The construction of a good sales memorandum

The first step after putting your online business profile live is to put together a well-researched and comprehensive sales memorandum (aka "sales brochure").

Writing a sales memorandum is a good way to get things straight for yourself; what exactly is being offered and what does it all cover? Moreover, the memorandum saves you a lot of time in the first buyer contacts. Many buyers ask the same questions in the first phase and you can get ahead of them with a well thought-out memorandum. In addition, a professional memorandum gives buyers an immediate good impression of the way in which you are conducting your business and therefore of the online business that is to be taken over.

The purpose of the sales memorandum

Potential buyers initially have only the anonymous information of your online business profile at their disposal. Once contact has been made via our platform and confidentiality has been confirmed, a buyer knows which online business is involved and who the seller is. However, this is not enough information to determine whether your online business is of interest to him or her. If, after seeing your online business URL, the prospective buyer is interested in following up, we recommend sending the sales memorandum with more detailed information about your company at this stage. The information in this memorandum should give potential buyers enough background information and a financial impression, to determine whether your company is an acquisition candidate. For the seller, this phase can be part of the selection, allowing you to take the next steps of the acquisition process only with the parties with the highest likelihood of a deal.

The content of the sales memorandum

Businessforsale.eu itself also advises on (larger) online business takeovers and so we regularly write an extensive sales memorandum for customers. Based on this experience we have developed a standard format, in which most aspects are mentioned that potential buyers ask for in this phase. You can use this format as the chapter structure for your own memorandum:

1. Introduction to the online business/company and its genesis

Tell something personal here about the origins of the business and its development to the present (in a nutshell).

2. Description of the market the business is in

Consider the size of the market, developments, any legislation, degree of competition and the opportunities you see for a buyer.

3. Description of the business

Include what platform the business is running on, how the assortment is structured, how orders are handled, what customers you serve, what the order value is, does the business meet certain labels and what customer reviews are. Also provide a summary of visitor statistics and positions in Google.

4. Description of the business

Is there staff and how is housing arranged.

5. Partners

Describe the companies being collaborated with and what their dependencies are.

6. Finance

Provide a summary of performance for the past 3 years, by fiscal year, explaining situation during that period. At a minimum, include sales and net profits (and don't forget to include your own hours as expenses).

7. Possessions and debts

Consider trademark rights, other domain names, stock and loans to your holding company or the bank.

8. Strategy and potential

9. Legal

Are any disputes ongoing?

10. Reason for sale and any conditions

Please indicate your reason for selling and the conditions under which you wish to sell (regarding stock, for example). Also indicate here whether your online business will be transferred via a share transaction or an asset-liability transaction.

11. Acquisition price & sale procedure

It is important that you have thought carefully about the asking price. This price will be the starting point of a negotiation and substantiation is important.

12. Attachments

Include recent annual reports and a Chamber of Commerce extract here.

Important issues for the sales memorandum

While writing the memorandum, remember that while a buyer has a duty to do proper research before making an acquisition, you as the seller have a duty of disclosure. So make sure that any problems are not swept under the rug.

In almost all cases, due diligence (a book examination) takes place during the acquisition. It makes little sense to make the figures look better than they are. In fact, in our experience it has a negative effect if a buyer later finds that the turnover is lower than initially reported. At that moment you are 2-0 behind as a seller and it is difficult to regain confidence.

On Businessforsale.eu we have also included a detailed list in the knowledge base with aspects that buyers can ask about. This can still be helpful in the further completion of the memorandum.

And finally: do not forget that the eye also wants something. So prepare the document neatly, or have it neatly formatted by a designer. This does not have to cost a lot and partly determines the first impression buyers have of your online business!

Sales support

Larger online businesses can purchase active sales support. In that case the sales process starts with a physical appointment at Businessforsale's office. If you are interested in this service please contact us via contact@webshopovername.nl.