The Gray Cat Blog

A comprehensive collection of blogs designed to assist small business owners and multiunit operators.

Creating An Offering Memorandum

Feb 03, 2023

There comes a time in every entrepreneur’s life when they wish to exit their business. At that time, one of the most essential documents a business owner should create is an offering memorandum. An offering memorandum should represent the guiding path for their enterprise, mixing in a historical prospective and its relationship to its future expectations. All too often, business owners fail to reflect on the past as a learning component to where their business is headed.

In my previous articles regarding business planning, each focused more on the execution of the plan. Most business owners are better at developing tactical initiatives to be executed, but have challenges is seeing how they connect to the overall financial performance of the company. The offering memorandum helps to communicate the vision of the business not only for today, but where the business is headed. Articulating realistic expectations for the company enables perspective buyers to effectively evaluate whether to invest or purchase your company. On the flip side, misrepresenting its value is an absolute no-no.

I am a solid believer in writing an offering memorandum in a fashion that if it fell out of your back pocket and someone stranger picked it up off the ground, they could read it and fully understand what your company has done and is expected to do. That is my “litmus test” for a solid memorandum. While an offering memorandum can encompass many components, here are the three essential areas that should be vetted and addressed:

Business Description: Each of these areas helps to explain the “who, what, why, where and how” attributes of the business. While it may seem elementary to include these items, remember that employees and/or investors need to understand the genesis of your company in order to embrace the future aspirations of its growth.

  • History – Company owners should outline the driving force that prompted the beginning of their enterprise. In particular, communicate what marketplace “needs” were present in order to be addressed with the formation of their company. It should also be reiterated in the projected five-year plan, especially if the initial needs have been modified.
  • Description of Products – Not only should the products of the company be explained, but also their share of revenue within the company business model. Product gross profit and unit velocity on an annualized basis should be included.
  • Company Economics – This is the section that explains how the company earns revenue from its product line against the associated expenses of the firm. Included in this area would be all revenue sources from commissions to distribution to fees, etc.
  • Marketing Strategies – How does the company go to market with their products? Items included explain the strategies that have been put in place that make the company unique with its offering.
  • Marketplace Opportunity – Lastly, how is the business positioned within the competitive landscape and what are the untapped opportunities that will continue to grow the enterprise? Presenting the upside value in the business in a realistic manner, will create the opportunity for the potential interested party.

Financial Review:

  • Historical Financial and Operating Data – The financial section of the offering memorandum is by far the most prominent section. Most transactions are made on a multiple of EBITDA and that multiple can vary by industry and/or upside potential. Accurately accounting for the historical financial data helps place value on the company.
  • Description of Assumptions – Along with the actual financials, a section describing the assumptions that are being used in the projected five-year plan is next. These assumptions help explain and frame the discussion surrounding how the projections were put together.
  • Projected Five-Year Plan – The five-year projections take into account the historical run-rates and the go-forward strategies of the company that enable it to achieve its Proforma. While this section can be up for debate between the buyer and seller, nonetheless it does attempt to tie the company initiatives to the corresponding financials.


  • Organizational Charts – The organizational chart of the organization should also be included so that the investing company can gain an understanding of the existing team. If the purchase of the company is part of a roll-up of companies, many positions may be deemed as duplicative by the acquiring party. If it is a stand-alone purchase, maintaining the integrity of the team is paramount for its continued operation.
  • Management Biographies – Lastly, the background of each of the key team members should be included in the package.

Communication is key when it comes time to exit your business. Being prepared and organized conveys a sense of stability and credibility for the potential investors. An accurate and powerful offering memorandum can be the difference between realizing your financial goals or not.

John Matthews, President & CEO, Gray Cat Enterprises, Inc.

John Matthews is the Founder and President of Gray Cat Enterprises, Inc. a Raleigh, NC-based management consulting company. Gray Cat specializes in strategic project management and consulting for multi-unit operations; interim executive management; and strategic planning. Mr. Matthews has over 30 years of senior-level executive experience in the retail industry, involving three dynamic multi-unit companies. Mr. Matthews experience includes President of Jimmy John's Gourmet Sandwiches; Vice President of Marketing, Merchandising, Corporate Communications, Facilities and Real Estate for Clark Retail Enterprises/White Hen Pantry; and National Marketing Director at Little Caesar's Pizza! Pizza!