What is a CIM? Confidential information memorandum explained
This post is for a first-time buyer who has just signed an NDA and received a PDF of 20 to 60 pages. By the end you will know what a confidential information memorandum (CIM) contains, which pages matter, and what to check each claim against before you make an offer.
The definition in plain words
A CIM is the seller's story of the business, written by the broker to get the best price. It is sometimes called an offering memorandum, an information memorandum, or a "book". Investopedia's page on the offering memorandum describes the same idea for larger deals: a document that gives a prospective buyer the facts needed to decide whether to go further.
Two things follow from that. First, the CIM is useful: it saves you weeks of questions. Second, it is one-sided. The broker chose which numbers to show and how to present them. Good brokers are accurate. Even so, the buyer's job is to verify, not to believe.
What a CIM contains, and what to check it against
Most CIMs for a small or mid-sized business follow the same order. The table below lists the usual sections and the document that proves or disproves each one. The example column is illustrative, for a $1,200,000 HVAC company.
| CIM section | What it usually says (illustrative) | Verify against |
|---|---|---|
| Summary and asking price | $1,200,000 for a 20-year-old HVAC business, owner retiring | Comparable sales; your own valuation |
| History and overview | Founded 2006, two trucks to seven, 1,800 active customers | Customer list with last service date |
| Products and services | 60% service and repair, 40% installs | Invoice export from the accounting system |
| Customers | No customer over 5% of revenue | Sales by customer for three years |
| Staff | Seven technicians, one office manager, owner sells | Payroll records; W-2s and 1099s |
| Financial summary | Revenue $2,100,000, SDE $410,000 | Three years of tax returns and the P&L |
| Add-backs | Owner's salary $120,000, personal truck $14,000, one-off legal $9,000 | Bank statements and the general ledger |
| Balance sheet items | $85,000 of receivables, $40,000 of parts stock | Aged receivables report; a stock count |
| Assets included | Seven vehicles, tools, software, phone number, website | Titles, leases, equipment list with serial numbers |
| Growth story | "Add a second office and double revenue" | Treat as opinion; price the business as it is |
Three pages carry most of the weight: the financial summary, the add-backs, and the customer breakdown. Read those first.
How to read the financial pages
Start with the tax returns, not the CIM's table. The CIM shows the "recast" or "adjusted" earnings, which is the tax-return profit plus add-backs. Each add-back should be a real expense that will stop when the owner leaves. The owner's salary is a fair add-back. "Owner's travel" is only an add-back if it was personal travel, not sales trips.
Then tie the P&L to the bank statements for at least one year. Deposits should match reported revenue within a small margin. If the CIM says $2,100,000 of revenue and the deposits show $1,850,000, you have found the real number.
Finally, read the trend. Three years of similar profit are worth more than one strong year after two weak ones, even if the three-year average is the same. Lenders read it the same way: the SBA's 7(a) loan page sets the frame, and the lender will want the tax returns the CIM was built from.
Where it shows up in a deal
The CIM arrives after the NDA and before any call with the seller. It is the document you use to decide whether to make an offer, and the numbers in it become the first draft of your letter of intent. In our guide on how to sell a business, preparing the CIM is one of the main jobs of the broker or advisor, and it is where a good broker earns their fee.
Brokers who want to write better CIMs, and buyers who want to understand how they are built, can read how to become a business broker. A clean CIM with the tax returns attached sells faster than a glossy one without them.
Common mistakes
- Valuing the business on the CIM's SDE. Value it on the SDE you can prove from the tax returns and bank statements.
- Skipping the customer list. "No concentration" in the summary sometimes hides one contract that is 30% of revenue.
- Reading the growth plan as part of the price. You are buying the business as it is. If the second office were easy, the seller would have opened it.
- Not asking for the raw files. Ask for the general ledger, aged receivables, and sales by customer as exports, not screenshots.
- Taking too long. A good listing draws several buyers. Read the three key pages within 48 hours and decide whether to ask for more.
Questions people ask
Is a CIM the same as a business plan?
No. A business plan is written by an owner about the future. A CIM is written by a broker about the past three years, with the asking price, to sell the business to a buyer.
Do I need to sign an NDA to get a CIM?
Yes, almost always. The CIM names the business and shows its financials, so brokers send it only after a signed non-disclosure agreement and usually a short buyer profile.
Can I trust the numbers in a CIM?
Treat them as the seller's claims. Most are accurate, but every number should be tied back to tax returns, bank statements and the accounting system before you rely on it.
How long is a typical CIM?
For a business with $500K to $50M in revenue, usually 15 to 60 pages. Longer is not better; the financial summary, add-backs and customer breakdown are the pages that decide the deal.
Sources
- investopedia.com — https://www.investopedia.com/terms/o/offeringmemorandum.asp
- sba.gov — https://www.sba.gov/funding-programs/loans/7a-loans
Pober, M. (2026). What is a CIM? Confidential information memorandum explained. Acquisitions.com. https://acquisitions.com/blog/what-is-a-cim/
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