How to read a CIM in one hour Five pulls, in order, before you fall for the story.
A CIM, the Confidential Information Memorandum, is the seller’s packet: written to sell the business, not to inform you about it. Give it one focused hour and pull five numbers in order: the revenue trend, the real earnings, customer concentration, the lease, and the stated reason for sale. What the packet leaves out usually tells you more than what it prints.
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Written to sell, not to inform
CIM stands for Confidential Information Memorandum. Strip the initials away and it is the seller’s packet, assembled to sell the business, not to inform you about it. A broker or the seller put it together to show the company in its best light, the same way a listing photo picks the angle that hides the crack in the driveway.
None of that makes the CIM useless. For most buyers it is the first real look at the numbers, and reading it well in one focused hour tells you whether a listing deserves a phone call, a second hour, or a pass. The skill is not suspicion for its own sake. It is knowing exactly where to look first, and what a polished packet tends to leave out.
Five pulls, in the order that matters
Open the CIM and go straight to five numbers, in this order. The cover letter and the mission statement can wait.
First, revenue by year, three years back. Look at the trend, not the last number alone and not the average. A business that grew steadily into its current figure is a fundamentally different business from one that is flat, or sliding, even when the most recent year looks identical on paper. The direction matters more than the destination.
Second, seller’s discretionary earnings, and every addback listed. SDE is the seller’s case for what the business truly earns once the one-time and the owner-specific items are stripped back out. Read every addback line, not just the total, and put one question to each of them: would the next owner really not pay this? A personal vehicle usually survives that question. A repair bill that quietly repeats every year does not.
Third, customer concentration. Find what share of revenue comes from the single largest customer. As a rule of thumb, anything above roughly 20% changes the risk of the whole deal, because that one relationship can walk out with the old owner, the old pricing, or the old favor attached to it. A packet that will not break this number out at all is telling you something too.
Fourth, the lease. Find the term left on it, whether it transfers to a new owner without turning into a fresh negotiation with the landlord, and rent as a share of revenue. A short lease and an uncooperative landlord can unwind an otherwise good business before you have signed anything else.
Fifth, the stated reason for sale. Retirement, health, relocation, a partner dispute, plain fatigue: read what the seller says, then check whether the other four numbers agree with it. A seller who says they are simply tired, while the packet shows sliding revenue and a founder still closing every sale personally, is telling you two different stories. Believe the numbers over the narrative.
The silences say more than the charts
What a CIM leaves out is usually more informative than what it prints. Three years of tax returns promised, and only a loose reference to one. A customer list that discusses concentration in the abstract but never actually lists a customer. A next-year projection drawn as a hockey-stick, with no method or signed contract behind the bend, just a line that goes up because the seller needs it to.
None of these silences prove anything by themselves. Each one is simply a question you now owe yourself an answer to before you go further, and how a seller or broker responds to that question, openly or defensively, is itself part of the read.
What to do with your first hour
Keep the five pulls above in front of you the next time a CIM lands in your inbox: the free two-page Deal-Read Checklist covers exactly this first hour. If something in the packet raises a flag you cannot answer alone, the guide book’s deal-breaker list walks through the seven flags that end a deal outright. If a listing survives your hour and earns a second look, the 48-hour deal read turns your CIM and financials into a written verdict, and the full worked example shows exactly what that verdict looks like on a real deal.
Do sellers inflate the CIM?
What are addbacks?
How accurate are CIM projections?
When do I get real financials?
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