Provoke buyer response with an Information Memorandum, or risk losing time and money
By Josh Foo, Senior Partner
Updated 9:25am AEST, May 19, 2020
(Onwardbull.com.au) - When selling a business, the Information Memorandum (also known as a Prospectus, Sales Memorandum, Business Summary Report, Business Overview, etc) is a powerful and critical document that persuades the buyers to take the next steps.
This is the part of the sales funnel that decides whether your marketing spent is 'paying off' or you are just wasting money and time.
You may have spent a considerable amount of money on marketing to attract buyers, but if you can't persuade them to take the next step, then your efforts would have been in vain. Do not let a poor Information Memorandum (or lack of) become your bottleneck.
An Information Memorandum should encompass content such as:
An introduction to the business
A brief history and explanation of your business (e.g. type of services/products offered, reason for the sale, etc)
An overview of the business' customer base and clients S.W.O.T. (Strength, Weaknesses, Opportunities and Threats) analysis for the business, and suggestions to mitigate the weaknesses and threats
Past Financials such as the Profit & Loss Statements, Balance Sheets, Business Activity Statements (BAS), etc.
Business plan and future outlook
Lease details and landlord overview
Franchise reports and related information (where applicable)
A list and description of the equipment included in the sale
Employee and staff operations overview, including the Owner's role
Buyers' Frequently Asked Questions (FAQ) page
Identify the common objections and concerns from prospective buyers and have ready answers in the Information Memorandum to reassure them
Testimonials and references from Customers, Suppliers and Franchisor (where feasible)
The sales process - instructions for the buyer on what to do next
Professional photos especially for retail, F&B and others B2C businesses.
As every business is different, the above is only a guide and not limited to these items only. There is no one best way of writing it.
The true mission of the Information Memorandum is persuasion. Thus, you can include almost anything in the Information Memorandum that helps to entice your prospective buyers to take the next step.
If the IM does not persuade buyers, the sales funnel is jammed.
Role In The Sales Funnel
There are many supposedly "good" resources online on how to prepare an Information Memorandum to sell your business.
However, what you might not know is that the Information Memorandum is a critical tool within the sales funnel. An inept Information Memorandum can become a serious bottleneck in your sales funnel, as the chart above illustrates.
If few or no buyers take action, then it is not a marketing issue but a conversion issue. The more persuasive the Information Memorandum is, the fewer buyers you will need to attract to achieve the same result.
On the flip side, an Information Memorandum that doesn't convert is as good as throwing your marketing dollars away.
Achieving The Persuasive Cue
Words tell. Story sells. Regrettably, most Information Memorandum is informational and factual only, not persuasive.
Stories connect with your buyers and appeals to their emotions. It builds trust. And trust is necessary for a sale. So, tell your story: Why are you selling? How did you get to where you are today? How will the sale impact your life?
Good copywriting will boost your conversion rate. A good copywriter knows how to string words together that sell. You may wish to learn the art of good copywriting to write the content yourself or hire a good copywriter.
If stories sell, then pictures tell a million words. Professional photos are imperative for selling your business. It is really not negotiable (aka, don't DIY with your smartphone)
You wouldn't want to tell a moving story and then allow bad photos to torpedo your conversion rate and the chance of a sale. If you don't believe me, then just look up Gumtree.com.au and see the photos posted by private sellers - most of them are shockingly bad.
The 2-Edged Sword
However, using the Information Memorandum is a "double-edged sword". It must be crafted properly and persuasively.
If it is poorly done, the Information Memorandum has the opposite effect. A bad Information Memorandum will actually repel buyers and completely "turn off the tap". (I know this because a newsagency owner wrote his own Information Memorandum, and he did such a bad job that no buyers were interested. Not surprisingly, he decided not to sell in the end)
Without an Information Memorandum, the sales funnel has a serious bottleneck but 'drips' of buyers come through, presumably on curiosity alone (but you could be waiting for years). However, a bad Information Memorandum will actually re-affirm to the 'few drips of buyers' that your business is actually not worth pursuing further.
In summary, the takeaway is:
The Information Memorandum is a critical sales tool within the sales funnel
The document must persuade buyers
Professional photos are a must
Do it properly or you may end up with no buyers at all.*