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Selling Memo and Investment Teaser Make An Attractive Sale


By Tsu-Li Liew

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As the consequences of the COVID-19 pandemic continue to disrupt our lives, the future of small businesses becomes more uncertain with each passing day. For many small business owners, selling their business might be the best option to survive. As tough as selling a business might be, there are certain actions a business owner could take to increase the chances of selling their business.


One example is working and fine-tuning the documents that prospective buyers will see first, such as the selling memo and the investment teaser. In this article, we will explain the importance of the selling memo and the investment teasers, and how a business owner can improve those documents to increase their chances of selling their business, while protecting their information.

Investment Teaser

The investment teaser is one of two documents that prospective buyers will see in order to learn about the business on sale. Unlike the selling memo, it is usually a short one-page document that provides details about the business to entice prospective buyers about the sale. The investment teaser is a primarily a tool for marketing the sale of the business. A business owner can send the teaser to potential buyers directly or use it as advertising on sites like BizBuySell. According to Harvest Business, the two main goals of investment teasers are to protect the confidentiality of the business and generate qualified buyers.


While the teaser should contain some specific details about the business, it is also important that the small business owner protect its confidentiality and does not include information that makes the business identifiable. The difficulty of keeping confidentiality in the investment teaser will depend on the type of business that an owner manages. For businesses that are commonly found in one’s surroundings, such as restaurants, it will be easier to conceal the business’s identity amongst the competitors. However, it will be harder to conceal the identity of a business that is more unique and has little competition, as the details might give a prospective buyer a clue as to who they are dealing with.


There are many reasons as to why a business owner should protect the confidentiality of the sale. The teaser might contain some sensitive information about the business’s performance, and a prospective buyer is not required to sign a non-disclosure agreement. If a prospective buyer could find the identity of the business, they could leak the information contained in the investment teaser or the fact that the business is being sold. A small business owner might also want to keep the sale secret to prevent their employees and their competitors from finding out. This is to ensure that the employees will not be alarmed by the leaked news of a sale, and that competitors will not be able to spread bad rumors about the business.


One way to easily prevent any prospective buyers from finding out the identity of the business is to not include public descriptions of the business. Any descriptions that can be found in public, such as on websites, flyers or other locations, can potentially give away the business’s identity. An owner should avoid including those same descriptions in their teaser to prevent exposing the business’s identity.


An investment teaser needs to look a particular way and include certain information to make it effective. Axial provides a list of information that an effective teaser should include, such as 1) how the business generates income, 2) when the business began, 3) sales and revenue of the products or services, 4) industry categories the business falls under, 5) distribution methods, 6) information on the management team, 7) overall financial profile over the past three years, and 8) some investment highlights about the strengths of the business. It should only include the goals of the transaction, such as what the owner is trying to accomplish with the sale or whether the owner is looking for a buyer with a certain skillset or other prerequisites. Including this information will let a prospective buyer see a general overview of the business, and whether the business will be a good fit for them.


It is also important that the investment teaser be no longer than one-page. After all, prospective buyers will be reviewing many investment teasers of other businesses on sale. By keeping the investment teaser short and concise, these buyers will be able to identify quickly whether the owner’s business is something that they are interested in buying. They also suggest making the investment teaser look professional and let the key facts of the business generate interest, rather than relying on superlatives and all capital letters to pique a prospective buyer’s interest. It also goes without saying that an investment teaser should contain only accurate information. Despite the temptation to stretch the truth in order to appear more favorable to prospective buyers, a business owner should avoid doing that, as they will eventually have to provide evidence of the numbers listed in the investment teasers in later stages. Stretching the truth will only harm the owner’s reputation as they can lose their credibility with prospective buyers.

Selling Memo

If a prospective buyer is lured in with the investment teaser and if they are a qualified buyer, the next document they will see is the selling memo. A selling memo goes by many different names, such as an offering memorandum or a confidential information memorandum. It contains the most up-to-date information about the business and is also another marketing tool designed to highlight all aspects of the business. The goal of a selling memo is to provide prospective buyers an in-depth overview of the business and why it is a good investment.


Depending on the size of the business and the asking price, the selling memo can range from being only one page to longer than ten pages. If the business is small and will most likely sell for less than $200,000, the selling memo can be condensed into a one-page terms sheet, which will provide a description of the business, financial information and the price and terms of the sale. However, if the selling memo is more than four to five pages long, an owner will need to include a table of contents in the beginning of the document, and any memo longer than ten pages should also include a summary. Similar to the investment teaser, it is important that all information is accurate in order to avoid losing credibility with prospective buyers and presented in a professional manner.


The information in a selling memo should include the details of the business, such as 1) the products or services, 2) its place in the industry, 3) the competition, 4) its operational procedures, 5) its management, 5) its employees, 6) other marketing material, and 7) the history of the business. Other information to include will be financial information over the past few years as well as the asking price. An owner can also address what kinds of difficulties the business has faced over the years, as well as any solutions that worked or any advice for the new owner. While it is difficult to exhibit the problems of a business in a document meant to entice buyers, it is better for an owner to be upfront about the challenges of running the business. Depending on the size and complexity of the business, more specific information needs to be included in the selling memo.


If a summary is needed, it should contain the business’s name and contact information of the owner, as well as a business description, financial overview and the sale’s price and terms. A summary will look similar to the one-page terms sheet used for smaller business sales. Inc.com provides a list of specific information that a business owner could add to their selling memo, if it applies to their business.


On the other hand, it is important to know what not to include in the selling memo as well. According to allBusiness.com, a business owner should refrain from making speculations and guarantees about the future of the business. After all, the industry could change drastically within a day due to unforeseen events, such as COVID-19. If the owner made some guarantees that a buyer relies on, it could pose some problems for the owner’s credibility in the future. An owner also should not include confidential information, such as the terms of an agreement with key customers or contractors. After all, if a competitor manages to get their hand on the selling memo containing important confidential information, it might be detrimental to the owner.


Before a business owner passes out their selling memos to prospective buyers, it is important that they screen the buyers to determine if they are qualified and that they are willing to sign a non-disclosure agreement in order to receive the selling memo. A qualified buyer is a buyer that has expressed interest in the sale and will most likely go through with it. These buyers might also have to meet more criteria, depending if the owner has specified what they are looking for in a buyer.


While an owner could protect themselves by excluding confidential information, the selling memo will nevertheless still contain a lot of information that can harm the owner if it is leaked and used by the competition. According to BizBuySell, an owner should number each individual copy of the selling memo. This ensures that the owner will be able to keep track of which interested buyer has a copy of the memo and knowledge of its content. Each page of the memo should also contain a reminder that the ability to see the selling memo is governed by the non-disclosure agreement and that there will be legal consequences if the buyer breaks the terms of the agreement.

Last Thoughts

Both an investment teaser and a selling memo are powerful tools that can help a business owner increase their chances of selling a business. Although it might be time-consuming to create an effective investment teaser and selling memo, these documents can provide prospective buyers an overview of the business through the information provided. The investment teaser and selling memo give buyers the ability to determine if they are a right fit for the business or if the investment will be worthwhile. However, as useful as these documents can be, an owner still needs to do their due diligence when it comes to protecting the business and vital information. In order to prevent these documents from getting into the wrong hands, an owner needs to take all precaution to protect the information by keeping the teaser confidential and protecting the selling memo with a non-disclosure agreement. Especially during the COVID-19 pandemic, using the investment teaser and selling memo effectively might help a small business owner increase their chances of selling their business and create a more streamline process of finding prospective buyers.

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