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The Role of Market Research in the Information Memorandum

When planning to sell a business you will need to prepare an Information Memorandum. This document is similar to a business plan. It is meant to provide an overview of the business and insight into the companyu2019s value in order to entice prospective buyers. A lot of what buyers are looking for is potential. The section that helps inform a great deal of this potential is the market overview, which should be based on current market research.

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The Role of Market Research in the Information Memorandum

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  1. The Role of Market Research in the Information Memorandum When planning to sell a business you will need to prepare an Information Memorandum. This document is similar to a business plan. It is meant to provide an overview of the business and insight into the company’s value in order to entice prospective buyers. A lot of what buyers are looking for is potential. The section that helps inform a great deal of this potential is the market overview, which should be based on current market research. Market research is the process of identifying consumer needs and preferences. It also involves identifying the total size of the industry and the customer base. When it comes to your information memorandum, the more thorough the Market Research the more you’ll be able to justify other sections of the plan. Thorough market research will allow you to: Demonstrate market share You can’t demonstrate your company’s place in the market without describing the overall market. If you’ve been busy working in your business, things around you may have changed without you realizing it. When you do market research, you get to see the real picture. You will also be able to identify what percent of the total market you are capturing. This is of particular interest to competitors who may buy your business simply to expand their market share.

  2. Justify financial projections In the financial section of the information memorandum, you will report historic information as well as projections for the future. When creating the projections, this should not only be based on your company’s financial trends but, overall market trends as well. It gives more validity to your numbers. Show future potential. As already mentioned, one of the most important parts of the business plan is the market overview. Even if your business is underperforming now, market research shows the future potential, making it far more appealing to buyers. Plenty of companies will purchase failing businesses if they know there is an upside. Market Research is where this can become evident. Receive top dollar. Ultimately, the reason it is so important to use market research in the information memorandum is because your goal is most likely to sell the business for as much money as possible. It doesn’t matter if your business is succeeding right now or not, if there is a reasonable potential for it to perform well you can receive top dollar. Business values are subjective and acquisition prices can come down to the highest bidder. The more people you have interested in your business, the higher the final offer. Since information memorandums are so similar to business plans, business planning professionals can help you. They will be able to complete the information memorandum with buyers in mind. Business plan writers and other similar professionals are accustomed to creating documents that “sell” the business. Ideally, you’ll be using a mergers & acquisitions (M&A) firm to handle your business sale. Even they often outsource the creation of the information memorandum - or at the very least market research - to streamline their businesses. Regardless your situation, hiring professionals can ensure you get the market research and the Information Memorandum that best represents your business.

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