How to Read a CIM: The 6 Numbers to Pull and the 4 Sections to Ignore

A CIM is written to sell you a business. Read it like an advertisement, not a textbook — because that’s what it is.

Sign an NDA on a deal and the broker sends back a CIM — a confidential information memorandum (sometimes a “CIP,” confidential information presentation). It’s a 15-to-40-page PDF that introduces the business: the story, the financials, the “opportunity.” And here’s the thing every first-time buyer learns the hard way: the CIM is a marketing document. A broker was paid to make this business look as buyable as possible. The photos are flattering, the narrative is polished, and every number that could be presented favorably has been.

That doesn’t make it useless — it makes it a test of your reading. A trained buyer doesn’t read a CIM front to back. They go straight for six numbers, form a verdict in about ten minutes, and skip four whole sections on the way. Here’s the same CIM, the way they actually read it:

The 6 numbers to pull

Everything that decides whether a deal is worth a second hour lives in these six places. Find them first; ignore the order the CIM presents them in.

1. SDE and the add-backs behind it. Seller’s discretionary earnings is the headline profit number — but it’s only as real as the add-backs propping it up. A broker recasts the P&L by adding the owner’s salary, personal expenses, and one-time costs back to net income. Some of those are legitimate; some are wishful. Run every add-back through one question: does this expense actually disappear when I own the business? Truly discretionary spend disappears. The owner’s salary doesn’t — it gets replaced by what you’ll pay someone (maybe yourself) to do that job, so only the excess above a market wage is a real add-back. When add-backs run past ~30% of SDE, slow down.

2. The three-year revenue trend. One number tells you nothing; three years tells you a story. Flat or gently growing is good and boring. What you’re hunting for is the shape: a revenue spike in the most recent year — right before the owner decided to sell — is the single most common thing a CIM is built to gloss over. Ask what changed, and whether it repeats.

3. Customer concentration. If one customer is more than 20% of revenue, the business has a hidden single point of failure; past 30%, it’s often a deal-killer. Lose that account after closing and you still owe the loan. A CIM rarely volunteers this clearly — sometimes you have to back it out of a “revenue by customer” table buried near the end, and sometimes you have to ask.

4. Owner dependence. The question under every small-business acquisition: does the business run, or does the owner run the business? If the seller personally holds the key customer relationships, makes every sale, or carries the license the company operates under, the revenue may not transfer with the keys. That’s not necessarily a no — but it’s a “the price and the transition plan have to reflect it.”

5. The asking multiple. Divide the asking price by SDE. For most owner-operated businesses under $1M of SDE, the fair lane is roughly 2–3× — the all-industry median is about 2.6× SDE (BizBuySell marketplace data), higher for clean, recurring, transferable revenue and lower for concentrated, owner-dependent, or lumpy businesses. Pricing is its own discipline the full guide to buying a business walks end to end. The CIM’s asking price is the seller’s opening offer, not a verdict. Knowing the lane tells you how far apart you are before you ever pick up the phone — you can sanity-check it against real asking prices and multiples by industry.

6. The reason for selling. “Retirement” or “pursuing other interests” is the default CIM answer, and it’s almost never the whole story. The real reason — a health scare, a key contract that’s about to lapse, burnout, a big piece of capex coming due — is one of the most important facts in the deal, and it’s your very first diligence question on the broker call.

The 4 sections to ignore (at least for now)

A CIM spends real page-count on sections designed to raise your enthusiasm, not your understanding. On the first read, skim them and move on:

• The market overview. The “$130B industry growing 7% a year” section is an industry brochure. It tells you nothing about this business.
• Growth opportunities. This is the seller’s wish list, and it’s frequently priced into the multiple as if you’ve already executed it. You’re buying what the business does today, not what it might do under you.
• Facilities and photos. Verify the physical operation on your site visit, not in a curated PDF.
• The closing narrative. “A turnkey opportunity for the right buyer” is ad copy. The numbers already told you the truth.

The broker tells

Beyond the numbers, how a CIM is written is its own signal. A few patterns that should make you read harder, not run — but read harder:

• Add-backs that add up to more than a third of SDE.
• No offer of tax returns — only a “recast” or “adjusted” P&L. The general ledger and the returns are what a quality-of-earnings analysis will reconcile against later; reluctance now is worth noticing.
• A revenue chart that conveniently starts the year the business turned a corner.
• A vague, glowing description of the owner’s role — often a sign the owner is the role.

From CIM to a decision in minutes

None of this is hard once you know where to look — it’s just easy to forget under a polished 30-page PDF when you’re working a deal at night after your day job. That’s the exact gap DealStratum’s AI deal screening fills: paste in a CIM or financials and it pulls the same six numbers, flags the add-backs and the concentration, and gives you a plain-English read on whether it’s worth a second hour — so the first pass takes minutes instead of an evening, and you only go deep on the deals that earn it.