How to prepare a business plan when purchasing a business,How to Create a Business Plan & Where Should the Executive Summary Be Located?
WebJan 23, · Writing a business plan is an opportunity to carefully think through every step to achieving your goals for your company. This is your chance to discover any WebAug 20, · The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in WebWrite your business plan; Calculate your startup costs; Establish business credit; Fund your business; Buy an existing business or franchise; Launch your business. Pick ... read more
Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb. Business Plan for Existing Company It should include a financial plan and high-level strategy with clearly assigned priorities, specific responsibilities, deadlines and milestones. Business Plan for an Existing Business 2. Benefits of Having a Business Plan for an Existing Business 3. How to Write a Business Plan for an Existing Business. Was this document helpful? Share it with your network! The Best Lawyers For Less. Talk to a Top Lawyer for Free. Content Approved by UpCounsel. Related Articles. Service Business Plan Sample of a Good Business Plan Details of a Business Plan LLC Business Plan Template Do I Need a Business Plan Creating a Business Plan Purpose of Business Plan Sample: Everything You Need To Know Business Plan for New Company Parts of Business Plan and Definition Business Plan Contents Page.
Want High Quality, Transparent, and Affordable Legal Services? Get Free Proposals. Why was this business for sale if projections are optimistic? Try to understand why owners are selling a business, and how this affects their willingness to produce real numbers, and how it affects your own possibilities to make this purchased business work for you. Where possible, spend time at the business in question, talk to customers, eat at the counter, use the service. For retail locations, for example, you can spend some time outside the store, count the customers, see how many go in empty-handed and how many come out with bags. Count the business for some sample hours, and then calculate what total sales might be by multiplying your estimated average purchase value per hour.
As you plan for the business you purchase, you start by making an important choice: business plans can be either for startup new businesses or for already-existing and ongoing business. When you buy a business from somebody else, either option is acceptable. This is a choice you make. The main difference between the two options is the existence in the plan of either a startup table, or a past performance table. In a new business, a startup table establishes opening balances for starting expenses, and financial balances including initial capital, debt, and assets. For an existing business, a past performance table shows past history of profit or loss, and balances of capital, debt, and assets.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans. Follow him on Twitter Timberry. Planning for Purchasing a Business 4 Min. Read Buying and Selling a Business By: Tim Berry. Start with existing information Start with the information you get from previous owners. Proceed with caution If you do have such a plan provided by the sellers, proceed with caution. Make sure you have enough information on the financials You should always have financial information. Use this financial information as a basis of comparison Question the information sources: copies of tax forms, if they are real, show what the sellers have told the government. Have a lawyer help you put this document together or, at the very least, review it carefully before you sign. This is where many deals fall apart because buyers and sellers often place very different values on the same business, and several factors affect a business's value.
Buyers and sellers usually use some kind of pricing model to get a ballpark number and frame negotiations. During this process, it can be very helpful to call in an independent business valuation professional to make an objective determination of value. To get some insight, we spoke with Mike Bilby, CPA and certified valuation analyst, at Concannon Miller. Bilby said small businesses should understand three main approaches to valuing an existing company when they're considering how to buy a business:. Best used for : buying existing businesses that are already turning a profit or have a positive forecast of earnings. The earnings approach values a business based on its historical, current, and projected profits.
Specific methods you may come across that fall into this approach include the capitalized earnings method and discounted cash flow method. For businesses with a history of fairly stable profits, that history can be used to anticipate future earnings and value the business. The disadvantage of the earnings approach is that it relies on a prediction of future earnings, which may not be accurate. The assets approach measures the value of a business's tangible and intangible assets minus debts and liabilities. Tangible assets include things like equipment and real estate, and intangible assets include things like patents, trademarks and software.
The assets approach considers the current fair-market value of the business's assets but also the future return on investment that the owner could get from those assets. Best used for : accounting for local factors or confirming a price that you arrived at based on one of the other two approaches. The market approach measures the value of a business based on how much comparable businesses have sold for. It might be confusing to get all these approaches straight in your head, but the point of all of them is to assess the current financial health of the business, as well as its growth potential.
In reality, Bilby says, none of these methods exists in isolation. All three of these approaches can be used to arrive at a fair price for a business, and the final price will always be the one that both the buyer and the seller agree on. Once you and seller agree on a number, the next step in buying a business is to get the money. Here are some of the ways to finance a business acquisition:. This is more likely if you're buying a small business rather than a chain. Many businesses are also funded with money borrowed from family.
If you go this route, you should understand the tax implications for gifts and family loans. Make sure that you and your family member put the exchange of money in writing and follow IRS rules for family loans. Some sellers will agree to holding a note, or accepting staggered payments — sort of like a lender. This way, they get guaranteed income for the coming months or years, depending on your plan. There are rules around seller financing, particularly if you plan to use another form of debt financing as well. Some sellers might also be willing to trade in some assets, like some furniture they really loved or the company car, for a lower price.
Understandably, not all sellers will be open to this option, since they more likely than not want to wash their hands and walk away from the sale. Buying a business will give you tons of documents to approach a bank or alternative lender with for financing: financial histories, tax returns, employee records, cash flow analyses, inventory and equipment valuations, and much more. SBA loan. Getting a business acquisition loan is typically easier because the lender has a history to assess. But just like with any business loan, lenders will scrutinize all of the following:. However, the SBA recently made some changes that make it easier for buyers to obtain SBA 7 a loans for buying a business.
The rest can come in the form of a seller's note as long as the seller agrees to be on full standby — meaning that the seller won't be paid back on their note until after the bank is paid. The last step in our buying an existing business checklist is to close the deal. When buying an existing business, this document will prove the actual sale of the business, officially transferring ownership of the business's assets from the seller to you. This is the final count of the cost of your purchase, including all prorated expenses—like rent, utilities, and inventory. Does the business you're buying come with any vehicles? If so, you might have to transfer ownership with the local DMV — make sure to get the right forms completed by the time of sale. Similarly, when buying an existing business, all patents, trademarks, and copyrights might require certain forms to get transferred to you, the new owner.
This document should be drafted in the case that the seller is staying on as an employee. Make sure to file this agreement if so. Bulk sale laws have to do with the sale of business inventory and are designed to prevent business owners from evading creditors by transferring ownership of the business to someone else. To comply, prospective buyers usually have to notify the local tax or financial authority about the pending sale. And that's everything you need to know about how to buy a small business. But knowing how to do it is one thing, knowing why you're doing it is another.
So let's talk about reasons for buying a business. Buying a business is kind of like being in the market for a home. When launching a brand-new business, the bulk of your time will be spent on the planning phase. An established brand and business brand identity whether or not you want to change it, people know it. Vendor and supplier base, plus manufacturing resources. Existing employees who can share their knowledge and expertise. An understanding of your competition and market. Granted, each of these things may not be in great condition, and the business might not be turning a profit yet. However, buying an existing business means it has some structure already in place, which will save you time upfront, letting you quickly see what you need to zero in on.
One of the major benefits of buying a business is that the operating costs are lower. Instead, you can pour more cash into expanding the business and adapting it to your vision. All this makes investors more likely to invest in the business and can make lenders more comfortable in giving you a business acquisition loan. The current owners can even participate in financing the transfer of ownership by giving you a loan. If your business-to-be has patented their products or has a copyrighted slogan or trademarked logo that wins over customers, then that intellectual property value will probably transfer over to you in the acquisition. That means when you buy a business, you sometimes buy more than what the eye can see.
What if you turned this small business into a national franchise? All of a sudden, that patent and copyright becomes a lot more valuable. Patents, copyrights and trademarks are often included in sales of software companies, tech businesses and creative businesses e. In fact, those purchasing costs might be greater than what it would take you to start a new business. Design work, from logo to store interior. Time, effort, and money spent testing out products. Refined processes, procedures and policies. Income stream if the business is already profitable. Intellectual property, such as copyrights, patents and trademarks.
All of these items will be the subject of negotiations between the buyer and seller and factor into the final purchase price when buying an existing business. This is especially true if you are entering an industry that you lack experience in. For example, equipment could be damaged, or the brand might have a bad reputation. Once you buy a business, you buy those issues, like it or not. Buying an existing business checklist.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money. Learn about the best business plan software. This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, and a broad summary of your financial growth plans.
Though the executive summary is the first thing your investors will read, it can be easier to write it last. Next up is your company description, which should contain information like:. Address of your business location. Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team. Lastly, it should cover the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section. The third part of a business plan is an objective statement.
The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company. For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and how much you think sales will increase over the next three years as a result. In this section, go into detail about the products or services you offer or plan to offer. An explanation of how your product or service works. The pricing model for your product or service. Your supply chain and order fulfillment strategy.
You can also discuss current or pending trademarks and patents associated with your product or service. Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section, explain who your competitors are. Discuss what they do well, and point out what you can do better. Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business. You may also include metrics such as:. Net profit margin: the percentage of revenue you keep as net income. Current ratio: the measurement of your liquidity and ability to repay debts.
Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year. This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business. The best business checking accounts. The best business credit cards. The best accounting software. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors. Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section. Here are some tips to help your business plan stand out:.
Providing unreasonable sales estimates can hurt your chances of loan approval. Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader. Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. You can search for a mentor or find a local SCORE chapter for more guidance. The U. Steps 1. Write an executive summary 2. Describe your company 3. State your business goals 4.
Describe your products and services 5. Do your market research 6. Outline your marketing and sales plan 7. Perform a business financial analysis 8. Make financial projections 9. Add additional information to an appendix Business plan tips and resources. ZenBusiness: Start Your Dream Business. Start now. Write an executive summary. Describe your company. State your business goals. Describe your products and services. You should include the following:. The typical customers you serve. Your sales strategy. Your distribution strategy. Do your market research. Outline your marketing and sales plan. Perform a business financial analysis. Make financial projections. Add additional information to an appendix. Business plan tips and resources.
On a similar note Dive even deeper in Small Business. Explore Small Business.
How To Write A Business Plan (2023 Guide),Benefits of Having a Business Plan for an Existing Business
WebAug 20, · The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in WebWrite your business plan; Calculate your startup costs; Establish business credit; Fund your business; Buy an existing business or franchise; Launch your business. Pick WebJan 23, · Writing a business plan is an opportunity to carefully think through every step to achieving your goals for your company. This is your chance to discover any ... read more
What Is ERP? Ideally, during the purchasing process, you received a business plan from the previous owners. Business Plan for an Existing Business 2. Include resolutions that your business implemented to correct any problems or failures. Content Approved by UpCounsel. Before you can begin your due diligence, the seller will most likely ask for a signed confidentiality agreement or nondisclosure agreement. Having a business plan for an existing business offers several benefits.
Lenders and investors will want to know what sets your product apart from your competition. An understanding of your competition and market. Read Buying and Selling a Business By: Tim Berry. Evaluate the price of the business with the earnings, assets or market approach. Share it with your network!
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