How to Prepare an Information Memorandum - Business Sale
An Information Memorandum is also known as a Product Disclosure Statement (PDS). An Information Memorandum provides a descriptive snapshot of your business’ history, status and projected future position.
The document’s primary purpose is to motivate potential buyers or investors to invest in your business. However, it is also a document which must be transparent, comprehensive and detailed.
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Information Memorandum for your business sale in Australia
An Information Memorandum or Disclosure statement is utilised as a marketing document, to help sell your business anywhere in Australia. However, it needs to include comprehensive and accurate information about your business. Ask yourself, what information would I like to know when buying a company? An Information Memorandum ranges from 25-to 75 pages depending on the required content. It contains:
An Information Memorandum ranges from 25-to 75 pages depending on the required content.
It contains: The History of the Business The Purpose of the business Performance and goals of the business Product or Service or Technology within the business Staff details and experience Management experience The Market Place The Competition Growth and further potential Leasing Arrangements of premises Licence transference Financials And much more.
How to Arrange Appointments with Prospective Buyers to Sell My Business?
Prior to prospective buyers coming to see your business, you need to qualify them. When dealing directly with a prospective buyer it is important you identify their motive: Why are they interested in buying my business; Do they have the skills required; How much training will they require; Is the buyer’s motive money or lifestyle; Do they have the finances to buy your business. When selling your business, preparation is the key, as it is not always about the financials. Potential for growth, the current operations, the ease of getting new business and your position in the marketplace, competition etc, are all other important factors that prospective buyers will be interested in. Having an Information Memorandum already prepared covering all the above plus much more, is highly recommended to have prior to any prospective buyers enquiring about your business. An Information Memorandum (or Product Disclosure Statement (PDS) is a descriptive snapshot of your business, its history, current status and projected future position, benefits and possible improvements/further potential. The primary purpose of this document is to motivate potential buyers to buy your business and not someone else’s!
How Can I find a Buyer to Buy My Business?
Yes, I’d like a buyer to buy my business, so to find buyers, it is all about making sure you get the best exposure (advertising your business for sale online) in order to have your business in front of as many potential buyers as you can. This can easily be achieved, even if you do not want to disclose your business name or location. It is the industry that is likely to be of interest to buyers, so advertising your business without disclosing your business name is relatively common. Advertising your business online is the fastest way to attract buyers for your business sale. Sites like Seekbusiness.com.au and CommercialRealestate.com.au, Anybusiness.com.au are among the largest sites to advertise your business for sale Australia wide. You can list your business for sale on these sites but it is recommended to use a company like No Agent business who are official subscribers and can list more cost effectively. Click here to see available packages to sell your business: https://www.noagentbusiness.com.au/sell-business-online-packages/
Sell My Own Business: Negotiating a Price with the Buyer to Sell My Business
Now that you have advertised your business, the buyers will come. Depending on the demand of your business, your location and industry, is often dependent on the volume of buyers. When you have more than one buyer interested, then you are in a far better negotiating position. This may not always be the case. Buyers and sellers share a critical commonality: To get the deal done. As a business owner, you should: Do the homework on your own business, your competitors and how you stack up against them. The prospective buyers would no doubt have done this. So, best to stay on top of the game! Know who you are negotiating with (search and understand who the buyer is and their motivation / interest in your business, before meeting with them). Be realistic with your sale price: Just like anything else you sell, if you have an unrealistic price, then buyers may ‘shy’ away unless they see huge growth potential and even then, it is harder to sell a business on growth alone. Make strategic concessions. Instead lowering your sale price, consider other options to add, such as a longer transition time (you stay longer to help in the initial changeover) or perhaps you have additional equipment you can include or an old vehicle etc. The more you are negotiating the closer you will get to a deal. Appreciate the buyer’s perspective. Common sense prevails here: The more you respect one another when negotiating, the more likely you are to reach a mutual decision. Have a walk-away price. You must have this in your own mind before you start your negotiations. Remember it’s OK to walk away. There will other potential buyers. But be make sure you are walking away without emotion as the driver. Although you can prepare an Information Memorandum yourself, it is recommended to use a company/consultant that will prepare them for you. It also provides you with an independent detailed professional review and evaluation of your business Companies like No Agent Business have been assisting business sellers for over 22 years and include an Information Memorandum about your business in some of their packages: https://www.noagentbusiness.com.au/sell-business-online-packages/
Why do I need an Information Memorandum?
Not all businesses for sale require an Information Memorandum or Disclosure Statement. However, it is good practice to have one. Basically, it will have every bit of information about the sale of your business, all in one presentation document. An Information Memorandum is recommended to be given AFTER a prospective buyer has signed an NDA (Non Disclosure Document). Providing an Information Memorandum to a prospective buyer will also show you are serious about selling your business and are handling the sale in a professional manner.
When do I need to prepare an Information Memorandum
An Information memorandum or Disclosure Statement can take a week or several weeks to prepare. It is often best to have an Information Memorandum already prepared as you advertise your business for sale.
How much does it cost for an Information Memorandum or Disclosure Statement?
No Agent Business include an Information Memorandum in their Ultimate Package to sell a business however the cost in the general market place to prepare an Information Memorandum or Disclosure Statement ranges from $2,500 with the price variance driven by the amount of work involved, the size of the document and graphic content.
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