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Help Buyers to Respond with an Information Memorandum

(SYDNEY) - Both the Sellers and Buyers are not being served properly when their broker does not have an Information Memorandum on the business.

For one thing, the Buyers are confused from the disparate bits and pieces of information on the business, and they are forced to draw their own conclusions - sometimes to their own detriment.

Sellers on the other hand have lost a golden opportunity to position the business in the best possible light and highlight its finest features to buyers.  Buyers that could be interested in the business often will look elsewhere if they can't understand the business easily.

Brokers are forced to defend the business when Buyers draw the wrong conclusions, but at this junction, it's too late because Buyers will come to believe that the intermediary is conflicted and not to be trusted.  This is a situation that does not serve anyone.

This is a situation that does not serve anyone.

 

SO, WHAT IS AN INFORMATION MEMORANDUM?

When selling a business, the Information Memorandum (also known as a Prospectus, Sales Memorandum, Business Summary Report, Business Profile, etc) is a powerful and critical document that highlights the best features of the business and inclines the buyers to take the next steps.

This is the part of the sales funnel that decides whether your efforts to attract buyers are '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 Buyers that your business is worth taking 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 can include other information as well.  There is no one best way of crafting it.  

The true mission of the Information Memorandum is persuasion.  I don't denote "persuasion" as a dirty word.  I think Buyers want Sellers to explain the best things about the business, so that Buyers can judge for themselves if it is right for them or not.

Thus, you can include almost anything in the Information Memorandum that helps to encourage your prospective Buyers to take the next step.

 

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If the IM does not persuade buyers, the sales funnel is jammed.

 

ROLE IN THE SALES FUNNEL

There are many "good" resources online on how to prepare an Information Memorandum to sell your business.  

However, 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 shows.  

If few or no buyers take action, then this is not a "buyer-attraction" issue but a conversion issue.  The more effective the Information Memorandum is, the fewer interested parties you will need to attract to achieve the result you want  

On the flip side, an Information Memorandum that doesn't convert is as good as throwing your marketing dollars away. 

 

..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, many Information Memorandum are too factual and informational and factual.  They lack the persuasive element.  k

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 makes the reader more likely to respond.   You may wish to learn the art of good copywriting to craft 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. Try not to DIY with your smartphone! 

You wouldn't want to do everything right, only to be sunk by horrible photos and kill the chance of a sale.

 

THE 2-EDGED SWORD

However, the Information Memorandum is a "double-edged sword".  It must be crafted properly to create excitement and lead Buyers to take the next steps.  

If done poorly, the Information Memorandum will have the opposite effect. A poorly crafted Information Memorandum will repel buyers and completely "turn off the tap". (I know this because a news-agency owner create his own Information Memorandum.  He did such a bad job that no buyers were interested)  

Without an Information Memorandum, there is a serious bottleneck in the sales funnel but the occasional random buyer can appear, presumably on curiosity alone (still, you are still going to wait for a very long time to find the right buyer).   However, a bad Information Memorandum will turn off the tap completely because nothing affirms that a business is bad more than a bad Information Memorandum.    

 

In summary, the takeaway is:  

  • The Information Memorandum is a critical sales tool within the sales funnel
  • The document must persuade buyers
  • Where it is required to take photos, professional photos are a must
  • Do this properly or you may end up with no buyers at all.*

 

Josh Foo

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If you wish to reach out, please email me at [email protected]

Disclaimer: This article is general information only and may contain inaccuracies. No responsibilities are taken for any omissions, errors, or inaccuracies. There is no financial, legal, or any kind of advice being provided to you. You should seek proper legal and specialist advice on your own circumstances.