When you're selling your business, you'll encounter various documents throughout the process. One of the most important—yet often misunderstood—is the memorandum of sale. If you've heard the term but aren't quite sure what it means or why it matters, this guide explains everything you need to know.
What is a memorandum of sale?
A memorandum of sale (also called an information memorandum, sales memorandum, or sales memo) is a detailed document that provides prospective buyers with comprehensive information about your business. It's essentially a marketing document that presents your business opportunity in a structured, professional format, covering everything from financial performance to operational details.
Think of it as your business's CV—it tells potential buyers who you are, what you do, how you perform, and why your business represents a good investment opportunity.
You might also hear about a "teaser document" or "executive summary"—this is different. A teaser is a brief, high-level summary shared at the initial enquiry stage before a non-disclosure agreement (NDA) is signed. It contains minimal detail to protect confidentiality whilst generating interest. Only after a buyer signs an NDA do they receive the full memorandum of sale.
What's typically included in a memorandum of sale?
A well-prepared memorandum of sale covers all the information a buyer needs to evaluate your business properly. Here's what you should expect to include:
Business overview — A description of what your business does, your products or services, how long you've been trading, and your market position.
Financial information — Typically three years of accounts showing turnover, gross profit, net profit, and EBITDA. This section also explains any adjustments needed to reflect the true earning potential (such as removing your salary or one-off costs).
Assets — List the key assets included in the sale, such as equipment, machinery, vehicles, stock, fixtures and fittings, and intellectual property (trademarks, patents, domain names). If the premises are included as freehold property, this represents a significant asset. Be clear about the condition and age of major assets.
Liabilities — Disclose any company debts, outstanding loans, lease commitments, or other financial obligations. Transparency here is essential—buyers will discover these during due diligence anyway, and early disclosure builds trust.
Working capital — Explain what working capital (stock, debtors, cash) is typically required to run the business day-to-day. This helps buyers understand the true cost of acquisition beyond the purchase price.
Operational details — Information about your premises (freehold or leasehold), equipment and assets, staff structure, and key operational processes.
Customer and supplier base — Details about your customer relationships, contract terms, repeat business rates, and supplier arrangements (without necessarily naming them at this stage).
Market position — An overview of your sector, local market conditions, competition, and growth opportunities.
Reason for sale — A clear, honest explanation of why you're selling, such as retirement or other commitments. Transparency here builds trust with buyers.
Future potential — Realistic growth opportunities that a new owner could pursue, backed by evidence where possible. This might include profit forecasts if you have a solid basis for projections.
What a memorandum of sale looks like
You might wonder what format to use or how to structure the document. While there's no single template that works for every business, most memorandums follow a similar structure with clear sections and professional formatting. If you're working with a business broker, they'll provide sector-specific templates based on successful sales. If you're preparing one yourself, looking at business listings on platforms can give you a sense of how comparable businesses present themselves, though remember these are condensed versions rather than full memorandums.
Sale expectations and terms
Being clear about your expectations helps qualify serious buyers from the start and avoids wasting time on mismatched enquiries.
Price expectations — State your asking price or indicative valuation range. If you're open to offers, say so. Being upfront about price expectations means you only engage with buyers whose budget aligns with your expectations.
Payment structure — Indicate whether you expect payment in full at completion or would consider deferred payment structures, such as an earn-out arrangement where part of the price depends on future performance.
Timescales — Give buyers an indication of your preferred completion timeline. Are you looking to exit within three months, or are you flexible? If there's urgency (such as pending retirement or health reasons), mentioning this can help match you with buyers who can move quickly.
What's included — Clarify what the sale price covers. Does it include all stock and work in progress? Are any personal assets excluded? Clear boundaries prevent confusion later.
When is the memorandum of sale used?
The memorandum of sale comes into play relatively early in the sale process, but not at the very beginning. Here's the typical sequence:
First, interested buyers see a brief teaser or summary advert with limited details—perhaps your sector, location, and headline figures. If they want to know more, they sign an NDA to protect your confidential information. Only then do they receive the full memorandum of sale.
This document helps serious buyers decide whether to proceed to the next stage: making an initial offer or requesting a meeting to discuss the opportunity further. It saves everyone time by providing enough detail for buyers to self-qualify before deeper due diligence begins.
It's worth noting that a memorandum of sale is distinct from the detailed documentation provided during due diligence. The memorandum gives buyers enough information to decide if they want to proceed, whilst due diligence documents—such as detailed contracts, complete financial records, and full customer lists—come later once a buyer has made a formal offer.
How the memorandum is distributed
Your memorandum of sale needs to reach the right buyers whilst protecting your business from competitors or unnecessary exposure.
Through a business broker — If you appoint a business broker like Selling My Business, they handle distribution as part of a comprehensive marketing strategy. Your memorandum reaches their database of registered buyers, appears on business-for-sale platforms, and gets shared through industry networks. Brokers also vet enquiries, ensuring only serious, qualified buyers receive detailed information.
Private sale — If you're selling privately, you control distribution directly. You might share the memorandum through business-for-sale websites, industry contacts, or word-of-mouth referrals. The challenge is reaching enough potential buyers whilst maintaining confidentiality.
How buyers request a memorandum — Prospective buyers typically see a brief listing or teaser first, either online or through a broker. If they're interested, they contact the seller or broker to request the full memorandum. Before receiving it, they'll be asked to sign a non-disclosure agreement (NDA) and may need to provide some information about themselves—such as their background, funding position, or business experience—to demonstrate they're a serious buyer. This vetting process protects sellers from time-wasters and competitors posing as buyers.
Non-disclosure agreements — Regardless of distribution method, it's standard practice to require buyers to sign a non-disclosure agreement (NDA) before receiving your memorandum. This provides legal protection against buyers sharing your confidential information or using it to benefit competing businesses. However, for smaller businesses (typically under £500,000), whilst NDAs are used, the level of sensitivity is often less critical than in larger corporate sales.
Making it accessible — Your memorandum should be readily available to send or share once a buyer expresses interest. Keep your financial reports up to date and have all supporting documents organised. Responding quickly to buyer enquiries with a professional, comprehensive memorandum creates a positive impression and reflects well on how you run your business.
How to prepare an effective memorandum of sale
Your memorandum of sale needs to be thorough, accurate, and professionally presented. Here's how to approach it:
Be honest and realistic. Don't exaggerate your financial performance or overstate growth potential. Experienced buyers will spot inconsistencies during due diligence, and any loss of trust can derail a sale. Present your business accurately, including both strengths and any challenges.
Organise your financial information clearly. Make sure your accounts are up to date and easy to understand. If there are any unusual items or adjustments needed—such as one-off costs or owner expenses—explain these clearly so buyers can see the true trading position. Work with your accountant to ensure financial information is accurate and professionally presented.
Highlight what makes your business attractive. This might be strong customer relationships, a loyal team, consistent profitability, growth potential, or valuable assets. Help buyers see why your business is a good opportunity.
Keep confidentiality in mind. Even with an NDA in place, avoid including information that could identify specific customers or suppliers by name unless absolutely necessary. You can provide this detail later in the process once a buyer is further committed.
Present it professionally. A well-structured, clearly written document makes a better impression than something hastily put together. Use headings, keep paragraphs concise, and make sure it's easy to navigate.
Keep it appropriately comprehensive. The length depends on your business complexity. A straightforward retail business might need fewer pages than a manufacturing business with multiple locations and complex supply chains. Focus on being comprehensive without padding—every section should serve a purpose.
Research comparable listings. Looking at how similar businesses are presented for sale can help you understand what information buyers expect and ensure you're not missing essential details.
Common mistakes to avoid
Many sellers either provide too little information—leaving buyers with unanswered questions—or too much, overwhelming them with unnecessary detail. Strike a balance by focusing on what a buyer genuinely needs to make an informed decision at this stage.
Another common issue is inconsistency between the memorandum and what buyers discover later. If your document says turnover is £500,000 but your accounts show £450,000, you'll need to explain the difference clearly. Any discrepancies raise red flags.
Finally, don't undersell your business. Some owners are naturally modest and fail to highlight what makes their business genuinely valuable. If you have strong customer retention, a skilled team, or a great reputation, make sure buyers know about it.
How Selling My Business can help
Preparing a memorandum of sale requires time, attention to detail, and an understanding of what buyers are looking for. At Selling My Business, our advisers handle this process for you, drawing on over 60 years of experience in presenting businesses effectively to the market.
We know what information buyers need, how to structure it clearly, and how to present your business in the best possible light whilst maintaining complete accuracy. We'll also manage the confidentiality process, ensuring your memorandum only reaches serious, vetted buyers who have signed appropriate NDAs. Our database of over 10,000 registered buyers and extensive industry connections mean your business gets maximum exposure to qualified purchasers.
If you're considering selling your business and want to understand how to position it effectively, contact a member of the Selling My Business team today.
