This article is one of a series that offers insight and guidance into the process of buying selling or valuing a business. Whether you want to buy, sell, or appraise the valuation of a going-concern business, these articles provide specific guidance and references to help you accomplish your goal.
Business Plan Basics
Edited by Russell L. Brown
The best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support is to show them a great business plan. This is especially true for those who want to purchase a going-concern business. Even if you are expecting that the business seller will be financing part of the purchase price you will need to convince him/her of your credit-worthiness. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Your business plan is like your calling card, it will get you in the door where you'll have to convince business sellers, investors and loan officers that you can put your plan into action.
Once you have raised the money to buy, start or expand your business, your plan will serve as a road map for you. It is not a static document that you write once and put away. You will reference it often, making sure you stay focused and on track, and meet milestones you have set out. It will change and develop as your business evolves.
Do I need a Business Plan?
Not everyone who buys, starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a business seller or venture capitalist, you will certainly need a comprehensive business plan that is well thought out and contains sound business reasoning.
If you are approaching a banker for a loan to buy a business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favorably on your application if you have one.
Reasons for writing a business plan include:
- Support a loan application to buy or start a business
- Raise equity funding to expand a business
- Define and fix objectives and programs to achieve those
- Create regular business review and course correction
- Define a new or newly purchased business
- Define agreements between partners
- Set a value on a business for sale or legal purposes
- Evaluate a new product line, promotion, or expansion
What's in a business plan?
A business plan should prove that your business will generate
enough revenue to cover your expenses and make a satisfactory
return for bankers or investors.
- Executive Summary--features the highlights of your plan and
sells your idea in two pages or less.
- Company Summary--a factual description of your company,
ownership, and history.
- Products (or services or both)--describes your products and/or services and how they stand out from competitive products and services.
- Market Analysis-provides a summary of your typical customers,
competitive landscape, market size, and expected market
- Strategy and Implementation-describes how you will sell your
product, how you will put your plan into action, and establishes
- Management Summary-provides background on the management
team, their experiences, and key accomplishments.
- Financial Plan-contains key financials including sales, cash
flow, and profits.
What makes a successful business plan?
- A well thought out idea and strategy
- Clear and concise writing so nothing is ambiguous
- A clear and logical structure that show's that you know what you are doing
- Illustrates management's ability to make the business a
- Shows realistic sales, expense and profitability projections
How do I write a business plan?
Sitting down looking at a blank computer screen as you prepare to
start your business plan can be daunting. You may want to look
at some alternatives that will make the process a bit easier.
Hire a Professional
A professional consultant will create the business plan for you, but you still have to be prepared to think through your business and understand the underlying concepts in your business idea. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business or business idea.
Use Business Planning Software
A good business planning software package will provide you with
an outline for a well-developed, objective-based and professional
business plan. Software packages will remove the problem of
starting from scratch by structuring your plan for you. The
software should ask you the right questions that will pull out
the most important underlying concepts within your business idea.
Additionally, you're considering buying, selling, or determining the value of a business, please take a look at some of the excellent books, reports, and software we have at Business Book Press to help you achieve success. For example:
The Business Reference and Pricing Guide is the bible of the business brokerage world. If you're a shrewd business buyer or seller, you will want this book to learn what just what the business broker knows. It will pay you big dividends throughout every aspect of the purchase and sale process. Learn more about it...
BizPricer Business Valuation Software is an accurate and inexpensive resource for prospective business buyers and sellers (and business brokers) who want to know the fair market value of a business. No financial expertise or specialized knowledge is needed. Save hundreds to thousands of dollars over hiring an appraiser to provide you with a similar result. Learn more about it...
Preparing A Business for Sale provides business owners with an understanding of the process they need to know to sell their business for the most money. Contains hundreds of little known tips, ideas and strategies to maximize the selling price of a business. Learn more about it...
Strategies for Successfully Buying or Selling a Business is our bestselling book. It has been recommended by Kiplingers Personal Finance Magazine, the BottomLine Personal Newsletter, and has been awarded the Best Business Book of the Year Award from the North American Bookdealers Exchange (NABE). Learn more about it...
Anatomy of a Business Purchase Offer provides you with all of the practical hands-on knowledge you need to make a successful purchase offer to buy a business. The author uses an actual Purchase Offer form to show you exactly what needs to be written and why! He details all of his recommendations in a line-by-line format for each and every aspect of the purchase offer. Learn more about it...
The Business Buyer's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully buy a business.
The Business Seller's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully sell a business.