Writing a Confidential Information Memorandum or Known as “Getting Naked”

If you are interested in selling your business and in the process of understanding how to secure the buyer and your prices, you must “get naked” and provide the potential buyer with a detailed package of information about your business. Merger & Acquisition professionals refer to this as Confidential Information Memorandum (CIM). The purpose of the CIM is to provide the buyer with enough information to generate an initial offer, called a Letter of Intent (LOI).

The CIM is a detailed brochure about your company that includes the facts that communicate your business differentiation to other businesses. It is also a marketing document that discusses both the features and benefits. According to “The Art of Selling Your Business” by John Warrillow, the sections that should be included in a CIM are:

Your business and its operations:

  • What makes your business model unique? For example, do you have a specialty that is superior, and you have many accolades in your area?
  • What do you do better than your competitors?
  • What have you figured out that an acquirer could leverage? You may outsource all your accounting, for example, versus doing it internally.


Products & Suppliers

  • List your services, organized by the percentage of annual revenue.
  • List your services, organized by the percentage of Gross Margin or Cost of Goods Sold.
  • Rank your top three to five suppliers by your annual spend.


Sales & Marketing

  • What is your customer “win” strategy?
  • How much does your customer acquisition cost for a new customer?
  • What is your market share?
  • Explain and emphasize any recurring revenue models (service agreements). Provide churn rates and the lifetime value of a customer.


Barriers of Entry

  • What makes your company unique and difficult for competitors to compete with?
  • What type of investment would it take to build what you have created, both time and money?


Trends and Opportunities

  • What is exciting in your industry?
  • What is growing or innovating?
  • What have you done in your business to embrace the trends and innovation of the future?



  • Include three years of adjusted P&Ls along with two years of projections.
  • Make sure adjustments are made to the financials to remove any one-time expenses and income that a new buyer would not incur.
  • Replace your compensation expense (salary and bonus) with a market-rate salary for a general manager who would do what you do.



  • Describe your customers by zip code, product sales, and average sale per customer. Do not provide a list of your customers.
  • What markets or products could you offer if you had more resources or capacity?


Management Team

  • Describe how well your company would run without you.
  • Show a visual organization chart that includes divisions and salary ranges of the employees.
  • Include a bio of each person in a leadership position, their compensation and incentives, and roles.


As you see from this list of items, providing a CIM is tricky when selling your business. You reveal some very intimate details about your company for an audience that may not use with the best intentions. Be careful of the buyer who just wants to learn more about what you do, like your fees, your processes, and your key customer strategies. If something is proprietary, do not expose that in the CIM. Even when a potential buyer signs an NDA, it is difficult to prove they used your proprietary asset to improve their business.

The CIM is not something you take lightly. It takes a lot of work and should not be given to any potential buyer unless you are committed to selling your business. Be prepared to be uncomfortable and know your leverage with a potential buyer.

Lynn Wise is the Founder and CEO of Contractor in Charge.

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area.

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