin a discussion about a sale. We ask because we want more context to understand who we are working with and what his/her motivations are, but of course every single buyer will want to know as well, which is why it’s explicitly listed in the memo.

Key Highlights of the Business

This is not a SWOT analysis. It’s more of a highlight reel. We’ll highlight positives like a loyal customer base, growth potential, longevity of key staff, good margins, etc.  We will mention the risk profile of the business, but the entire section is obviously and understandably positively focused.

Financials

Sometimes employees don’t even get to see full financials, so you won’t see them here either. We’ll have put together some key numbers so that buyers can see trends without knowing your precise business mechanics. It’s also important to be oblique here because we want to keep the sale confidential and giving away too much information here (or anywhere else in the memo) may cause the information to leak out into the public and muddy the waters – whether it be with competitors or with employees.  Confidentiality is key.

Price and Expected Sale Terms

Of course somewhere in the document we’ll need to mention the price, and also mention any specific sale terms. We will discuss whether the seller is firm on cash up front or if he/she open to some portion of seller financing (remember that some fractional seller financing is often part of SBA loans). We also discuss the sale timeline and how long the seller is willing to stay on to be part of the transition (if at all) and his/her willingness to sign a non-compete agreement.

We’ve prepared thousands of these memos over the years which have gone on to be the first step in a successful sale.  Let us know if we can start putting one together for you!

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