how to write a business plan for buying an existing business

Business Plan for Existing Company

It should include a financial plan and high-level strategy with clearly assigned priorities, specific responsibilities, deadlines and milestones. 3 min read

A business plan for existing company should include a financial plan and high-level strategy with clearly assigned priorities, specific responsibilities, deadlines and milestones.

Business Plan for an Existing Business

Business plans are not only meant for new businesses. Having a business plan for an existing business offers several benefits. It increases the confidence of investors in your business, attracts new partners or employees to your company and makes your business look more attractive to the prospective buyer if you are selling your business. Above all, a business plan guides you through growth and success at different stages of your business.

Preparing a business plan in black and white gives you an opportunity to give a careful thought to each step required to achieve your business goals. You can discover any existing weaknesses and likely challenges you may encounter down the line. It also helps you identify untapped opportunities and capitalize on them.

A typical business plan includes the following sections:

• Description of the Company
• Mission and Objectives
• Products and Services Offered
• Market Demand and Trends
• Marketing and Sales Plan
• Operational Plan
• Management and Organization
• Financial Statement
• Financial Analysis
• Financial Plan

Sometimes, events like business acquisition, new product development or franchise purchase, may necessitate an existing business to create a business plan. Existing businesses generally use a business plan to outline their strategies, keep a tab on expenses, and benchmark the progress. Unlike in the case of a new business, creating a business plan for an existing business is simpler due to ready availability of operational information.

Benefits of Having a Business Plan for an Existing Business

Guide your growth : The success of a business depends upon a lot of factors, including persistent hard work, prevailing economic trends, market needs and location of your business. Having a business plan guides and influences your growth and helps you move towards defined business objectives in a proactive manner.

Manage your priorities : A business plan helps you focus on the order of your priorities and you can allocate resources where they are required the most. You can capitalize on your strength to perform those tasks first, which are most important in achieving your business objectives. In the meantime, you can simultaneously work towards tackling your weaknesses.

Assign responsibilities : Organizational responsibilities are developed and assigned on the basis of a business plan in order to achieve the set objectives.

Monitor business progress : A business plan sets the benchmark to measure progress towards achieving your goals. Without a plan, it becomes difficult to monitor whether you are managing the business in the right manner or whether the business is progressing in the right direction at a speed it ought to.

Plan for cash : Cash is the lifeline of any business. However, many businesses do not plan cash management well, although they are very particular about earning profits. Poor cash management can create bottlenecks in operations and damage your reputation among suppliers, vendors and creditors. A business plan includes a plan for efficient cash management, making way for smooth operations and functioning of the company.

How to Write a Business Plan for an Existing Business

• Create a cover page with your business name, address, and contact information.
• Write a general business description with company's mission.
• Write a legal business description that includes the type of business entity (sole proprietorship, Limited Liability Company, corporation, etc.), number of years you've been in the business, sales, profit and finance history, etc.
• Define the products and services of your business.
• Analyze your industry, target market, demand and competition.
• Prepare a marketing plan using your research and analysis.
• Identify your main competitors along with their products, strengths and weaknesses vis-à-vis yours.
• Define strategies for advertising and customer retention, along with associated costs and revenue generation.
• Describe the operations of your business including its location and equipment details.
• Identify the key personnel, and assign responsibilities and functions to them.
• Provide financial information like accounting method (whether cash or accrual basis), credit terms, payment collection methods, etc.
• Prepare financial statements like balance sheet, profit and loss statement and cash flow statement.
• Summarize your business plan.
• Generate a table of contents and appendices.

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Business Plan for Buying an Existing Business

Published Oct.18, 2023

Updated Apr.19, 2024

By: Alex Silensky

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Table of Content

Buying an existing business is a great way to enter a new market, expand your product or service offerings, or leverage the seller’s existing customer base and brand recognition. However, before making an offer, you need a clear and realistic acquisition business plan for running and growing the business post-acquisition.

A business plan for buying an existing business is a document that outlines your vision, goals, strategies, and financial projections for the business you want to buy. It is similar to a regular business plan but also includes information about the seller’s business history, performance, strengths, weaknesses, opportunities, and threats. 

A business plan for buying an existing business via franchise business planning services helps you to:

• Evaluate the feasibility and profitability of the deal
• Negotiate the best price and terms with the seller
• Secure financing from lenders or investors
• Manage the transition and integration process smoothly

What to Include In an Acquisition Business Plan?

A business plan for purchasing an existing business should cover all the essential aspects of running and growing a business, such as:

• Executive summary
• Company overview
• Industry analysis
• Marketing plan
• Operations plan
• Organization and management
• Financial plan

Why Do You Need a Business Plan Sample for Buying an Existing Business?

A business plan sample can help you write a business plan for buying an existing business by providing a template and examples of how to structure and present your information. A business plan for buying an existing small business can also inspire you with ideas and insights on improving or innovating the existing business.

To help you get started with writing your acquisition business plan template for buying an existing business, we have created a sample based on buying a restaurant for you.

Executive Summary

We are XYZ Restaurant Group, a company that owns and operates several successful restaurants in New York City. We seek to acquire ABC Restaurant, a well-established and popular Italian restaurant in Brooklyn, New York.

For over two decades, ABC has been a mainstay in the community, earning devoted regulars and renown for top-notch cuisine and hospitality. This 100-seat eatery runs at full capacity for lunch and dinner daily. Raking in $1.2 million yearly with $150,000 left over after expenses, ABC shows no signs of slowing down after its longstanding prosperity.

ABC Restaurant is an excellent opportunity to expand our portfolio and enter a new market. We have identified several areas where we can add value and improve the performance of the restaurant, such as:

• Updating menu and dishes
• Enhancing online presence and marketing
• Renovating interior/exterior
• Hiring and training new staff

We estimate the total cost of acquiring and improving ABC will be $500,000. We project that ABC will generate an annual revenue of $1.5 million and a net profit of $200,000 in the first year after the acquisition and grow by 10% annually.

Company Overview

XYZ Restaurant Group owns and whips up several nifty eats-places in the Big Apple. We’re crackerjack at serving out first-rate delicious eats from all over the world, like Mexican, Thai, Indian, and Mediterranean. Folks rave about our mouthwatering chow, friendly service, cozy mood, and fair coin.

Our mission is to dish up a memorable dining experience that delights taste buds and beats hopes. Our vision is to become top cook in the USA, with a diverse and brainy bill of fare for different chowhounds. We value being the cat’s meow, passionate, upright, diverse, and keeping customers cheerful.

We aim to acquire ABC, a swell and popular Italian hub in Brooklyn. ABC has loyal eaters and a dynamite food and service name. We want to buy ABC because it has a potential for growth and bankroll.

Industry Analysis

The restaurant industry in the USA is a large and diverse sector that includes various types of establishments, such as full-service restaurants, fast-food restaurants, cafés, bars, and catering services. 

Here are some key stats regarding the restaurant industry in the USA:

• The food service industry might reach $997B in sales in 2023. (Source – National Restaurant Association )
• There are 749,404 restaurants in the United States as of 2023. (Source – Zippa )
• Between April 2022 and March 2023, new business openings in the restaurant industry increased by 10%. (Source – Yelp )
• The US restaurant industry shall grow at a CAGR of 10.2% in 2022 and 2023. 

Some of the key trends and drivers that influence the restaurant industry are:

• Consumer preferences
• Regulations

Our primary competitors in the Italian restaurant segment are:

• Strong brand recognition
• Diverse menu selection
• Provides good value
• Menu lacks innovation
• Food quality is inconsistent
• Customer service needs improvement
• Expensive menu prices
• Small capacity limits covers
• Relies heavily on its location

Marketing Plan

Our marketing plan for ABC is based on the following objectives:

• To increase the awareness and recognition of ABC.
• To attract new customers and retain existing customers.
• To increase the sales and profitability of ABC.

Our business plan for buying an established business consists of the following elements:

• Professionals
• Millennials
• Updating the menu and introducing new dishes
• Enhancing the online presence and marketing
• Renovating the interior and exterior
• Hiring and training new staff and implementing best practices
• Branding – Our brand name is simple, memorable, and distinctive. Our brand logo is a stylized letter A with a fork and knife on either side. Our brand slogan is “ABC: A Taste of Italy.” Our brand colors are red, white, and green, representing the colors of the Italian flag. Our brand voice is friendly, professional, and authentic.
• Offering discounts and coupons
• Implementing dynamic pricing
• Creating bundle deals
• Providing upselling and cross-selling opportunities
• Online – Search engines, social media, email, and blogs, online reviews, testimonials, and referrals
• Offline – Newspapers, magazines, radio, TV, billboards, print ads, radio spots, TV commercials, outdoor signs, flyers, brochures, and business cards
• Events – Trade shows, festivals, and community events via booths, banners, and samples to display using contests, games, and giveaways

Operations Plan

Our operations plan for ABC is based on the following objectives:

• To provide a safe, clean, and comfortable environment
• To deliver high-quality food and service
• To manage our resources and costs effectively

Our business plan for buying an existing company consists of the following elements:

• Location and Facilities – ABC operates at 123 Main Street, Brooklyn, New York. It is a prime location with high foot traffic, visibility, and accessibility. The restaurant occupies a 2,000-square-foot space, including a dining area, kitchen, storage room, restroom, and office. The dining hall has a capacity of 100 seats and can accommodate up to 150 customers at peak times.
• Food: We buy ingredients from XYZ Food Distributors, a local company specializing in Italian food products.
• Beverages: We buy our beverages from ABC Beverage Company, a national company that offers a wide range of alcoholic and non-alcoholic drinks.
• Other: We buy our other supplies from DEF Supply Store, a regional company that provides various supplies.
• Food Safety – Adhere to all FDA and DOHMH guidelines. Monitor and log temps, freshness. Train staff on protocol.
• Service Excellence – Follow XYZ standards for hiring, training, dress code, incentives, feedback. Address complaints ASAP.
• Performance Evaluation – Track KPIs (sales, costs, satisfaction, retention) with POS, software, spreadsheets. Hold regular reviews to improve.
• Business License from NYS Department of State
• Food Service License from DOHMH
• Liquor License from NYS Liquor Authority
• Health Inspection clearance from DOHMH
• Fire Inspection clearance from NYFD
• Workers’ Compensation Insurance
• Liability Insurance
• Sales Tax registration and remittance with NYS Taxation and Finance
• Passed inspections for health, sanitation, and fire safety standards
• Obtained all necessary permits, licenses, registrations, and insurance

Organization and Management

XYZ Group is a partnership between Alex Smith, Park Smith, and Mark Wood, who own 33.3% and oversee strategy, operations, and technology, respectively.

ABC is a subsidiary operated by the following staff:

• General Manager – Reports to Alex Smith, oversees daily strategic and operational planning services
• Chef – Reports to Park Smith, manages kitchen and food preparation
• Sous Chef – Assists the Chef ensures food quality
• Kitchen Staff – Report to Sous Chef, perform various kitchen duties
• Servers – Report to the General Manager, take orders, and serve customers
• Host – Reports to General Manager, greets and seats guests
• Bartender – Reports to General Manager, prepares and serves drinks
• Delivery Driver – Reports to Mark Wood, delivers orders to customers

We have an experienced, competent team at ABC with proper training, compensation, and a collaborative work culture to drive success. The organizational structure establishes clear roles and reporting lines.

Financial Plan

Our financial plan for ABC is based on the following objectives:

• To generate sufficient revenue and profit
• To maintain a positive cash flow
• To secure adequate funding

When buying an existing business, it’s important to determine how much operating capital you should plan for. Our financial plan consists of the following elements:

• Funding Sources
• Assumptions

Income Statement

• Balance Sheet
• Cash Flow Statement
• Ratio Analysis
• Break-Even Analysis

Get Expert Help with Your Acquisition Business Plan

As you can see, developing a comprehensive business plan for buying an existing business requires significant time and expertise across various areas like finance, operations, marketing, and more. That’s where our expert advisors at OGSCapital can help.

With over 15 years of experience in M&A, strategic planning, and business planning, OGSCapital has helped numerous clients acquire and integrate businesses successfully. Our business plan writers can conduct diligence, analyze the deal, create projections, and craft a winning plan tailored to you. If you’re still thinking about how to buy an existing business, partner with our seasoned advisors to maximize your chances of closing and profiting.

Frequently Asked Questions

What is acquisition in business plan.

Acquisition in a business plan is buying or merging with another company to achieve strategic or financial goals. Acquisition planning can help a company expand its market share, diversify its product portfolio, acquire new technologies or skills, or reduce competition.

How do you create an acquisition plan?

To create a business plan for buying an existing business, you must define your objectives, identify and evaluate targets, conduct due diligence for merger and acquisition , negotiate the deal, plan and execute the integration, and monitor the outcomes.

How do I prepare my business for acquisition?

To prepare your business for acquisition, you should improve your business value, know your valuation range, establish an advisory board and a transition team, clean up your financials and legal documents, and prepare a pitch deck and better buy side due diligence services .

What should be included in an acquisition plan?

A business plan for buying an existing business should include an executive summary, target description, market overview, sales and marketing, financial history and projections, transition plan, deal structure, and appendices/supporting documents.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Business Insights

Due diligence tips for acquiring an existing business, august 16, 2024.

Acquiring an already-established business may seem like a highly promising venture, However, a comprehensive approach is crucial to ensure the acquisition’s success. In that case, performing comprehensive due diligence is crucial for identifying potential problems and facilitating informed decision-making.

Due diligence entails thoroughly investigating and evaluating a business or investment opportunity before finalizing a transaction. It involves reviewing financial and statements, legal documents, operational aspects, and potential risks to ensure that the decision is informed and the investment is sound. This critical step helps buyers and investors avoid potential pitfalls and make decisions based on a comprehensive understanding of the target’s actual value and condition.

Below are some critical due diligence tips for acquiring an existing business.

Evaluate financial health and history

Assessing a business’s financial health and history is essential in the due diligence process . This includes reviewing financial statements, tax returns, accounts receivable, and cash flow reports. By understanding the company’s economic track record, you can gain valuable insights into its profitability and stability. Additionally, obtaining a business valuation is crucial to ensure that the purchase price reflects the business’s true worth.

When reviewing financial documents, new business owners should pay close attention to any red flags, such as declining revenue or irregular expenses. It’s also advisable to check the current owner’s credit score to understand the business’s creditworthiness.  

Utilizing online platforms that list businesses for sale, like Bsale in Australia, can be a good start in your journey. These platforms offer valuable insights and resources to assist you in evaluating various aspects of potential businesses. For first-time buyers of established businesses, exploring these websites and learning more about the process can be helpful.

Assess the business plan and market conditions

Before acquiring a business, it’s essential to review the existing business plan and assess its alignment with your vision for the new company. That said, evaluate the company’s market research, customer base, and brand recognition. Meanwhile, understanding market conditions and how the business has adapted to industry changes is also vital for planning future growth.

If needed, you can consult with a business broker to get a professional opinion on the business plan and market viability.

Analyze legal and operational aspects

A thorough review of the business’s legal and operational aspects also helps avoid future complications. This includes verifying that all licenses and permits are current and that the company complies with local, state, and federal regulations. Furthermore, reviewing supplier contracts, leases, and any pending litigation is also crucial.

The acquisition process should include an in-depth analysis of the company’s operating and startup costs, too. Understanding these costs will help the new owner prepare for initial investments and budget accordingly. Also, it’s crucial to analyze the company’s history regarding its accounts payable and relationships with suppliers to identify any potential issues that may impact future operations.

Explore financing options

Obtaining adequate financing is an essential aspect of any business acquisition. New business owners have several financing options to consider, including SBA loans, business acquisition loans, and seller financing.

SBA loans are particularly popular for small business acquisitions due to their favorable terms and low interest rates. However, obtaining an SBA loan requires a strong business plan, a good credit score, and a solid business checklist to meet the Small Business Administration’s requirements.

Meanwhile, business acquisition loans are designed to help individuals or companies purchase an existing business by providing the necessary capital for the purchase price and related costs. These loans can also cover additional expenses like working capital or equipment upgrades. They are available from various sources, including traditional banks and credit unions.

Seller financing may be another viable option that can provide immediate cash flow for the new owner. In this financing setup, a business or property seller extends credit to the buyer. Then, they can pay in installments over time, often with interest, until the agreed-upon purchase price is fully paid. Seller financing may be ideal for buyers looking for an alternative to traditional loans or for sellers who wish to facilitate the sale of their business or property more quickly.

When considering financing options, it’s essential to factor in both the purchase price and the business’s ongoing operating costs. You can also work with business experts such as a business broker or financial advisor to find the most suitable financing options.

Conduct a comprehensive review of physical and intellectual assets

Finally, comprehensively review the business’s physical and intellectual assets. This includes inspecting real estate, equipment, inventory, and intellectual property, including patents and trademarks. Assessing the condition and value of these assets will help determine whether the business requires additional investments to maintain or improve them.

Similarly, reviewing the company’s customer lists, market research, and company culture can provide insights into the business’s long-term sustainability. Understanding the current owner’s relationship with key customers and suppliers is vital to maintaining the business’s reputation and effectively serving its loyal customer base.

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Original text

Business plans aren't just for startups. Developing a business plan for an established business serves several purposes: It can help convince investors or lenders to finance your business, persuade a business buyer to purchase your business or entice partners or key employees to join your company. Most importantly, it serves as a roadmap guiding your business's growth and continued success throughout its following stages.

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 weaknesses that may threaten your business, identify opportunities you may not have considered, and plan how to deal with challenges that are likely to arise.

This template includes instructions for each section of the business plan for your established business, followed by corresponding fillable worksheet/s.

Sections of this business plan include:

• Executive Summary
• Company Description
• Products and Services
• Marketing Plan
• Operational Plan
• Management & Organization
• Personal Financial Statement
• Financial History and Analysis
• Financial Plan

The last section in the instructions, “Refining Your Plan,” explains ways to modify your plan for specific purposes, such as getting a bank loan, or for specific industries, such as retail.

After you complete the worksheets, print them out, and you will have a working business plan for your established business. Then, contact a  SCORE mentor  to review and refine your plan.

Business Planning & Financial Statements Template Gallery Download SCORE’s templates to help you plan for a new business startup or grow your existing business.

Simple Steps to Write and Follow a Sustainable Business Plan that Ensures You Achieve Your Goals In this webinar, you will learn how to write a business plan to ensure you can go from business idea to business success.

You Created a Business Plan; Now What? So you have created your business plan. Now what?. In this webinar, you will learn the next step, how to execute your business plan.

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated July 29, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan

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Buying An Existing Business in 2024

• There are many opportunities to buy an existing business, offering an excellent way to break into entrepreneurship without starting from scratch.
• The positives of buying an existing business include inheriting a customer base and operational plan, while the negatives include a potentially high purchase price and perhaps having to deal with problems that may not be disclosed.
• Find out what you need to look for in a potential business purchase, the pros and cons, where to find the right one, and the best funding options to purchase an existing business.

Plan ahead – see what you qualify for today

State of the “businesses for sale” market.

The “businesses for sale” market refers to the sector that deals with selling and buying businesses already in operation. It’s made up of a wide range of industries and sectors, from small local businesses to large enterprises. The market is influenced by a variety of factors, including:

• The state of the economy : During times of economic growth and stability, the market tends to be more active, with a higher number of businesses being bought and sold. On the other hand, during economic downturns or recessions, the market may experience a slowdown as buyers become more cautious.
• Industry trends : Different industries have varying levels of demand. Some sectors, like technology, healthcare, and e-commerce, traditionally have more potential for growth and profitability. Other industries may experience fluctuations based on consumer preferences, regulatory changes, or market disruptions.
• Demographics : The aging population and retirement of baby boomers have had a significant impact on the “businesses for sale” market. Many business owners from this generation are looking to sell their businesses and transition into retirement, creating a supply of businesses for sale. This trend is expected to continue as more baby boomers reach retirement age.
• Online marketplaces : The invention of online platforms and marketplaces has transformed the way businesses are bought and sold. Websites and platforms dedicated to connecting buyers and sellers have made it easier to access a larger pool of potential buyers. These platforms offer various tools to streamline the buying and selling process.
• Financing and deal structure : The availability of financing options and deal structures can impact the market. Access to capital and favorable lending conditions can motivate buyers and make acquisitions more feasible. On the other hand, the market can go down when interest interest rates are high and credit is less easily available.

Like all markets, the “businesses for sale” market is dynamic and can vary significantly based on regional and local conditions. Factors like government regulations, tax policies, and cultural norms can also shape market dynamics. 

Pros and Cons of Buying an Existing Business

Buying an existing business can offer several advantages and disadvantages for small business owners. Here are some pros and cons to consider when finding the right business to purchase:

• Established operations: An existing business already has a foundation in place for things like operational systems and processes. This can save time and effort compared to starting a business from scratch.
• Brand recognition: You’ll get a brand name, reputation, and customer loyalty built into the deal. This can provide a head start in terms of market recognition and customer trust (although make sure that the brand reputation is a positive one).
• Established customer base: One of the biggest advantages is inheriting an existing customer base. This can generate immediate revenue and provide a platform for future growth and expansion.
• Cash flow and financial history: An established business often has a track record of financial performance, which can help in securing small business loans and assessing the business’s financial viability. Positive cash flow from day one can also reduce the risk of initial losses.
• Supplier and vendor relationships: Established businesses may already have established relationships with suppliers, vendors, and partners. This can make it easier to access reliable suppliers and favorable terms from the get-go.
• Higher cost: Buying an existing business can cost more than starting a new business. The value of an established business may reflect its assets, customer base, and potential for future earnings.
• Existing challenges: The business you acquire may come with existing problems or challenges that need to be addressed, like outdated equipment, inefficient processes, or legal issues. Assessing and fixing these issues can require time, effort, and investment on your part.
• Management challenges: It’s hard for a new owner to integrate into an existing business culture and manage employees who already work there. These challenges can lead to difficulties putting needed changes into place or achieving desired outcomes.
• Hidden liabilities: It’s crucial to conduct thorough due diligence to uncover any hidden liabilities — this could be pending lawsuits, unpaid taxes, or contractual disputes. If you don’t identify these risks ahead of time, you may end up paying for them down the road.

Ultimately, you’ll want to consider both the advantages and disadvantages, as well look closely at the specific business and its market conditions. Conducting due diligence, seeking professional advice from a business valuation expert, and creating a well-informed business plan can help mitigate risks and increase the chances of a successful acquisition.

Where to Find Existing Businesses

There are several ways to find businesses that are for sale. Here are some common strategies to help you locate businesses that are on the market.

Online business marketplaces

There are online platforms dedicated to buying and selling businesses. Websites like BizBuySell, BizQuest, and BusinessesForSale.com offer listings of businesses for sale across different industries and locations. These platforms let you search for businesses based on specific criteria, like industry, location, and price range.

Business brokers

Working with a business broker can help you access a wider range of businesses for sale. Brokers specialize in connecting buyers with sellers and often have a large network and access to confidential listings. They can help you navigate the buying process, negotiate deals, and provide guidance throughout the transaction.

Professional networks and associations

Engaging with professionals such as lawyers, accountants, and financial advisors who work with businesses can provide access to potential opportunities. They may be aware of businesses looking for buyers or have connections with business owners who are planning to sell.

Direct outreach

If you have a specific industry or location in mind, you can proactively reach out to business owners to ask about their interest in selling. This approach requires research and targeted communication, but it can lead to discovering businesses that are not actively listed for sale.

Industry-specific publications and websites

Some industries have specialized publications, websites, or newsletters that feature businesses for sale within their niche. These resources can provide insights into opportunities within your industry.

When searching for businesses to potentially buy, having a clear understanding of your own criteria, budget, and objectives will help streamline the search process and focus on opportunities that line up with your requirements.

Why Consider a “Boring” Business

When people think of successful businesses, they often first think of flashy startups like Google or household names like Target. But there are a lot of lesser-known businesses with less of the pizzazz that provide fantastic opportunities for any entrepreneur looking to buy an existing company. More localized businesses or family-owned companies can have a proven track record of success, be profitable, and provide stability for you as an investor. 

Types of “Boring” Businesses

There are many types of businesses that might be more low-key than a billion-dollar tech startup or high-profile company but are profitable and stable. These businesses include:

• Construction or landscaping companies
• Vending machines
• Personal training
• Online teaching
• Cleaning service
• Accounting and bookkeeping
• Real estate

When you’re looking to buy a business, it’s best to look at the financial details and potential for future performance rather than being drawn in by a shiny idea. Making sure the business is a stable investment is the best way to set yourself up for success.

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What Are the 7 Steps To Buying an Existing Business?

Though the exact steps may vary somewhat,  most buyers will want to incorporate the following 7 steps into the process of buying a business. 

1. Decide what you want. 

Running a business is hard work, so you want to carefully choose the kind of business you want to own. The right business should combine your skills and/or interests with the potential to build a profitable business. Everyone wants a high cash flow business , but if you really don’t like the business you may find it hard to stick with it or grow it. 

You’ll want to research the business model and industry, as well as the company itself. 

2. Prepare financially. 

How much money can you afford to put toward the purchase price? What are your credit scores, and how much will you be able to borrow for a business acquisition loan? How long will it take before you can pay yourself a salary, and how will you survive financially until then? 

3. Find a business to buy. 

If you’ve ever bought a house, you know that sometimes things fall together quickly and sometimes it takes a long time to find the right house, get your offer accepted, and close. Patience at this stage can pay off. Rather than rushing into a less-than-ideal business, be willing to take time to find the right deal using the resources in this article. 

4. Make your offer. 

Here’s where you decide how much you think the business is really worth. Like buying a house, it may involve some back and forth negotiations. A broker can prove very helpful here. Contingencies can protect you if the seller wasn’t completely truthful and you uncover issues during the next step of the process. 

Another option is to sign a letter of intent that will allow you to proceed to the next step before making a formal offer. 

5. Do due diligence

Thoroughly vet the prospective business, and enlist the help of professionals to minimize expensive surprises. (See more details about the due diligence process below.) 

6. Secure financing

If you need financing, and if the seller is willing to wait for you to get financing, you can apply for a loan at this stage. If you have already been preapproved, this step can go more quickly though that’s not always possible. 

7. Close the deal

You legally purchase the business and transition to full ownership.

Business Formation: Due Diligence and Legal Considerations  

With any new venture — whether that’s forming your own business or buying an existing one — you’ll need to both conduct due diligence and address legal considerations to ensure compliance, mitigate risks, and protect your interests. 

Due diligence is the process of thoroughly investigating and assessing a potential business opportunity before going ahead with it. You’ll need to gather relevant information (like the asking price vs. the fair price), analyze these details, and make informed decisions before agreeing to a sale of the business. Due diligence helps you understand the risks, opportunities, and overall viability of the business you’re forming or acquiring.

During due diligence, you’ll want to think through the following aspects:

• Compliance : Make sure that the business complies with all applicable laws, regulations, and licensing requirements. Assess any potential legal liabilities, ongoing litigation, or regulatory issues that may affect the business.
• Finances : Review financial statements, balance sheets, tax returns, and other relevant financial documents to assess the business’s financial health, revenue, expenses, profitability, and cash flow. Identify any outstanding debts and liabilities.
• Contracts and agreements : Examine contracts with customers, suppliers, landlords, and employees. Evaluate their terms, obligations, rights, and potential risks. Identify any limitations, exclusivity, clauses, or potential disputes that may impact the business.
• Intellectual property : Determine whether the business owns or has the right to use any patents, trademarks, copyrights, or trade secrets. Assess the protection and enforceability of its intellectual property.
• Assets and liabilities : Identify and evaluate the assets and liabilities of the business, including real estate, equipment, inventory, leases, loans, and outstanding obligations. Assess any potential environmental, legal, or operational liabilities.

In addition to due diligence, you’ll want to consider several legal aspects when forming or acquiring a business. While the specific legal requirements may vary depending on the jurisdiction and type of business entity, some common legal considerations include:

• Business structure : Make sure the business uses the appropriate legal structure, such as a sole proprietorship, partnership, corporation, or limited liability company (LLC). Each structure has different legal and tax implications.
• Registration and licensing : Check that the business is registered with the relevant government authorities and has the necessary permits and licenses required to operate legally in your area.
• Contracts and agreements : Review contracts, like partnership agreements, operating agreements, shareholder agreements, employment contracts, customer agreements, and vendor contracts. Make sure they’re comprehensive, clear, and protect your interests.
• Compliance with employment law : Ensure the previous owner understands and complies with employment laws, including hiring practices, wage and hour regulations, employee benefits, workplace safety, and anti-discrimination laws.
• Tax obligations : Check that the business complies with tax laws and obligations, including obtaining tax identification numbers, understanding tax reporting requirements, and fulfilling tax payment obligations.
• Data privacy and security: If the business handles customer data, make sure there are appropriate privacy and security measures to protect it in compliance with the law.

It’s a good idea to consult with legal professionals to ensure that all legal requirements and considerations are adequately addressed when you’re acquiring or forming a business. Using a business formation service is one of the best ways to form a business and make sure you’re compliant.

Financial Requirements and Funding Options for Buying a Business

When you buy a business, you may need a significant amount of money to cover startup costs like the purchase price and the down payment. You may also need working capital if the cash flow of the business isn’t currently strong, or if you want to introduce new products or services.

There may be a variety of sources for this capital, including private funding (from investors, personal savings, and/ or loved ones) or from lenders, including traditional banks or lines of credit. 

Some of the best business acquisition loans include term loans and SBA loans . Retirement funds ROBS accounts are also popular for this purpose. It may also be possible to buy a business with a business credit card if the price is right and your credit limits are large enough.

Most lenders require good credit, a down payment (or strong collateral), and will scrutinize financials carefully. 

You also may be able to use seller financing for some or all of the purchase price. Seller financing is an agreement between the buyer and the current owner to pay for the business over time. When structured properly, seller financing can benefit both parties. The seller may get a broader pool of buyers. The buyer may have time to ramp up revenues before getting a traditional loan. 

Examples of sources for business acquisition loans include:

How Nav Can Help

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Frequently Asked Questions

Is it smart to buy an existing business.

Buying an existing business can be a very smart move, as long as you do your due diligence to understand any weaknesses and problems the business may be facing. It can often be easier to improve an existing business that’s doing OK, compared to starting a new business from scratch. 

How do I take over an existing business?

If you’re serious about buying a business, take the time to thoroughly research your options, and to investigate the type of business you want to buy as well as looking at specific opportunities. Avoid getting too emotionally invested in a specific business early on; make sure you thoroughly research how financially viable it is. 

It’s also a mistake to gloss over financial data or to make a “handshake” deal. Buying a business is a big investment of your time and money: do it correctly. Work with a business broker and/or an attorney with experience in business acquisitions.

What are disadvantages of buying an existing business?

Cost can be one disadvantage of buying a business. If a business is successful, the owners will want to sell for an attractive price. That may require the buyer to dig deep and exhaust personal resources or take on a significant loan to purchase the business. 

Undisclosed problems are another potential pitfall. If the buyer isn’t careful they could end up with financial or legal problems the seller didn’t share. 

An existing business may be set in its ways and easily challenged by startups with more innovative products or services. 

A new owner may find it necessary to change operations, or staff. They may find it necessary to create new revenue streams to make the company more competitive. Employees may resent those changes, even if they are necessary.

Equipment may be nearing the end of its useful life, and require new equipment leases or equipment financing that add to operating costs. 

This article was originally written on October 25, 2023 and updated on April 21, 2024.

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Tiffany Verbeck

Tiffany Verbeck is a Digital Marketing Copywriter for Nav. She uses the skills she learned from her master’s degree in writing to provide guidance to small businesses trying to navigate the ins-and-outs of financing. Previously, she ran a writing business for three years, and her work has appeared on sites like Business Insider, VaroWorth, and Mission Lane.

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How to Write a Business Plan, Step by Step

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What is a business plan?

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. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

LLC Formation

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers 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. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

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.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about 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.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

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. If you’re serving a different or underserved market, explain that.

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.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate 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.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. 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. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

How to Write a Business Plan for an Existing Business

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Quick Step Process Business Plan

How to start a woman-owned company, how to create a food service business plan.

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The business plan is not just for business startups. Business acquisitions, franchise purchases and newly developed products are just some of the events that might prompt an existing business to create a business plan. Existing businesses use the business plan to monitor their expenses, define their strategies and benchmark their progress. Unlike new business startups, the business plan creation process is often simpler for the established business because the business’ operation information is more readily available.

Create a cover page for your business plan. Include the name of your business, full address and all contact information, including fax number and email address.

Complete a general business description for your business. Provide the company’s mission in 30 words or less. Include your business’ objectives, goals and philosophies here, as well. Provide a brief description of your business’ industry and include information on the industry’s growth trends and forecasts.

Follow this information with your company’s legal business description--sole proprietorship, corporation--and expound on the company’s history, including its number of years in business, sales and profit history, and significant successes and failure. Include resolutions that your business implemented to correct any problems or failures.

Define your business’ products and services. Explain the products in depth and highlight the competitive advantages and disadvantages of your products. Identify any strategies or steps that your business has taken to overcome disadvantages in your products.

Complete a primary and secondary analysis of your industry, industry trends, target market, target market demands and competition. Use resources, such as demographic profiles and census data, to complete your secondary analysis. Refer to your own business data and analysis to complete your primary analysis.

Use your research data and analysis to complete your business’ marketing plan. Provide detailed information, including statistics and sources, to support your findings and strategies. Identify and explain the demographics of your target market. Explain the features and benefits of your products, as well as why these features and benefits appeal to your target market.

Identify your business’ major competitors, their products and locations. Compare your business’ strengths and weaknesses against those of your competitors. Identify your business competitive advantages and disadvantages and explain the strategies that your business will use to compete against the competition.

Explain the advertisement methods that your business will use to capture its target market. Define the strategies that your business will use to retain its customers, as well as generate referral business. Include price points and expenses that will generate from these strategies.

Describe your business’ operations. Include information on your business’ location and equipment. Include information on the expenses that pertain to each, such as mortgage or lease payments, utilities and equipment warranties. Provide details about your business legal requirements, such as permits, zoning compliances and environmental regulations. Explain how your business completes its operations, maintains quality, controls inventory, develop products and services customers.

Identify your personnel. List the responsibilities and functions of your executive and senior employees. List the number of employees that your company maintains and identify each department. Create an organizational chart for an easy visual reference. Identify the pay rates for each employee, along with the training methods and requirements for each employee. Identify any vacate positions and include information on the pay ranges for those positions.

Provide information on your business finances. List your business’ accounting method (cash or accrual). Explain your business’ credit terms and fees, and collection methods, if your business uses the accrual method.

Complete a personal financial statement for each owner of your business. Provide a balance sheet, income statement and cash flow statement for your business. Analyze your business’ profits and losses, and complete a 12-month profit and loss sales forecast for your business. Include a five-year projection if your company seeks to include long-term goals and projections.

Complete an executive summary for your business plan. Limit the summary to more than two pages, as recommended by SCORE. Highlight your business’ target market, specialty products and mission within the summary.

Create a table of contents and an appendix for the plan. Generate the table of contents so that it references the exact pages to where each section begins. Include supporting documents in the appendix, such as receipts, tax returns and accounts payable schedules. Label each supporting document accordingly and organize the documents so that they are organized in the order in which they are referenced.

• MasterCard International: The Plan

Writing professionally since 2004, Charmayne Smith focuses on corporate materials such as training manuals, business plans, grant applications and technical manuals. Smith's articles have appeared in the "Houston Chronicle" and on various websites, drawing on her extensive experience in corporate management and property/casualty insurance.

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How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

There are several paths to becoming a business owner. The most popular one is building a business from scratch. It is also one of the hardest routes to owning a business.

You have to come up with a product or service from scratch, conduct market research , find the right employees, attract customers, build cash flow, and so on.

If you don’t want to go through all this, an easier and less risky option is to buy an already existing business .

An existing business already has existing products or services, existing customers, employees who are knowledgeable about the company and its products, existing cash flow, and so on.

It’s good to note, however, that buying a business is not as simple as finding a business that’s on sale and paying the asking price. There are several things you have to keep in mind if you don’t want to end up making the wrong decision.

Below, let’s check out the 8 step process of buying an existing business.

Table Of Contents

How To Buy An Existing Business Checklist

Step 1: decide what type of business you want to buy.

If you go to BizBuySell and search for all businesses that are on sale, you’ll find thousands of businesses from a wide range of industries.

For instance, if you search for on-sale businesses in California, there are over 1,500 businesses that you can buy. The first three results show how varied the businesses are – the first business is in the tax preparation industry, the second in the food industry, and the third in the cannabis industry.

It is very unlikely that these three businesses across very different industries would all be suitable for you.

Therefore, before you begin searching for an existing business to buy, you have to start by thinking about the kind of business that you want to buy, one that would be suitable for your unique needs, characteristics and financial goals .

Some of the things you need to look at when deciding what type of business you should buy include…

1. Location

Most businesses operate within a specific location, and therefore, when buying a business, this is something you need to think about. Ideally, it is a good idea to look for a business that is within your locality .

If you are looking to buy a business in a different geographical location from where you live, this could require you to move, so it’s something you should be ready to do.

Apart from the convenience of being able to closely monitor your new business, the location of a business also affects other things such as taxes, labor costs, the cost of leasing rental premises, and so on .

All these have an impact on the business’s performance, so it is important to consider them before deciding to buy a business.

It’s good to note that if you’re looking to buy a business that operates online, location will not be such a huge factor to consider, since you can operate the business from anywhere.

2. Your Passion, Skills, Talent, And Experience

When buying a business, it is always a good idea to go for something that is well aligned with your passion, as well as your skills and experience . This is because these factors affect your ability to properly run the business and keep it profitable.

For instance, let’s say you have always worked as a marketing executive in a marketing agency, and have always dreamt of owning your own digital marketing agency.

If you go ahead and buy an existing digital marketing agency, you have enough skills and experience in the industry to successfully run the marketing agency you just bought.

Now, imagine that with your experience in the marketing industry, you go and instead buy a business that deals in mountain biking gear.

You have never ridden a mountain bike all your life, you have no idea which gear is popular among mountain bikers, you have no mountain biker in your network.

Without the experience, skills, and passion in the industry, it would be very difficult for you to keep the business profitable, even if the business was making money before you acquired it.

Note that this doesn’t mean that it is impossible to achieve success with a business in an industry you have no prior experience with. However, the more knowledgeable you are about the industry, the more likely you are to be successful .

3. Market Outlook

Just because an industry is performing well today, this doesn’t mean that it will do the same in future. And just because an industry is not doing well today, this doesn’t mean that it won’t do well in future.

Therefore, before making the decision to buy a certain type of business, take the time to do some market research and consider the long term forecast for the industry. Is there potential for growth within the industry?

Another important thing to think about is the size of the business you are interested in buying . Are you looking for a small business that you can run by yourself? Do you want a large company with dozens of employees and revenue that runs into the millions?

5. Lifestyle

Being a business owner is more than a job; it is a lifestyle. This is because running a business is a demanding venture that will have a huge impact on your lifestyle .

Before you decide to buy a business, therefore, you have to consider how it will affect your life, and if you are ready for such changes.

For example, if you are a solitary person who likes spending their time alone and doesn’t enjoy interacting with strangers in person, it would be advisable to buy a business that allows you to make money online , without the need to interact with customers in person.

Similarly, if you buy a business that will involve lots of travel, yet you do not like traveling, this could take a toll on your lifestyle, making it difficult for you to keep the business running successfully.

With this in mind, we recommend choosing a business that is well aligned with the kind of life you’d want to lead .

Finally, before you start looking for a business to buy, you have to consider how much you are willing to spend on purchasing the business .

You could find a well-performing business in an industry you are passionate about, a business that is well aligned with your lifestyle, and in a location that is convenient for you, but if it costs more than you can afford, you’ll have no other choice but to let it go.

You should keep in mind, however, that you don’t need to have all the money in cash in order to buy a business . You can still afford a business through other innovative financing options, such as seller-financing, debt financing, and so on.

Step 2: Search For Businesses That Are For Sale

Once you have determined the kind of business you want to buy, you can now start looking for businesses that are available for sale and that meet your criteria.

At this point, you want to identify as many businesses as possible that fall within what you are looking for, so you should look in as many places as possible. Some of the places and methods you can use to search for on-sale businesses include…

1. Online Platforms

The easiest way to find businesses that are for sale is to use the internet. There are several websites that list businesses that are for sale. The beauty of using online platforms is that they allow you to quickly identify thousands of businesses that you can buy .

Many of these platforms also allow you to filter available businesses by criteria such as location, industry, price, cash flow, gross revenue, how long the business has been in operation, and so on.

Another advantage of using online platforms is that they allow you to set up email alerts . This way, if a business that meets your search criteria is listed, you get notified. This is a lot easier than having to come back to the listings website to search for businesses every few days.

One of the best online platforms for finding businesses that are for sale is BizBuySell . With over 100,000 for sale businesses listed at any one time, you have a very high chance of finding a business that is perfect for you.

Other online platforms and websites where you can search for on-sale businesses include…

• BizQuest.com : Best for finding small businesses and local business brokers.
• BusinessBroker.net : Over 30,000 listings at a time, and offers finance and loan options.
• BusinessMart.com : Best for finding business using advanced search and filtering options.
• BusinessForSale.com : Over 70,000 listings from across the world.
• DealStream.com : Has a database offering over 40,000 businesses and investment options at a time.

2. Reach Out To Local Businesses

Very often, business owners that are selling their businesses don’t put up signs on their door advertising that the business is for sale, since this can easily push away employees and customers.

So, how do you tell that such a business is up for sale? By talking to actual business owners.

To use this method, start by identifying suitable local businesses in your preferred industry that you’d be interested in buying, then reach out to the owners and let them know that you are looking to buy a business in that industry .

If you are lucky, you’ll get in touch with a business owner who is looking to sell their business. Even if they are not selling, however, they probably know another business owner who would be interested in selling their business.

With this method, you’re basically tapping into the network of business owners within your locality and using it to identify businesses that could be looking for a buyer .

One thing to keep in mind when using this method is that you are not looking for an immediate yes or no answer. If the person you are talking to doesn’t know anyone who is selling their business, ask them to be on the lookout and notify you if they happen to hear about a business that is for sale.

3. Hire A Business Broker

Hiring a business broker is one of the most effective ways of finding a business that you can buy . Business brokers are always in contact with business owners looking to sell their business, and therefore, it is very easy for them to find a business that meets your needs.

It’s good to note that brokers will charge you a commission to help you find a suitable business . However, this commission is usually paid if you find a business you like. Working with a broker can also provide you with several other benefits, including…

• Screening the business for you : Any broker worth their salt will usually screen a business before recommending it to their clients. Many will check to make sure that things like the business’s financials and price are okay before recommending the business to you.
• Paperwork assistance : If you have no prior experience buying a business, a business broker can help you with the required paperwork and ensure that you are compliant with all necessary laws and regulations.
• Negotiation : A good broker also knows the ideal price range for different kinds of businesses and can help you negotiate a good deal.
• Help you avoid pitfalls : Good business brokers know what kinds of businesses you should avoid and the mistakes to watch out for when buying a business, and can help steer you from buying a business you’d later come to regret.

4. Watch Out For Advertisements

Business owners looking to sell their business will sometimes put up advertisements in local newspapers, industry journals, publications and newsletters, and even classifieds sites like Craigslist. By keeping an eye out for such ads, you might find a business that fits the bill of what you are looking for.

You can also take matters into your own hands by putting out your own ads letting business owners know that you are looking for a business to buy.

Someone who is looking to sell their business but doesn’t know how to find a buyer could spot your ad and reach out to you with just the right kind of opportunity you were looking for.

5. Talk To Professionals That Work With Business Owners

Another way to identify businesses that are up for sale is to talk to professionals that work with business owners, such as lawyers, insolvency guys, M&A firms, auditors , and so on.

These guys will often know if a business owner is looking to sell their business, and by asking them for leads, you can easily identify business buying opportunities that you’d not have known about otherwise.

Step 3: Shortlist The Companies You Would Want To Own

The aim of the previous step was to identify all businesses that fit the criteria of the kind of business you are looking for. However, all the businesses you identified in that step will not be suitable for your needs, and after all, you cannot buy them all.

What you need to do next is to take a more detailed look at the businesses you identified in step 2 and come up with a shortlist of 2 or 3 businesses that are best aligned with your goals, your budget, and your resources.

When shortlisting the most suitable businesses, here are some of the factors you need to look at.

When identifying businesses that fit your criteria in Step 2, you looked at the cost and your ability to afford them. Now, it’s time to take a second look at each of the businesses you identified and determine which ones are comfortably within your budget.

Here, you should look not just at the initial cost of purchasing the business, but also the working capital needed to keep the business running once you take over . You don’t want to buy a business and then run it to the ground simply because you spent all the money on the purchase and don’t have the money to keep the operations going.

As part of evaluating how much you’ll need to keep the business running, you have to think about what you intend to change about the business, and how that will affect operation costs .

For instance, if you intend to focus on new marketing channels to help you grow the business, confirm whether your budget allows you to do this, in addition to paying the purchase price.

2. Expected Return On Investment

Take a look at things like the products or services offered by each of the businesses you identified, their customer base, and their annual revenue to help you estimate how much returns you can expect once you take over the business. Generally, the higher the expected return from the business, the more suitable it is .

3. Think About The Required Time Investment

All the different businesses you identified will require different levels of time investment. For instance, if one of the businesses is in an industry you don’t have a lot of experience in, you’ll need to spend a lot of time learning about the industry and the market.

An online business in an industry you are experienced in, on the other hand, might not require such a huge time investment from you, especially if it is a business that you can easily automate.

What you need to do here, therefore, is to go through the list of businesses you identified and determine the kind of time investment you’ll need to put into each business, compared to the time that you can actually put in realistically . The less time you need to invest in order to make the business successful, the better.

4. Understand Why The Owner Is Selling

A lot of times, business owners sell their businesses for very valid reasons. They could be relocating to a different place, they might be looking to retire, or they might have undergone a lifestyle change, making it impossible for them to continue running the business.

All the above reasons have something to do with the owner, rather than the business, and therefore, you can easily take over the business and continue running it successfully.

Sometimes, however, people will put up their businesses for sale because there is something wrong with the business . This is a huge red flag, since it will affect your ability to earn returns from the business once you take it over.

Some of the negative reasons why someone could be selling their business include…

• Poor business concept
• Declining market
• Business debts
• A product or service that does not have any market
• Poor business location
• Negative brand reputation
• Outdated, costly equipment
• Excessive competition

If the owner is selling the business for some of these reasons, they’re just trying to dump it on some unsuspecting investor. Note, however, that the seller won’t tell you this is why they are selling, so you need to do your homework to identify the owner’s motivations for selling.

If you feel that the business owner is being untruthful about their reasons for selling the business, strike it off your list.

5. Steady Income Stream

Just because a business has been operational, this doesn’t necessarily mean that the business has been making any profit, or even sustaining itself.

Therefore, it is important to check whether the business has been providing enough cash flow to pay for its expenses, and whether it has been making any profit for the owner.

Go through each business in your list and strike off any business that has been in existence for a significant amount of time but has not been generating sufficient income to keep things running smoothly.

Such businesses could end up being a money pit for you without delivering any returns, even in the long run.

6. Potential For Improvement

Sometimes, a business that is up for sale might not be performing optimally. However, upon closer inspection, you realize that there are some opportunities you can potentially exploit to significantly improve its performance .

Such businesses are some of the best that you can buy. Due to the sub-optimal performance, you will be able to negotiate for a significantly low price. Once you take over the business, you can then exploit the opportunities you spotted and rake huge returns from the business.

When evaluating a business, always try to see if there’s anything that can be done to improve the business. If there is no potential for improvement, strike it off your list.

7. Competition

Finally, make an evaluation of the market each business is operating in and the level of competition it is facing . What percentage of market share does the business control? Who are its biggest competitors? What do the competitors excel in? Does the business have any edge over the competition?

Generally, the less the competition a business is facing, and the greater the advantage it has over the competition, the more suitable it is .

By the end of step 3, you should have narrowed down your list to about 2 or 3 businesses that present the best opportunity for you.

Step 4: Complete Your Due Diligence

Now that you have 2 or 3 businesses you are really interested in owning, it’s time to conduct proper due diligence into each of these companies. This allows you to determine whether the assumptions you have so far about the business are accurate, and whether the business presents a good opportunity for you.

To do this, you need in-depth access to the company’s information, so you’ll first need to sign a letter of intent .

The letter of intent is drafted after you have spoken to the business owner and expressed your interest in purchasing their business.

The letter of intent defines your proposed buying price (subject to valuation), the tentative list of assets and liabilities that you intend to purchase as part of the acquisition, and the terms and conditions that will govern the sale.

The letter of intent is a demonstration to the seller that you are serious about your interest in purchasing their business , and that if everything meets the conditions agreed upon, you’ll go ahead with the deal.

Once you’ve signed the letter of intent, the seller can now allow you to access any legal or financial information that you need in order to perform a thorough analysis of the business. It is advisable to go through these documents with the help of an accountant to help make sure everything is in order.

During the due diligence stage, some of the things you need to look at include…

1. Financial Statements

These give you a detailed look into the business’s finances. How much money is flowing into and out of the business every month? Is the business generating enough money to keep itself running, or is it spending more money than it is making? How do the company’s assets compare to its liabilities?

Checking the financial statements will allow you to determine the financial health of the company and decide whether it is a worthy purchase .

The financial statements will also help you identify any opportunities that can be exploited to grow the business . For instance, you might identify expenses that can be reduced to generate more profits, or revenue opportunities that the business is not taking full advantage of.

2. Sales Records

Even though the financial statements have a record of the sales, you should still go through the sales figures individually. If possible, check the monthly sales figures for the last three years or more.

When evaluating the sales, check which products generate the most sales, whether most of the sales are made in cash or credit, whether most of the sales come from a single client or multiple clients , and so on.

This will give you a good idea of current business activity and help you make more accurate projections of what to expect once you take over the business.

3. Business Structure

How is the business legally structured? Is it a sole proprietorship, a partnership, or a corporation? This information is important because it will affect things like taxes, as well as your liabilities once you take over the business.

4. Brand Recognition

Branding is a very important factor in business. When a lot of customers know about the business you are interested in purchasing, you can easily achieve results without having to invest so much into marketing. It is also easier to benefit from things like word of mouth marketing.

It’s good to note that brand recognition can sometimes be negative, which is something you want to avoid. You are better off trying to build a little known brand than trying to do damage control for a brand with a negative reputation .

You can evaluate the kind of reputation a business has by checking feedback from past customers on the company’s social profiles, BBB ratings, and other online reviews.

5. Business Operations

These are the processes that the business undertakes every day in order to deliver products and services to customers. How are products manufactured? How does the business facilitate sales? What distribution channels does it use?

The point of evaluating business operations is to help you determine whether you’ll be able to keep these operations up once you take over the business, and identify any opportunities to make the business more efficient once you acquire it.

6. Marketing Strategies

How does the business promote its products and services to customers? What kind of image does the business project to customers? Are these marketing strategies working?

Taking a look at the marketing strategies the business is applying and their effectiveness will help you determine if you can grow the business by improving how it markets itself.

7. Inventory

If the business deals with physical products or supplies, check the level of inventory that the business is holding at the moment.

Find out the condition of the inventory, where they are stored (and whether you’ll have access to the storage area following the purchase), the company’s inventory management processes , and whether you’ll get the inventory as part of the purchase.

8. Existing Contracts

Since the business is already in operation, there is a high chance that it already has some existing contracts with clients, partners, suppliers and vendors, and so on.

Go through these contracts and determine how they will affect business operations once you take over the business .

For instance, some contracts could prevent you from bringing in new vendors, which means you won’t be able to lower some expenses.

If the business has existing contracts with clients, on the other hand, this is a good sign, because it means you’ll have clients even after you take over the business.

9. Employee Details

A business is as good as the employees working for it. Therefore, before purchasing a business, take the time to dig into the existing team. How skilled and qualified are they? How productive are they? Are there employees who are redundant?

If the business has a good team in place, it will be easier for you to take over the business without any significant impact on business operations .

Similarly, if you find that the business has some redundant roles, you can reduce costs by letting go of the employees in these roles.

10. Location

In the shortlisting stage, you only looked at the general location in which the business is located and how that affects your ability to run the business. During the due diligence stage, you need to look at the specific location of the business and how it affects the performance of the business .

For instance, if you are interested in buying a restaurant business, look at the specific area where it is located and ask yourself questions like,

• “Is there enough foot traffic to sustain the business?”
• “Are there other restaurants around the area?” “
• “What kind of people frequent this area?”

In addition to helping you determine how the location affects revenue, you should also consider the costs that come with maintaining a business in that location .

For instance, if the business you want to buy is a manufacturing business that doesn’t rely on foot traffic, you can reduce expenses by moving the business to a cheaper location.

Does the business own any assets, such as buildings, property, equipment, furnishings, vehicles, and so on? Will these be sold together with the business, or does the owner intend to retain ownership of some of these?

Generally, purchasing a business together with its assets will be costlier, but it could still be beneficial, especially when these assets are crucial to business operations . However, take the time to evaluate the condition of some of these assets, such as equipment and furniture.

12. Liabilities

With the help of an accountant, go through the list of all liabilities owed by the business and determine how they affect the business .

For instance, if the business owner has used some of the business assets to secure loans, this is something you’ll want to know.

Similarly, if there are any unrecorded liabilities, such as out of court settlements that the business is paying off, or employee benefit claims, you’ll want to be aware of them, since they could be transferred over to you once you purchase the business.

13. Customer Patterns

If the business has been keeping track of customer data, go through this data to gain a better understanding about customer patterns.

Here, you want to answer questions like:

• “Do most sales come from existing customers or first time buyers?”
• “What is the customer churn rate?”
• “Which seasons attract the highest number of first time or repeat buyers?”
• “Which products are the most popular with customers?”

The more you understand about the business’ customers, the easier it will be for you to give them what they want and grow the business.

14. Seller-Customer Ties

Sometimes, you’ll find that there is some special tie between the business owner and some customers. In such situations, the exit of the business owner could result in the loss of such customers .

To avoid finding yourself in a situation where the business loses major customers following your purchase, try to identify any relationships between the seller and customers .

Who are the biggest customers? How long have they been customers of this business? Do they have some special agreements with the business? Do you have any reason to believe that these customers could leave once you take over the business?

Step 5: Brainstorm On What Marketing, Product, And Organizational Changes Could Increase Your Enterprise Value

While it is important to consider the past performance of a business before acquiring it, greater attention should be paid to its potential performance in future .

Now that you have done your due diligence and have a good idea of where the business you want to buy stands, both in terms of finances, legal and organizational structure, and business operations, it is time to brainstorm on ideas that you can use to grow the enterprise and increase its value.

The more ideas you can come up with on how to grow the business once you own it, the more suitable that business is, and the higher chances you have of achieving success after you buy the business.

Below are some marketing, product and organizational changes that you can make to grow the value of the business once you own it.

1. Create Additional Income Streams

If you have noticed some opportunities for earning the business new income streams that the current owner has not been taking advantage of, implementing them can be a great way to grow the business following the acquisition.

For instance, let’s say the business you want to buy is an online sports store. During the due diligence stage, you noticed that the business’s only source of revenue is selling sporting equipment.

However, based on your experience in the industry, you feel that the company is sitting on an opportunity to make money selling digital workout programs that your customers can do using your sporting equipment.

By implementing such new income streams, you can grow the company’s revenue without any significant increase in recurring expenses, leading to increased profitability .

2. Get Rid Of Unprofitable Products And Services

Sometimes, a company could be generating good revenue, but then a huge chunk of this revenue goes to producing and maintaining products and services that are not profitable.

By getting rid of such products, you can quickly increase the company’s profitability, while at the same time freeing up your employees to work on more productive tasks that contribute to the company’s bottom line.

Steve Jobs provides a great example of how this works. In 1996, Apple was producing dozens of products, but the company was on the brink of bankruptcy, with over $1 billion in losses in 1996.

When Steve Jobs came back to the company in 1997, he realized that the company was supporting too many products that were not making any profit.

When Jobs took over as the new CEO , he got rid of 70% of Apple’s existing products at the time, and only retained four of the company’s most profitable products . By the end of 1998, Apple had made over $300 million in profits.

Just like Jobs, if you notice that a business is spending resources producing and maintaining unprofitable products and services, you can increase the company’s profitability by simply getting rid of these products and services.

3. Improve Product Quality

Another easy way to grow a business after acquisition is to improve the quality of its products and services.

For instance, if you are buying a restaurant, and you think that the reason it has not been maximizing its revenue is because the food was average, you can hire a skilled chef after acquisition to improve the quality of the food, which will lead to more clients patronizing the restaurant.

4. Invest In Better Marketing

After doing your due diligence, you might have noticed that the business has great products at a great price point, but is still not making enough sales. In such a situation, the problem could be the marketing strategy.

Once you take over the business, you can increase the company’s revenue by investing in better, more effective marketing channels , such as Facebook marketing or webinar marketing .

5. Review The Current Pricing Structure

A business’s pricing strategy has a huge impact on its ability to make profits . While raising prices immediately after acquiring a business can be a risky move, it can still make a huge impact on the company’s profits, especially if the price increase is accompanied by an increase in quality.

6. Increase Operational Efficiency

Very often, businesses are unable to achieve peak performance not because they don’t have the right resources, but because they are not using these resources in the most efficient manner.

For instance, unnecessary red tape and departments that operate in siloes can easily lead to increased delivery times and loss of productivity.

If you identified such inefficiencies during the due diligence stage, you can make a significant impact on the organization’s bottom line by reducing the inefficiencies .

Some of the things that you could do to improve operational efficiency include getting rid of policies and workplace procedures that introduce bottlenecks, breaking down siloes between teams and departments, and ensuring that all teams are aligned with the needs of the business.

7. Reduce Expenses

Another low hanging fruit for anyone looking to improve a company’s bottom line following an acquisition is reduction of expenses. By reducing business expenses, you can achieve an immediate increase in profitability without implementing any other strategy.

Some of the things you can do to reduce expenses include shifting to low cost production processes, finding cheaper vendors and suppliers or negotiating for discounts, letting go of redundant employees, moving the business to new premises with lower rent costs, digitizing processes to reduce paper and stationery costs, and so on.

You can easily identify excessive expenses that present the opportunity for reduction during the due diligence stage by looking at documents like the cash flow statement .

8. Take Advantage Of Technology

Adopting new technology is another very effective way of increasing the value of an enterprise after acquiring it and making an impact on the bottom line.

For instance, by taking advantage of artificial intelligence software and tools , you can automate various business processes and increase productivity without the need to increase your staff.

Aside from increasing productivity, adoption of new technology after you take over the business can also help you increase the quality of your products or services and give you a competitive edge over the competition.

Step 6: Evaluate The Price Of The Business

Having done your due diligence on the business, and with a clear idea of the changes you’ll make to improve the business and grow its value, it’s now time to evaluate the current value of the business, which will help you determine a reasonable price for the business.

In most cases, the seller will often try to get as much as possible for the business , and will sometimes use unconventional valuation methods that give them the greatest advantage. This is why it is very important to conduct your own valuation.

You can evaluate the price of the business by yourself or hire a professional to do it for you. Whatever option you opt for, below are some of the most common methods used to determine the price of a business that is on sale.

1. Using Multipliers

This is a simple way of evaluating the price of a business, where you take a certain business value, such as after tax profits, seller discretionary earnings (SDE) , or monthly gross sales, and apply a predetermined multiplier to this value .

For instance, let’s say you are using monthly gross sales as the basis of your valuation. The business you want to purchase registered average monthly gross sales of $100,000 over the last 12 months, and the industry multiplier for this type of business is x3.

In this case, the price of the business would be:

$100,000 x 3 = $300,000

While using multipliers is often the simplest way of determining the price of a business, it has one major weakness – multipliers are subjective .

Multipliers will often vary depending on factors like the industry the business is operating in, the level of competition in the industry, how diversified the business is, post-closing expenditure, how well-established the business is, how closely related the business is to the owner, whether the business owns any intellectual property, and so on.

With all these, deciding which multiplier to use can be confusing, and there’s a chance that the seller will prefer using a different multiplier that gives them the greatest advantage.

That said, using multipliers can still give you a quick estimate of what you should pay for the business .

2. Assets Approach

This is one of the most accurate ways of evaluating the value of a business. With this method, you determine the price of the business by subtracting its liabilities from its assets, then multiplying the difference by a predetermined number , usually one or two.

You can easily determine the difference between assets and liabilities by checking the company’s balance sheet.

The assets to consider when using this method include any property owned by the business, equipment, furniture, fixtures, leasehold improvements, unsold inventory, supplies, accounts receivables, trademarks, patents, and so on.

Liabilities include tall unpaid debts, bad investments, liens, uncollected taxes, lawsuits and judgments, and anything else that can potentially take money away from the business.

Asset based pricing evaluation is the best approach when you are purchasing a business that is capital intensive, as well as those that have not started making profit .

3. Discounted Cash Flow

This method allows you to estimate the current value of a business by looking at its projected cash flows in future .

In other words, the DCF method tries to determine the current value of a business based on the return on investment you will receive from the business in future, adjusted for the time value of money.

The DCF method assumes that the value of a dollar today is higher than the value of the same dollar tomorrow , because today’s dollar can be invested to yield more money tomorrow.

When using this method to value a business, you need to calculate the projected cash flows from the business for a certain period of time, then use a discounted rate to calculate the present value of those earnings .

While the DCF method is a great way to evaluate the appropriate price of a business based on your expected returns, it has one major weakness. The accuracy of your valuation depends on the accuracy of your predictions . If you come up with inaccurate cash flow projections, you’ll end up with an inaccurate valuation.

When evaluating the price of a business , it is always advisable to work with a professional who is well conversant with valuing businesses , otherwise you can easily end up paying more than the business is worth.

Step 7: Secure The Required Funding To Finance The Purchase

After valuing the business, you now know how much money you need in order to complete the purchase. If the seller is in agreement with your valuation and has agreed on the amount you are offering, it’s now time to put together the money you need to acquire the business.

It’s good to note that buying a business can be a costly affair, so you need to have given some thought to your source of funding even before you start looking for businesses to buy.

Fortunately, you have several options when it comes to raising funds to finance a business acquisition. Let’s check out some of them below.

1. Personal Funds

This is the simplest way of funding a business purchase. Here, you are basically using your own money to cover the cost of purchasing the business .

The problem with this financing option is that you need to have a lot of money saved up, which often makes it a not viable option, especially when you want to acquire a large business.

However, y ou can easily use personal funds to finance the purchase of a small business that has a relatively low price tag.

2. Debt Financing

This is one of the most common ways of financing the purchase of a business. With debt financing, you are purchasing the business with money borrowed from a bank or other lending institution.

The beauty of debt financing is that you can then use proceeds from the business to clear the loan over the agreed period of time.

What makes debt financing such an attractive option for financing the purchase of an existing business is the fact that the existing business provides you with tangible proof of the ability of the business to pay back the loan .

By providing the lender with documents like cash flow statements, the company’s tax returns, financial histories, valuations of the company’s equipment and inventory, employee records, and so on, you give lenders the confidence that they are not funding something that could end up being an expensive gamble.

If you decide to use debt financing, some of your options include…

• Traditional bank loans : This involves approaching a bank for a loan. The bank gives you money that has to be repaid plus interest within a certain time, usually ranging from 1 to 5 years. Bank loans work best when you are purchasing a business with substantial assets. You also need to have an exceptional credit score.
• Online loans : This involves financing the business acquisition using funds borrowed from online lenders. They are similar to bank loans, but they usually have lower qualification requirements compared to traditional bank loans. However, these loans often charge higher interest since they are usually unsecured. Some examples of good online lenders that you can borrow from include Fundera , Lendio , Fundbox , Funding Circle , BlueVine , and OnDeck .
• SBA Loans : This is one of the best options for borrowing money to purchase a business. SBA loans are guaranteed by the U.S Small Business Administration , which makes SBA loans easily accessible and very affordable, with very low interest rates.

3. Seller Financing

This is a unique way of financing the acquisition of a business by borrowing money from the seller.

In simpler terms, you pay the seller an initial sum of money, take control of the business, then continue paying them over time until the whole purchase amount has been cleared . In most cases, you pay off the seller using money generated from the business.

It’s good to note that finding a seller who’s open to this option can be very difficult , since most sellers want to get their money and hand over the business entirely. However, there is no harm in asking, you might come across a seller who is comfortable with this option.

4. Asset Based Financing

Also known as a leveraged buy-out, this is where you use the assets owned by the business you are buying as collateral to secure a loan, and then use this loan to fund the acquisition of the business .

Some of the business assets that you can use to secure funding include the company’s property, equipment and machinery, inventory, and unpaid invoices.

It’s good to note that with this kind of financing, you won’t be able to raise the whole amount required to purchase the business. Therefore, this option is typically used with another financing option, such as use of personal funds or seller financing.

5. Find A Partner

If you are unable to raise the funds to purchase the business on your own, another suitable option is to find a partner to help you purchase the business.

With this option, you have two options. The first one is to find a co-owner . In this case, you own the business together, and each one of you will be involved in the day to day running of the business.

If you opt for the co-owner route, it is advisable to find someone who has some skill set or experience that is beneficial to the business .

If you don’t have someone who’d be interested in partnering with you in mind, ask the business owner to give you a list of any other people who had expressed interest in purchasing the business but couldn’t afford the purchase price.

You can then approach these people and propose a partnership deal. Remember to always prepare a partnership agreement with the help of your lawyer before bringing on board a partner.

The second option is to find a venture capitalist or an angel investor . In this case, the investor is not involved in the day to day running of the business. Instead, they only give you the money and get a share of the profits until they recoup their investment plus interest.

6. Selling Stock To Employees

Another innovative way to finance the purchase of a business is to sell stock to the company’s employees.

With this route, you pay a percentage of the purchase price, while the employees raise the remaining percentage , which gives them some ownership of the company.

If you opt for this route, it is advisable to sell non-voting stock. This way, you get to retain total control over how the business is run. The employees only get a share of the business profits in the form of dividends.

7. Decline Receivables Or Assume Liabilities

You can also lower the initial purchase price of the business by declining the company’s receivables or assuming its liabilities.

When you decline the receivables, any money owed to the business before you took over will be paid to the seller . This means that you can deduct this amount from the purchase price.

When you assume the business’ liabilities, you are agreeing to pay off the debts that the business owed before you acquired it .

Note that while this will reduce the initial purchase price, you’ll still have to spend money to cover the debts. The only difference is that you will not be required to spend this money immediately, and can therefore pay off the debts using money generated by the company after you take it over.

Step 8: Close The Deal With The Right Documents

If everything is in order, and you have secured the funds you need to finance the purchase, it’s now time to do the final thing in the process – closing the deal and taking ownership of the business.

Closing the deal is a complicated process that sometimes involves various legal and financial traps, so you should always go into this step with the guidance of your lawyer.

Your lawyer will ensure that you meet all your contractual rights and obligations, and help you scrutinize all the necessary documents.

Below is a list of the documents that need to be present before you can finalize the deal, pay the seller, and officially take ownership of the business.

1. Confidentiality Agreement

During the sale of a business, a lot of confidential information is exchanged – details about business assets, debts, and finances, details about how the business runs its operations, details about you (the buyer) and how you intend to finance the purchase, and so on.

All these are very sensitive details that both you and the seller might want to keep away from the public – whether the deal goes through or not. To prevent such details from leaking to the public, it is a good idea to always have a confidentiality agreement.

2. Bill Of Sale

This is a very important document that proves that the sale occurred and that the business, as well as its assets have been transferred from the seller to the buyer.

3. Adjusted Purchase Price

This document gives the final purchase price of the business , and takes into account the cost of everything that contributed to the final purchase price – including the cost of things like assets, inventory, goodwill, and so on.

4. Acquisition Agreement

This is a legal document that covers all the terms that govern the purchase . It defines all the details of everything that the seller and the buyer have agreed upon, including the price of the acquisition , the assets and liabilities that are to be transferred as part of the purchase, and the time frame within which the acquisition needs to be completed .

The acquisition agreement also anticipates and describes what needs to be done in case things do not go as planned – for instance, if the buyer discovers that the seller misrepresented some information. The aim of this is to protect you (the buyer) and ensure you get what you are paying for.

5. Asset Purchase Agreement

If you are assuming ownership of the business’s assets as part of the purchase, you will need an asset purchase agreement. This document describes, in detail, the exact assets that you are purchasing, and those that you are not purchasing .

The information in the asset purchase agreement is usually covered by the IRS form 8594 , which you must complete before acquiring a business.

The asset purchase agreement typically covers the following:

• Inventory : A list and value of all inventory currently held by the business.
• Plant and machinery : a list and value of the plant and machinery owned by the business, as well as the lease or purchase agreements for these assets.
• Goodwill : This gives the value of intangible assets like customer base, brand and reputation, and intellectual property.
• Creditors/debtors : Unless you have agreed to decline receivables or assume liabilities, the seller will be responsible for paying creditors and collecting debtor payments until the transfer is officially completed.
• Employees : This describes whether the employees will be automatically transferred with the purchase of the business. This is usually governed by the TUPE regulations , and usually applies when the business is being transferred as a ‘going concern.’
• Contracts : Any current contracts will be listed here. You might want to review the contracts and protect yourself from potential liabilities by adding some clauses to these contracts.
• Assignment deeds : In the event that you are taking over lease or hire purchase contracts, you have to get the consent of the lessor or the hire purchase company before the contracts are transferred to you.
• Property transfer documents : If you are acquiring the business premises as part of the transfer, you’ll need to fill and sign the formal transfer documents.
• Landlord consents : In situations where the business has leased the business premises, you’ll need to get the consent of the landlord to have the lease transferred to you. As part of getting the landlord’s consent, you might be required to provide some personal guarantee.
• Vehicle transfer documents: If the business owns any vehicles that you are purchasing as part of the business acquisition, you’ll need to get the proper forms and have the ownership of the vehicles transferred with the local DMV.

6. Intellectual Property Transfer Documents

If the business you are purchasing owns any copyrights, trademarks, and patents, make sure that these are transferred to you before you take over the business.

7. Non-Compete Agreement

Imagine a situation where someone sells their business to you, then sets up a similar business next door. By doing so, they take away the customer base, as well as any goodwill they had built in the business they just sold to you.

To avoid such situations, it is always recommended that you ask the seller to sign a non-compete agreement.

The non-compete agreement restricts the seller from setting up a business, or from being employed or consulting for a business that would be a competitor to your business within a given radius from your business premises.

A good non-compete agreement will also have a clause to restrict the seller from engaging in similar business with the customers of the business for a given time frame following the purchase.

The non-compete agreement should also restrict the seller from encouraging the employees of the business to quit from their positions in your business and take up employment in a competing business.

8. Employment/Consultation Agreement

In the event that you intend to have the seller remain in the business, either as an employee or a consultant, you’ll need to create this document to define the terms of this agreement.

9. Bulk Sale Laws

Bulk sale laws are laws that were created with the aim of protecting creditors of a business by giving them a notice whenever a company that owes them is selling most or all of its assets . This way, business owners cannot sell their businesses with the aim of escaping their liabilities to creditors.

Before closing the deal, you’ll need to notify the local tax office about your intention to purchase the business.

If all the above documents are in order, you can now go ahead to make the payment to the seller and assume control of the business.

Quick Due Diligence List For Buying A Business

Collecting as much information as you can about a business before you decide to acquire it, which is also known as due diligence, is a very important part of the process of buying a business.

If you don’t do it right, you could potentially find yourself in various financial or legal problems shortly after taking ownership of a business.

To help you avoid finding yourself in such problems, here is a quick list of everything you need to look at when doing your due diligence before buying a business. You should go through everything in this list with the help of your lawyer and accountant.

1. Organization And Good Standing

Here, the aim is to determine the legal structure of the business and find out whether it is in good standing with state authorities .

Some of the documents and paperwork you need to look at here include:

• The articles of incorporation for the company, and any amendments that have been made since incorporation.
• All company bylaws, as well as amendments of the same
• Copies of the company’s minutes for the duration it has been in operation
• A list of shareholders showing how much shares each shareholder holds
• Certificate of good standing
• A list of all states and countries where the business is legally authorized to do business, as well as states and countries where the business does business, has employees, and holds or leases property.
• The company’s annual reports for the last 3 years

2. Financial Information

A company’s financial information plays a key role in helping you determine whether a business is worth buying, as well as how to value the business . When evaluating a company’s financials, some of the documents you need to look at include…

• The business’s audited financial statements for at least 3 years
• The company’s most recent unaudited statements
• Auditor’s reports, letters, and replies for at least 3 years
• Sales records for the last 3 years
• A schedule of accounts receivable and accounts payable
• The company’s capital budgets, projections, and strategic plans
• The company’s analyst reports
• The company’s credit report
• The company’s general ledger
• An analysis of the company’s gross margins, if available
• An analysis of the company’s expenses, both fixed and variable
• A schedule of the business’s advertising costs

3. Inventory, Equipment, And Other Assets

T he assets owned by a business you want to purchase will have a direct impact on the amount you are going to pay for the business , so it is important to know what they are, their actual value, and their condition, as well as whether you’ll actually need them once you take over the business.

Some of the documents to ask for here include…

• Copies of purchase documents on equipment owned by the business
• All leases on equipment not owned by the business
• A schedule of the business’ fixed assets and where they are located
• A schedule of all major capital equipment purchased or sold by the business in the last three years
• A schedule of all inventory held by the business
• All U.C.C filings

4. Real Estate

If the business owns some property, you need to know about the property, and whether it will be part of the transfer or not. If the business owns real estate, you’ll need to ask for the following documents…

• A schedule of all business locations maintained by the company
• Copies of all deeds, title policies, mortgages, leases, variances, surveys, and use permits

5. Intellectual Property

Where the business you are interested in holds some intellectual property rights, copyrights, and trademarks, you should ask to see the following documents…

• A schedule of copyrights
• A schedule of trade names and trademarks
• A schedule of all patents held, both domestic and foreign, as well as any pending patent applications
• Any “work for hire” agreements
• A description of how the business protects its know-how and trade secrets
• A description of all technical know-how held by the business
• Copies of consulting agreements the business has with third parties
• A list of all intellectual property claims or threatened by or against the business

6. Employees And Employee Benefits

When purchasing a business that employs staff, it is important to know the number of staff under employment and how much they get paid , especially if you intend to retain the employees after acquiring the business.

Here are the employee-related documents you’ll want to check as part of your due diligence…

• A detailed list of all staff, including their positions and roles, their salaries and benefits, how long they’ve been working for the company, and all salaries and benefits paid out for at least 3 years.
• All agreements between the business and its employees, including employment, consulting, non-competition, non-solicitation, and non-disclosure agreements.
• The company’s employee handbook and schedules of all employee policies
• Resumes of key employees
• Copies of any existing collective bargaining opportunities
• Copies of all stock purchase plans and stock options available to employees
• A description of existing employee health and welfare insurance policies and the benefits accorded under these policies
• A list and description of all labor disputes the business has faced within the last 3 years – whether settled or pending

7. Business Permits And Licenses

It is also important to know whether the business you want to purchase has all the permits and licenses it needs to operate, and that it is not in violation of any state or city laws. The permits required will depend on the nature of the business and the industry it operates in.

8. Environmental Regulations

Imagine buying a business, only to discover that it is facing fines and penalties because it has been illegally disposing of hazardous chemicals into a nearby river? To avoid such situations, you need to make sure that the business is in compliance with all environmental laws .

• Any available environmental audits for all properties leased or owned by the business
• A list of the business’s environmental licenses and permits
• A list of all hazardous substances the business uses in its operations, as well as how they are disposed
• Copies of all correspondence between the business and any environmental regulatory agency
• A list of all environmental disputes, investigations, or litigations the business has been involved in

9. Zoning Laws

Next, you need to check whether the business you intend to buy is in compliance with any zoning restrictions.

In some cities, you might find that certain businesses, such as bars, nightclubs, and manufacturing businesses, are not allowed in certain neighborhoods. You don’t want to buy a business that could end up being closed for violating zoning laws.

Has the business you are interested in buying been diligently filing its taxes, and is it compliant with all tax laws and regulations? Here, ask to see the following documents…

• All sales and income tax returns filed for the last 3 years
• All employment tax filings for the last 3 years
• All recent tax settlement documents
• Any tax liens

11. Contracts And Leases

It is important to find out all the contracts and leases held by a business before you acquire it. This way, you can determine whether to maintain the contracts and leases or whether to negotiate new ones, as well as how canceling any of these contracts will affect the sale .

When reviewing contracts and leases, you’ll need to look at the following:

• Contracts and agreements between the business and its vendors and suppliers
• Contracts and agreements between the business and its customers
• Any lease agreements for properties occupied by the business or equipment
• All installment sale agreements
• All loan or credit agreements to which the business is a party
• All non-competition and non-disclosure agreements the business has signed with other parties
• Any other contracts and agreements that apply to the business

12. Product And Service Lines

Ask for a list of all products and services currently offered by the business, as well as those that are under development. If there are any evaluations, studies, tests, surveys, or customer complaints regarding the products or services, get a copy of these as well.

13. Customer Information

Your due diligence would be complete without information about the company’s customers. When reviewing customer information, ask for the following…

• A list of the company’s biggest customers for the last 3 years
• Any existing supply or service contracts between the business and customers
• A description of any credit agreements between the business and its customers
• A list of all pending customer orders
• A list of all key customers lost over the last 3 years, and the reasons behind the loss
• A description of the business’ current marketing strategies
• A list and description of the business’s main competitors

14. Litigation

If you purchase a business that is facing legal disputes, you could easily end up assuming liability for these disputes.

To avoid this, you need to make sure that the business is under no legal threat . To do this, ask to see a list of all pending and threatened litigations, as well as documents relating to any settlements, consent decrees, or injunctions to which the business is a party.

15. Professionals

If the business has engaged any professionals over the last 3 years – such as consultants, external accountants, and law firms – ask for a list of these professionals, as well as their contact information.

16. Articles And Publicity

Finally, ask for copies of all of the business’s press releases, articles, or any other form of publicity that the business has been featured in over the last 3 years. This can help you evaluate the company’s brand and reputation.

Pros Of Buying A Business

Now that you are conversant with the step by step process of buying a business, is it better to buy an existing business or build your own business from scratch? Let’s go over some of the advantages of buying a business that is already in existence.

1. Market Tested Concept And Products

When starting a new business from scratch, you are taking a very big gamble. You don’t know whether your business concept will work, or whether there is a ready market for your products and services .

Things like creating a business plan and conducting market research will help you reduce the risk, but you’ll ultimately know whether there’s demand for your products once they hit the market.

With an existing business, the risk is less, because you can check how the business has been performing to determine whether the business concept is working, and whether there is demand for the products and services.

2. Reduced Startup Time

Getting a new business off the ground takes a significant amount of time and effort , because there are lots of things to be done.

You have to find office space or business premises, purchase equipment and inventory, find the right employees and train them, come up with management policies and processes, build relationships with vendors and suppliers, develop a distribution network, and so on.

With all these activities that need to be done, it could be a while before you actually open your doors to the public and start selling.

When buying an existing business, most of this work has been done for you . You can literally finalize the purchase today and open shop tomorrow.

However, this is not to say that there’ll be no work on your part. You also have to put in work to improve the business and take it where you want it to be.

3. Established Brand And Customer Base

Building a brand is no small task, especially if you are starting a business in a crowded industry. It could take a few years to get people to know about your brand and your products and services, and a few more to build a loyal customer base.

With an already existing business, the brand is already established, and the business already has an existing customer base , thus making things a lot easier for you.

4. Securing Business Funding Is Easier

Raising funds to start a new business is not an easy thing to do. This is because you are borrowing money against an idea that is only in your head.

This presents a huge risk for investors and lenders, because the only tangible thing is your business plan, and there is no guarantee that you will be able to successfully implement the business plan.

With an existing business, securing funding is a lot easier because you are not borrowing against projections that may never materialize. Lenders and investors can look at revenue figures, profit margins, and the company’s assets and lend you money against something tangible.

This is not to say that it is impossible for an existing business to fail. However, financing an existing business presents a lower level of risk to lenders and investors compared to financing a new venture.

Sometimes, the business you are buying could have copyrighted slogans, patents, trademarks, and other intellectual property.

Once you acquire the business, this intellectual property could be transferred over to you, and could give you a competitive edge that you would not have had by starting your business from scratch. Note, however, that you may be required to pay for this intellectual property as part of the purchase.

Cons Of Buying A Business

Despite having all the above advantages, buying an existing business is not all smooth sailing. Some of the drawbacks of buying an existing business include…

1. Higher Upfront Costs

With a new business, you can acquire various assets gradually as the company grows, which allows you to keep the cost of starting the business manageable. When buying an existing business, however, y ou’ll be expected to pay for these assets all at once .

In addition, when acquiring an existing business, y ou’ll also be paying for other intangible assets , such as the brand and reputation of the business, the customer base, intellectual property, business policies and procedures, income streams, and so on.

While all these are negotiable, having to pay for them at once can push the cost of acquiring an existing business way higher than the cost of starting a new business and growing it gradually.

2. Risk Of Unidentified Problems

Sometimes, business owners will decide to sell their business because there’s an issue with the business that could affect its long term success . However, many of them will try to hide this information from potential buyers.

While an intensive due diligence process can help you identify such red flags before you commit your money to buy the business, it is possible to miss an issue or two, or underestimate an issue that seems insignificant.

Once you have bought the business, there’s no going back. If you discover any red flags at this point, the only thing you can do is try as much as possible to rectify the issue, though this might not be possible in some cases.

For instance, if you just bought a business in a market that is declining, there’s not much you can do to revive the market.

3. Unfamiliarity With The Business

When you build a business from scratch, you’ll have an extensive knowledge of how that business works, how it makes its profits, and the inner workings and processes that make the business successful.

When you buy a business that was built by someone else, you don’t enjoy the privilege of such knowledge, even if you have experience in the industry . This means that you’ll have to go through a steep learning curve in order to continue running the business successfully.

Sometimes, someone who bought an existing business might be unable to discover the unique thing that made the business successful under the previous owner, and faces the risk of running the business into the ground.

4. Making The Business “Your Own” Can Be A Huge Challenge

When someone starts a business, they have a goal and vision for that business. When you buy the business, you’re essentially stepping into the founder’s vision.

Since you don’t have the same vision as the founder, you have to work on developing your own vision for the business, which calls for changes to the business.

For instance, you might want to introduce new products and services, or change the business model. However, instituting such changes to the business can be detrimental to its performance, and can sometimes lead to loss of customers or key employees .

Ready To Buy A Business And Start Your Entrepreneurial Journey?

If you want to become a business owner, but don’t want to go through the challenging process of building a business from scratch, you can start your entrepreneurial journey by choosing to buy an existing business instead.

While buying a business can be a complicated process that requires its own specialized knowledge, we’ve furnished you with all the required information and broken the process into 8 easy to follow steps.

Here’s a recap of the steps:

• Step 1: Decide what type of business you want to buy
• Step 2: Search for businesses that are for sale
• Step 3: Shortlist the companies you would want to own
• Step 4: Complete your due diligence
• Step 5: Brainstorm on what marketing, product, and organizational changes could increase your enterprise value
• Step 6: Evaluate the price of the business
• Step 7: Secure the required funding to finance the purchase
• Step 8: Close the deal with the right documents

While these steps break down buying a business into a simple process, buying a business is still an involved process that requires a lot of time investment and a lot of caution. We always recommend working with the right professionals to avoid any legal or financial problems down the road.

It is also advisable to keep in touch with the previous owner, because you might need their help or advice somewhere down the road.

All said and done, if you follow the process and recommendations shared in this guide, you’ll be able to successfully start your entrepreneurial journey without the pressure of building a business from the ground up.If you prefer starting your own business, rather than buying an existing business, check out our guides on how to start a blogging business , how to start a podcast , how to start a consulting business , and how to start an online store .

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Anastasia belyh.

Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.

How to write a business plan in 12 steps (2024 edition)

This guide breaks down how to write a business plan and what you need to think about to make your business plan as persuasive as possible.

20 August 2024

This guide breaks down how to write a business plan, step-by-step, detailing what your document needs to include and what you need to think about to make your business plan as persuasive as possible.

What is a business plan?

A business plan is an essential document that can provide immense value for new and existing companies of all sizes. It is an overview that includes an outline of your business, its key objectives and plan for achieving important goals.

This information can be used to communicate strategic actions to internal teams and also attract interest from potential partners and investors . However, writing a business plan can be a lengthy and involved process. For many, using a business plan template can be a good way to get started.

For best results, you’ll need to do a lot of thinking and planning before you start writing your business plan. This way you have all the information and resources you need at your fingertips and won’t be under time pressure to come up with something at the last minute. After all, a well-thought-out business plan can help you avoid generic information and set your company up for success.

Download your free business plan template .

Why write a business plan?

Writing your business plan helps to get your strategy nailed down and onto the page. A plan that stays in your head is probably going to be full of unrealistic assumptions and biases, whereas a strategically thought-out and organised approach forces you to notice your blind spots and find a way forward.

If you’re looking for financing, a bank or investor needs to be persuaded by your business proposal and the opportunity to work with you. Therefore, a well-written business plan can help provide potential financial partners with the confidence that your business can become profitable. Your business plan gives them a comprehensive view of all aspects of your business and details your strategy for achieving your goals.

What are the main sections of a business plan?

Whatever your line of work, your business plan will generally need to provide the following:

An executive summary

A business overview

The market opportunity

Your products/services

How to write a business plan

Make sure you cover each of the following steps when preparing your document:

1. Write an executive summary

This section of your business plan should be 1–2 pages in length and enables potential financiers or partners to get an overview of what your business does and – most importantly — what the opportunity is for them. If they’re interested in the opportunity, they’ll conduct their own due diligence - and this will start with going through your business plan and financials.

It’s a good idea to write your executive summary last, when you’ve clarified your thinking around every section of the document. As an overview section, you don’t want to add any new content that isn’t in your business plan. Aim to keep this summary succinct and engaging by using simple, plain language, as this is much more persuasive than complicated or academic wording.

Use sub-headings and bullet points to help your most important information stand out, especially as busy executives may simply scan your executive summary and use this to decide whether they want to find out more.

What to include in an executive summary?

Make sure you include details on:

What your business does

What the opportunity is

What your unique selling points / differentiators are

How much funding you’re looking for

What the funding will be used for

How you'll succeed

Remember, you’re providing the big picture overview of your business - the detail is in the rest of the document and in the appendices.

2. Write your business overview

This section of your business plan needs to be more than just a list of what your business does. Its purpose is to excite those you’re hoping will work with you or help to fund your business.

Information to address includes:

What's the purpose of your business?

What problem does your business’ product or service solve?

What niche could it fill?

What’s different about your offering?

How are you better than anyone else at what you do?

Consider what your customer value proposition is by deciding what you want to achieve and what your number 1 benefit is for your customer.

3. Identify your USP

Think about what your unique selling points (USP) or differentiators are, and what proof-points you can provide to back them up.

For example, you can use terms like “market-leading” but if you don’t provide any evidence to back up your claims, your reader will take them with a big pinch of salt!

You should certainly reference any awards or endorsements that position you as the best person to provide your product or service, as well as any client testimonials. Make sure you include any education or experience that makes you an expert in your field as well.

4. Describe the market opportunity

Show you understand your industry, market and where you fit in it. While no-one can predict the future, offer up where you think the opportunity is for your business and make sales projections based on that. 

For example, imagine your business is selling personalised cookies - there's little competition in your area and you see your market opportunity to create designs for all calendar and holiday events. You expect to increase sales by 30% in one year and 50% in three years, driven primarily by word-of-mouth referrals.

Make sure you also consider macro trends that may create opportunities for you, such as social, environmental, or technological changes that may affect buying behaviour.

5. Include a SWOT analysis

Whatever your business strengths or opportunities, they’ll always be known and unknown weaknesses and threats; there’s no such thing as certainty in business or in life!

However, you can demonstrate that you’ve examined your business through different lenses and have a thorough understanding of it by doing a SWOT (strengths, weaknesses, opportunities, threats) analysis.

Don’t worry about drawing attention to your business’ shortcomings - every opportunity has them and it’ll give investors and partners confidence in you that you won't bury your head in the sand. Naturally, it's important that you specify what you’re going to do to address these weaknesses and counter these threats.

Here are some areas you can think about to get started: reputation, technology, location, experience, staff, overheads, competition, suppliers and price.

6. Present a competitor analysis

Let’s face it, no matter what industry you’re in, or what you’re selling, there’s going to be other businesses offering the same thing. But instead of worrying about the competition, use this as a positive opportunity to up your game and work out the unique advantages you have that will keep you competitive.

Identify your top 3 competitors and analyse what they're doing well and where they’re coming up short. Try to be as objective as possible and identify how to differentiate yourself from them.

You should also look into who the industry leaders are and what the benchmarks are for your industry so that you can set yourself targets for continuous improvement.

7. Create a customer persona

A customer persona is a fictional person who represents your company's ideal customer. Naturally, the persona can be based on a real person - the more you get to know your ideal customer, the more targeted and successful your marketing efforts will be.

To create a customer persona, you need to conduct research into your ideal customer’s age, sex, income, employment, daily activities, interests and hobbies. If you’re feeling unsure about your customer persona, you may need to give your ideal customer further thought and download the customer persona template to get started.

8. Write your marketing strategy

When you’ve created your customer persona, you need to work out how you’re going to reach them. Do they hang out on social media apps, like Facebook, Instagram, Pinterest, Twitter or LinkedIn? Or are they more used to local, traditional marketing like free local papers or high foot traffic areas?

Once you’ve figured where your audience is likely to hang out, you can outline your strategies for promoting and advertising your products or services in the next 12 months.

Make a list of the marketing channels you’ll use to achieve your advertising strategy and be sure to include your budget. How much can you set aside for advertising? And where are you most likely to see a return on your efforts? Paid ads on Facebook? Half or full paid spreads in an industry magazine? Or even a direct mail out? 

For more structured help around this, check out free course: Business 101 | Get social with your business on Facebook . 

9. Design your customer retention strategy

Business success relies heavily on the relationship you’re able to build with your customers. What techniques will you use to keep them coming back? Consider the following:

What can your business do to increase the number of repeat customers? 

Does your business have a referral or loyalty program? 

Do you have a post-purchase follow up in place?

Will you use surveys to track customer satisfaction?

What ways can you continue delivering outstanding service?

Is there a way to continue educating and adding value to your customers?

10. Present your financials

Most people who are looking at investing their time and/or money in your business will want to see your financial statements - your performance to date and your projections over the short and medium term. They'll also want to know how much you’ve received in funding to date and what these other sources of funding are - including your own investment.

Current finances

You need to show how your business has performed financially over the last year, highlighting metrics such as positive cashflow , net profit and assets.

Financial forecasts

You should also provide a balance forecast projecting total assets, total liabilities and net assets over 1, 2 and 3 years, and a profit and loss forecast for the same periods detailing gross profit /net sales, total expenses and net profit/loss. Finally, you should also provide a cash flow forecast month by month over the next year.

It’s also a good idea to speak to an expert like an accountant or bookkeeper about your finances and get advice on how best to present them in this all-important section of your business plan.

11. Detail how much funding is needed

Naturally, you also need to be very clear about how much money you’re looking for and what you plan to do with it. If you’re looking for a loan , you need to detail what it’s for, over what period it’ll be repaid, and what collateral you have to secure it.

12. Propose an exit strategy

Any financial stakeholder in your business will want a return on investment. If you’re pursuing this type of funding, you should include some detail on your proposed exit strategy . For example, do you want to sell the company at some point or go public?

Similarly, you should outline your succession plan so the business can continue to operate if you decide to step away from it. Likewise, you need a plan for what happens if the business loses money and can’t sustain itself. Documenting this means that everyone is on the same page and potential investors have this information upfront.

Frequently asked questions about writing a business plan:

When to write a business plan.

Typically, entrepreneurs write their business plans within the first year of operations. A business plan is a tool that helps business owners refine their strategy, attract partners and financiers, and grow their business.

If a business plan is written too soon, it may lack the substance that comes with time in the market. However, it’s important to note that a business plan isn't a static document - it can and should change as the business evolves.

How long should your business plan be?

There are no hard and fast rules around how long your business plan should be - it just needs to include all the relevant information. Aim for clear, concise sections and build a business plan that is as easy to read and navigate as possible.

Using a business plan template can help you make sure you have everything covered off, while also having a document that looks as professional as possible. Make sure you run a spelling and grammar check too - any sloppy errors can undermine your credibility.

What’s a business plan on a page?

It’s important to write your business plan as it helps to embed your strategy - as well as communicate what you’re about to potential partners or investors. When you have a comprehensive business plan you can easily adapt it to suit different audiences. For example, a full business plan is essential for raising capital but a business plan on a page may be enough for potential partners or employees.

What do venture capitalists look for in a business plan?

Venture capitalists invest money into businesses with the goal of achieving a return on their investment within the short to medium term. As a result, they’re looking for an attractive market opportunity, a clear point of differentiation, a strong management team, a proven track record, solid financials and, importantly, an exit opportunity.

Where to go for help or more information?

There are many great resources out there to help you fine-tune your business strategy and write your business plan. The Australian Government has a comprehensive website dedicated to supporting businesses at all stages of their journey.

You can also get help from Business Enterprise Centres , business advisors, accountants and fellow business owners, so your venture has the very best chance of success. 

Disclaimer:  Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

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7 Business Plan Examples to Inspire Your Own (2024)

Need support creating your business plan? Check out these business plan examples for inspiration.

Any aspiring entrepreneur researching how to start a business will likely be advised to write a business plan. But few resources provide business plan examples to really guide you through writing one of your own.

Here are some real-world and illustrative business plan examples to help you craft your business plan .

7 business plan examples: section by section

The business plan examples in this article follow this template:

• Executive summary.  An introductory overview of your business.
• Company description.  A more in-depth and detailed description of your business and why it exists.
• Market analysis.  Research-based information about the industry and your target market.
• Products and services.  What you plan to offer in exchange for money.
• Marketing plan.   The promotional strategy to introduce your business to the world and drive sales.
• Logistics and operations plan.  Everything that happens in the background to make your business function properly.
• Financial plan.  A breakdown of your numbers to show what you need to get started as well as to prove viability of profitability.
• Executive summary

Your  executive summary  is a page that gives a high-level overview of the rest of your business plan. It’s easiest to save this section for last.

In this  free business plan template , the executive summary is four paragraphs and takes a little over half a page:

• Company description

You might repurpose your company description elsewhere, like on your About page, social media profile pages, or other properties that require a boilerplate description of your small business.

Soap brand ORRIS  has a blurb on its About page that could easily be repurposed for the company description section of its business plan.

You can also go more in-depth with your company overview and include the following sections, like in the example for Paw Print Post:

• Business structure.  This section outlines how you  registered your business —as an  LLC , sole proprietorship, corporation, or other  business type . “Paw Print Post will operate as a sole proprietorship run by the owner, Jane Matthews.”
• Nature of the business.  “Paw Print Post sells unique, one-of-a-kind digitally printed cards that are customized with a pet’s unique paw prints.”
• Industry.  “Paw Print Post operates primarily in the pet industry and sells goods that could also be categorized as part of the greeting card industry.”
• Background information.  “Jane Matthews, the founder of Paw Print Post, has a long history in the pet industry and working with animals, and was recently trained as a graphic designer. She’s combining those two loves to capture a niche in the market: unique greeting cards customized with a pet’s paw prints, without needing to resort to the traditional (and messy) options of casting your pet’s prints in plaster or using pet-safe ink to have them stamp their ‘signature.’”
• Business objectives.  “Jane will have Paw Print Post ready to launch at the Big Important Pet Expo in Toronto to get the word out among industry players and consumers alike. After two years in business, Jane aims to drive $150,000 in annual revenue from the sale of Paw Print Post’s signature greeting cards and have expanded into two new product categories.”
• Team.  “Jane Matthews is the sole full-time employee of Paw Print Post but hires contractors as needed to support her workflow and fill gaps in her skill set. Notably, Paw Print Post has a standing contract for five hours a week of virtual assistant support with Virtual Assistants Pro.”

Your  mission statement  may also make an appearance here.  Passionfruit  shares its mission statement on its company website, and it would also work well in its example business plan.

• Market analysis

The market analysis consists of research about supply and demand, your target demographics, industry trends, and the competitive landscape. You might run a SWOT analysis and include that in your business plan. 

Here’s an example  SWOT analysis  for an online tailored-shirt business:

You’ll also want to do a  competitive analysis  as part of the market research component of your business plan. This will tell you who you’re up against and give you ideas on how to differentiate your brand. A broad competitive analysis might include:

• Target customers
• Unique value add  or what sets their products apart
• Sales pitch
• Price points  for products
• Shipping  policy
• Products and services

This section of your business plan describes your offerings—which products and services do you sell to your customers? Here’s an example for Paw Print Post:

• Marketing plan

It’s always a good idea to develop a marketing plan  before you launch your business. Your marketing plan shows how you’ll get the word out about your business, and it’s an essential component of your business plan as well.

The Paw Print Post focuses on four Ps: price, product, promotion, and place. However, you can take a different approach with your marketing plan. Maybe you can pull from your existing  marketing strategy , or maybe you break it down by the different marketing channels. Whatever approach you take, your marketing plan should describe how you intend to promote your business and offerings to potential customers.

• Logistics and operations plan

The Paw Print Post example considered suppliers, production, facilities, equipment, shipping and fulfillment, and inventory.

Financial plan

The financial plan provides a breakdown of sales, revenue, profit, expenses, and other relevant financial metrics related to funding and profiting from your business.

Ecommerce brand  Nature’s Candy’s financial plan  breaks down predicted revenue, expenses, and net profit in graphs.

It then dives deeper into the financials to include:

• Funding needs
• Projected profit-and-loss statement
• Projected balance sheet
• Projected cash-flow statement

You can use this financial plan spreadsheet to build your own financial statements, including income statement, balance sheet, and cash-flow statement.

Types of business plans, and what to include for each

A one-page business plan is meant to be high level and easy to understand at a glance. You’ll want to include all of the sections, but make sure they’re truncated and summarized:

• Executive summary: truncated
• Market analysis: summarized
• Products and services: summarized
• Marketing plan: summarized
• Logistics and operations plan: summarized
• Financials: summarized

A startup business plan is for a new business. Typically, these plans are developed and shared to secure  outside funding . As such, there’s a bigger focus on the financials, as well as on other sections that determine viability of your business idea—market research, for example.

• Market analysis: in-depth
• Financials: in-depth

Your internal business plan is meant to keep your team on the same page and aligned toward the same goal.

A strategic, or growth, business plan is a bigger picture, more-long-term look at your business. As such, the forecasts tend to look further into the future, and growth and revenue goals may be higher. Essentially, you want to use all the sections you would in a normal business plan and build upon each.

• Market analysis: comprehensive outlook
• Products and services: for launch and expansion
• Marketing plan: comprehensive outlook
• Logistics and operations plan: comprehensive outlook
• Financials: comprehensive outlook

Feasibility

Your feasibility business plan is sort of a pre-business plan—many refer to it as simply a feasibility study. This plan essentially lays the groundwork and validates that it’s worth the effort to make a full business plan for your idea. As such, it’s mostly centered around research.

Set yourself up for success as a business owner

Building a good business plan serves as a roadmap you can use for your ecommerce business at launch and as you reach each of your business goals. Business plans create accountability for entrepreneurs and synergy among teams, regardless of your  business model .

Kickstart your ecommerce business and set yourself up for success with an intentional business planning process—and with the sample business plans above to guide your own path.

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Business plan examples FAQ

How do i write a simple business plan, what is the best format to write a business plan, what are the 4 key elements of a business plan.

• Executive summary: A concise overview of the company's mission, goals, target audience, and financial objectives.
• Business description: A description of the company's purpose, operations, products and services, target markets, and competitive landscape.
• Market analysis: An analysis of the industry, market trends, potential customers, and competitors.
• Financial plan: A detailed description of the company's financial forecasts and strategies.

What are the 3 main points of a business plan?

• Concept: Your concept should explain the purpose of your business and provide an overall summary of what you intend to accomplish.
• Contents: Your content should include details about the products and services you provide, your target market, and your competition.
• Cashflow: Your cash flow section should include information about your expected cash inflows and outflows, such as capital investments, operating costs, and revenue projections.

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The Only Checklist You’ll Need for Buying an Existing Business

You’ve heard it here before— buying an existing business is a much better option than trying to start something on your own and scale it up.

But it’s important to know what to do (and what NOT to do) when searching businesses and making an offer.

Keeping track of all the stuff you need to get done is a lot easier when you have a checklist you can reference.

Our checklist breaks everything down into simple steps to follow as you go. And you can download a printable version here .

1. Understand Your Goals for Buying a Business

You know it’s a good idea, but go deeper.

What’s your why?

Even with an established business, you’ll face challenges and roadblocks as you go. Not only will knowing your why help you push through them, but it can also help guide your future plans for the company.

You need to know:

• What kind of owner you envision yourself as (a hands-on owner, someone building the roadmap to hand over to an operator, someone who wants to systematize everything to franchise the whole thing, etc.).
• How you’ll know when the company hits its goals and achieves success.
• What kind of team you need to build the business.
• Why you think you’re suited to manage the company.

2. Determine What Kind of Business You Want to Buy

There’s no shortage of boring businesses that make for great choices as a business acquisition. We’ve even come up with a list of the most lucrative businesses to buy for you to get the creative juices flowing.

Start by thinking about your own job history, skills, and background.

What you know and bring to the table provides powerful direction to the type of business that’s best for you. You’ll be able to get more revenue out of a business that needs the skills in your zone of genius.

For example, an operational wiz with skills in developing processes, will provide a lot of value to a business that needs an organizational shape up.

While someone with a background in marketing can get more mileage out of a business where the biggest problem is getting the message out to potential customers.

We also recommend that you buy a business that fits our SOWS (stale, old, weak, simple) framework. 

These types of boring businesses are stable, simple to scale, and there’s always demand. They’re the perfect acquisition for first timers.

And don’t forget our golden rule of business buying. It’s a two-parter:

• Don’t lose money.
• Don’t buy a business that can bankrupt you.

It’s about so much more than finding something that interests you or the “hot thing” everyone’s promoting. Look beneath the surface to find the real hidden gems.

Sure, placing ATMs sounds easy, but for being a business all about money, it can actually take you years to make some of your own. Same with Amazon FBA and other commonly-promoted business models that face multiple problems.

3. Choose How You Will Finance Your Purchase

Contrary to popular belief, you don’t always need a lot of money to purchase someone’s business. You can get in the doors with $5,000 or less for plenty of boring businesses using seller financing.

Here’s a quick rundown of the best financing options for buying a business :

• Your own cash (savings, personal loan funds, credit)
• Business loans, including SBA loans
• Other people’s money (investors, crowdsourcing)
• Seller financing (using the owner like a bank and paying them back over time)

Your own cash is problematic because it puts all your eggs in one basket. And that’s if you have the money in the first place.

Business loans? Not as easy to get as you might think, and there will be a lot of paperwork and back and forth with the lending officer. It’s still a viable option if your other choices don’t work out, though.

Our favorite? Seller financing. You can work out your own deal terms here, such as limiting your down payment.

4. Find Businesses That Are for Sale (Including the Ones that Are Off-Market)

By now, you should already know what kind of business you’re interested in. Combine that with your funding sources, and you should have a narrowed-down list of industries to research.

A few hot spots to check for businesses on the market include:

These are just the places where an owner’s already looking to get out as soon as they can.

You can go deeper and cut out a lot of the competition by looking for off-market deals. You can use BizScout , a service we own, to find business opportunities that haven’t hit the market yet.

And if you’re still having trouble finding the perfect option, check out our guide to finding a business to buy .

5. Send a Letter of Intent to the Business Owner

Great, now you’ve found a business you want to buy. It’s time to start evaluating the business before you buy it .

Make contact with the seller and provide a letter of intent. This signals the seller that you’re a serious prospective buyer and opens the door for future sharing of pertinent info, like financial data.

This is a preliminary commitment to do business with another party and may or may not be binding. But it doesn’t mean you’re obligated to buy the company if you find a big red flag.

6. Run a Financial Health Check

Read through financial records, balance sheets, cashflow statements, and credit reports.

A few questions to ask here:

• Is the business making money?
• Are there concerning seasonal or cyclical issues with income?
• Are expenses way out of whack with earnings?
• Do tax returns match the actual financial statements?
• Are there any tax liens on the company?
• Are there pieces of aging equipment or other things that will require an overhaul?
• How much debt does the company carry?
• What are the profit margins?
• What business assets does the company own?
• Does the company also own any intellectual property?

7. Evaluate the Business’s Operations

If you still feel good about things after looking over the finances, move on to a deep dive into operations.

Review the existing business plan and organizational charts if the owner has them. Dig into how the company works on a nuts-and-bolts level. 

Look for any red flags you can’t live with in the business.

The business needs a huge team to process work, and you don’t love being a manager? Red flag.

People putting in 80-hour weeks, and you see no chance of that changing? Red flag.

If the business is a little out of date or the marketing sucks, you can fix those kinds of business operations issues. If they have a complex process in place to systematize, you can fix that, too.

This is also your chance to discuss keeping the owner on for a transition period to work out kinks. It’s also your opportunity to vet key employees for moving up to bigger roles.

8. Run a Competitive Analysis

You can’t feel fully confident when buying an existing business if you don’t know what else is out there. Take a look and answer these questions:

• What unique selling proposition are competitors leaning into?
• Does the business I want to buy have a potential competitive edge I can use?
• Where are the other companies falling short?
• Is it reasonable to think that with my strategic insight, we can improve our competitive standing in the market?

9. Get a Professional Appraisal for all Company Equipment and Assets

Don’t take the current owner’s word for it when it comes to any physical equipment.

Get an independent evaluation from an outside expert. This will really help you when it comes time to make an offer on the business so you get a fair price.

Pay an outside expert to do this. Yes, it will cost you some cash to value all of the tangible and intangible assets. But the peace of mind and negotiation advantage you’ll get are worth it. 

10. Check the Business’s Reputation and Relationships

In your list of things to work on once you take over, you might consider some easy wins, like improving the brand’s online presence.

To do this, check out current reviews, feedback, and relationships and ask things like:

• Does the business have an existing customer base?
• What are customers’ sentiments? Do they have positive reviews, mostly positive, mostly negative?
• What relationships does the company have with vendors, suppliers, and partners?
• Do they have any marketing efforts in play right now? If so, what kind and how are they doing?

11. Conduct Legal Due Diligence

Skipping the due diligence process is one of the best ways to totally f*ck up your new business .

You don’t want to step into any surprises once the deal goes through. Check things like:

• Current business licenses and permits.
• Any pending or past litigation.
• Insurance policies (and whether these fully cover all risks and liabilities).
• Existing contracts and legal documents with customers, vendors, and partners.

12. Negotiate the Deal

Now for the fun part: let’s make a deal!

Negotiating can be a challenge if you get pushback, but use all the data you found up to this point to back up your offer.

Don’t fear working through a few rounds of negotiation with the seller. You can use what you learn to come up with a purchase price and terms that work for both of you.

And don’t be discouraged if your deal falls through.

It’s very common for first time buyers to lose on their first go-round. The important part is that you have the ability to dust yourself of and go look for another (better) deal.

13. Close the Deal

Congrats! The ink is dry on the purchase agreement, and it’s time to start working in the business.

Don’t forget to do things like:

• Secure any funding if you took out a loan, including details on repayment dates.
• Transfer all licenses, software, and paperwork into your name.
• Choose an official start date and prepare employees for the transition.

14. Make the Business Your Own

You’re finally in charge. It’s time to optimize the business now. With your due diligence complete, you probably already have a full list of things to tackle. Check out our ideas for the best tools for buying and growing a business .

That could include:

• Upgrading all operations to the 21st century, like using software and automations.
• Leveling up marketing.
• Looking at growth opportunities.
• Tweaking customer service.
• Providing more training to employees.

Make the Right Moves and Buy Now

Now that you know the steps involved in buying a business and what to pay attention to in each one, you’re ready to step out there and start the process.

Knowing what you want and where you’ll shine in the company gives you an initial direction for an informed decision, but spend time researching companies for sale before drafting your first letter of intent.

If you make the right moves, you could find yourself in the owner’s shoes sooner than you expected!

One more thing. We designed this checklist as a quick reference for your first business purchase. If you feel like you need a deep dive, check out our guide to buying a business . And if you really want to drink from a firehose, check out our Small Biz Buying Course .

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Powerful strategies to help you successfully acquire a company.

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Adam Coffey, founding partner of CEO Advisory Guru, LLC . Best-selling author of The Private Equity Playbook.

The time has come. You’ve made the decision: You’re going to buy a company.

Kudos to you! You’re making a smart choice. By buying a company with a proven track record of attracting customers and generating revenue, you’re setting yourself up for success by eliminating a lot of the risk inherent in starting a company from scratch.

But making the decision to buy is just the beginning. You also need to figure out what industry you’re going to focus on, then generate a list of prospective companies within that industry. Once you’ve done that, you need to take some time to narrow your list of prospects down to a manageable number. Then (and only then) will you be ready to begin reaching out to those businesses to determine if they’re the right fit for you. If they are, you’ll have to convince their leadership that selling to you is the right decision.

These last two steps are especially critical to your success. Luckily, there are certain things you can do to increase your odds of a favorable outcome. Let me explain.

Working With A Buy-Side Advisor

When it’s time to reach out to prospective businesses, I highly recommend working with a buy-side advisor. In a nutshell, buy-side advisors make outreach seamless and pain-free. They’ll review the list of prospective companies in your industry, determine which of them fit your ideal company profile , then reach out to those that do to see if they’re interested in talking with you about selling.

After buying 58 companies over the course of my 21-year career as a CEO, I can say beyond a shadow of a doubt that buy-side advisors are worth their weight in gold. However, they do come with a potential drawback: They aren’t cheap. On average, they charge a flat fee of about $5,500/month plus a success fee. The success fee is usually around 2% of the purchase price of the company. So if you pay $10 million for the company, the advisor’s success fee will be $200,000.

For many entrepreneurs, these numbers bring up sticker shock. The question to ask yourself, though, is whether you’d rather spend time or money on outreach. There’s no right or wrong answer, so reflect on what resource is more important to you and act accordingly.

Do It Yourself

If you decide that spending money on a buy-side advisor isn’t for you, you’ll need to roll up your sleeves and do the outreach yourself. What does that mean? First, make sure you know exactly what your “perfect company” looks like. What revenue size are you looking for? Do you want to run the business yourself or remain passively in the background? What geographic area are you targeting? What type of customer (residential or commercial) do you want to serve?

Once you’re crystal-clear on your ideal company profile, get out your list of prospective companies and start filtering out ones that don’t meet your criteria. You can use a social media platform like LinkedIn to do so, or you can go directly to the company’s website. Whatever method you choose (and you may need to utilize different methods for different companies), your goal is to determine if the company fits your profile. If it does, get the phone number and/or email address of the company’s owner and make a direct inquiry.

This is a slow and arduous process. You might talk to 50 or 100 companies (or more) to find the one. But that’s the game, and the end results can make the whole process well worth it.

It’s All About Relationships

As you begin your outreach, remember that buying a business is a relationship-based sale. Simply getting someone on the phone and saying, “I’d like to buy your company. How much do you want for it?” won’t work. This is even more important to keep in mind if you don’t use a buy-side advisor. In those instances, you’re cold calling people who may not even be looking to sell! You need to create sellers, and that’s where relationships come in.

Think of it like dating. You don’t meet someone for the first time and ask them to marry you. You have to get to know each other first. You need to establish compatibility and make sure you both want the same things in life. Only if the getting-to-know-you process goes well might you start thinking about marriage.

The same holds true when you’re courting a business owner. Take things one step at a time. In the first conversation, your only goal should be to get to an in-person meeting.

Here’s a very loose script you might use to accomplish this (modify it accordingly, of course):

I’m an entrepreneur who’s interested in buying my first business. I’ve done a lot of research, and I’ve decided your industry is the industry I want to seek my first opportunity in. I’ve been researching companies in the industry and came across yours. I think it looks great—I love what I’m seeing, and I think you’ve built an amazing business.

I’m wondering if you’ve ever potentially thought about selling? If that’s something that might be an interesting conversation for you, I’d love to take you out to lunch.

Move Slowly

If they agree to the in-person meeting, fantastic! If not, it’s OK. Remember, this is a numbers game. You’re going to have to weed through a lot of companies to find the right one. But in my experience, it’s worth it.

So now, you have some decisions to make. Use a buy-side advisor, or DIY your outreach? If you aren’t sure which is the best for your unique situation, it may be helpful to talk to a business coach who is experienced in finding and acquiring companies.

Whatever path you choose, I wish you the best of luck as you embark on the incredible journey of becoming a business owner.

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Buy an existing business in the UK

The steps of buying an existing business, including how to assess and value a business and your obligations to any existing staff.

• How to buy a business in the UK
• Advantages and disadvantages of buying a business
• Decide on the business to buy
• How to value a business
• Due diligence
• Buying a business
• Looking after existing employees

1. How to buy a business in the UK

Buying a company that's already established may be quicker and easier than starting from scratch.

However, you will need to put time and effort into finding the business that's right for you. Also, the costs involved in buying an existing business can be substantial and should not be underestimated.

This guide takes you through the steps of buying an existing business, including how to assess and value a business and your obligations to any existing staff.

2. Advantages and disadvantages of buying a business

There can be many good reasons why buying an existing business could make good business sense. Remember though, that you will be taking on the legacy of the previous business owner. You need to be aware of every aspect of the business you're about to buy.

• Some of the groundwork to get the business up and running will have been done
• It may be easier to obtain finance as the business will have a proven track record
• A market for the product or service will have already been demonstrated
• There may be established customers, a reliable income and a reputation to capitalise and build on. There will be a useful network of contacts
• A business plan and marketing method should already be in place
• Existing employees should have experience you can draw on
• Many of the problems will have been discovered and solved alread

Disadvantages

• You often need to invest a large amount up front, and will also have to budget for professional fees for solicitors, surveyors, accountants etc
• You will probably also need several months' worth of working capital to assist with cashflow
• For a neglected business you may need to invest more on top of the purchase price to give it the best chance of success
• You may need to honour or renegotiate any outstanding contracts the previous owner leaves
• You also need to consider why the current owner is selling up. Think about how this might impact the business and your taking it over
• Current staff may not be happy with a new boss, or the business might have been run badly and staff morale may be low

3. Decide on the business to buy

Any business you buy needs to fit your own skills, lifestyle and aspirations. Before you start looking, think about what you can bring to a business and what you'd like to get back. List what is important to you. Look at your motivations and what you ultimately want to achieve.

It is useful to consider:

• Your abilities - can you achieve what you want to achieve?
• Your capital - how much money do you have to invest?
• Your expectations in terms of earning - what level of profit do you need to be looking for to accommodate your needs?
• Your commitment - are you prepared for all the hard work and money that you will need to put into the business to get it to succeed?
• Your strengths - what kind of business opportunity will give you the chance to put your skills and experience to good use?
• The business sector you're interested in - learn as much as you can about your chosen industry so you can compare different businesses. It's important to take the time to talk to people already in similar businesses. The internet and your local library will also be good sources of information
• Location - don't restrict your search to your local area. Some businesses can be easily relocated

4. How to value a business

There are several valuation methods you can use to value a business. Your accountant may be able to help. However, a business transfer agent, business broker or corporate financier will be best qualified to provide valuation advice.

• the history of the business
• its current performance - sales, turnover, profit
• future projections or a business plan
• its financial situation - cashflow, debts, expenses, assets
• why the business is being sold
• any outstanding or major litigation the business is involved in
• any regulatory changes which might have an impact on the business

Talk to the vendor and, if possible, the business' existing customers and suppliers. The vendor must be comfortable with you doing this and you must be sensitive to their position. Customer and suppliers may be able to give you information that affects your valuation, as well as information about market conditions affecting the business.

For example, if the vendor is being forced to sell due to decreasing profits, your valuation might be lower.

Intangible assets

Valuing the intangible assets is usually difficult and could include:

• the company's reputation
• the relationship with suppliers
• the value of goodwill
• the value of licences
• patents or intellectual property

Other factors that will affect the value:

• competition
• benchmarking - what other businesses in the sector have sold for
• who else in the sector is for sale or on the market
• the economic climate - will any new government legislation have an impact on the business

5. Due diligence

Once an offer has been made and accepted a period of time is allowed for you to access the business' books and records. This is known as due diligence.

It should give you a realistic picture of how the business is performing now, and how it is likely to perform in the future. It should also highlight any issues or problems which might need warranting or guaranteeing.

There are traditionally three types of due diligence. You might need different advisors for each:

• legal due diligence - as part of a sales and purchase contract, the lawyers can check that the business has legal title to sell, ownership of all the assets and that regulatory and litigation issues are fully addressed
• financial due diligence - checking the numbers and making sure there are no black holes or hidden financial issues
• commercial due diligence - finding out the business' place in the marketplace, checking competitors and the regulatory environment

Don't start due diligence until you have agreed a price and terms with the seller. They may agree to take the business off the market during your investigation. This is known as an exclusivity period and the seller will often ask for a down payment to secure it.

The investigation period is negotiable - but most small businesses need at least three to four weeks.

Where to get help

Ideally you should get accountants and solicitors to help you identify risk areas. If it is registered with Companies House, you can also obtain copies of the company accounts, the annual return and the other key documents.

Due diligence is about more than the finances of a business. You need to know exactly what you are getting into, what needs to be fixed, what it will cost to fix, and if you are the right person to take on this business.

Key areas to cover are:

• employment terms and conditions
• outstanding litigation
• major contracts and orders
• IT systems and other technology
• environmental issues
• commercial management including customer service, research and development, and marketing

You may also need information from external sources such as the landlord, tax office or bank.

Read our guide Buying business premises

6. Buying a business

An organised approach will help you find and acquire the right business.

Get professional advice

Professional help is invaluable as you go through the negotiation, valuation and purchase process.

Research the sector you're interested in, including the best time to buy, and shortlist two or three businesses.

Initial viewing and valuation

Be discreet - the owner may not want staff to know they are selling, but be thorough and record key findings.

Arrange finance

Lenders generally require:

• details of the business/sales particulars
• accounts for the last three years
• financial projections - if no accounts are available
• details of your personal assets and liabilities

Make a formal offer

If you make your initial offer by phone, follow this up in writing. Head your letter 'subject to contract' and include this phrase in all written communication.

Negotiation

Before completing the sale, it may be worth trying to negotiate an overlap period so you have time to become familiar with the business before taking over.

You and your solicitor need to verify the information you have based your offer on.

If you're buying premises, you may want to arrange an independent survey and valuation, even if a lender is also carrying out their own survey and valuation at your expense.

Even after you reach an agreement on the price and terms of sale, the deal could still fall through. You have to meet certain conditions of sale to complete, including:

• verification of financial statements
• transfer of leases
• transfer of contracts/licences
• transfer of finance
• transfer of existing or new VAT registration

7. Looking after existing employees

There are regulations that govern what happens to employees when someone new takes over a business.

These apply to all employees when a business is transferred as a going concern. This means employees automatically start working for the new owner under the same terms and conditions.

Employment tribunal awards

When you buy an existing business, you might decide you need to employ fewer staff. But be careful about making any changes, as an employee might take a case to an employment tribunal for unfair dismissal or unfair selection for redundancy. It's best to consult a solicitor before making any such changes.

Inform and consult employees

You may want to discuss reducing employee numbers or reorganising staff. However, it's a good idea to wait until you have completed the due diligence period, but before you take over the business. As the new employer you should inform and consult all employees - including employee representatives - who may be affected.

As their new employer, you do not have to take over rights and obligations relating to employees' occupational pension schemes put in place by the previous employer. However, if you don't provide comparable pensions arrangements, you could theoretically face a claim for unfair dismissal.

Read our guide Buying business premises .

Get the support you need right now

You can connect with us through the contact form, call us or contact your local Business Gateway office.

You might also be interested in

Franchising.

Decide if franchising is for you. How to find the right franchise, and the key issues you need to consider.

Working on a business plan

Whether you’re starting a business or already running one, our guide will help you evolve and support your business plan effectively.

Buying business premises

Most businesses looking for premises will decide to rent however there are some circumstances where it might be preferable to buy a property.

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