Business Plan Template
Learn how to create a Business Plan that your lender will love – in just 8 minutes.
I’m a big advocate of creating a business plan prior to the purchase of a business and here’s why.
Creating a Business Plan serves two purposes:
- It forces you to look at all the different aspects of the business you are looking to buy.
- In the likely event you need financing from a lender in order to buy that business, the quality and presentation of your business plan to a lender might make the difference between you getting a loan or getting declined for a loan.
So let’s talk about some of the essential components I’d recommend you include in the creation of a business plan template, as it relates to buying an existing business.
The beauty of creating a business plan template, as it relates to buying a business, is that a lot of the information will come from the existing business owner. Let me explain…
All the high level details you need should be in the initial information package you receive once you have signed a Confidentiality Agreement.
Assuming the business is of interest to you, you’ll get more details about the business once you meet the business owner in person, and have a tour of the business.
It is important to note that, there is going to be some highly confidential details that you will not be able to obtain, nor should the business owner be providing you, until you have paid a deposit and you have engaged your lawyer.
That being said, the information you do get will be more than sufficient to create a great business plan, worthy of any lender review.
I would highly recommend that part of your business analysis include an understanding of the main products and / or services offered by the business.
Which of these products and / or services are making the business money. Conversely identify what products / services might be costing the business money. A summary of your findings should be reflected in your business plan.
Your business analysis should also determine what capacity the business is operating at. Ask the business owner when you meet them, ask how much of an expansion, or increase in revenue, the business could accommodate, given the size of the real estate, current employee count and available cash flow? If, for example, the business can increase its revenues by 10% with very little to no increase in expenses, reflect these details in your business plan.
Your going to have historical financial data, in the form of accountant prepared financial statements, included in the initial information package. However, through a discussion with the business owner, you first need to be clear where each dollar is coming from, and where each dollar is going.
Understand that with few exceptions, business owners typically do not “clean up” their financial statements prior to listing their business for sale. This means that you will very likely find money within the business that can be put to better use. Money you should account for in your business plan financial projections, for both you and a lender to see.
That being said, be mindful of such things as when each employee last got a pay raise as well as when the last product or service price increase occurred. This information too should be reflected in your business plan!
Employees. Their roles and skill set.
Every one of us have strengths and weaknesses and from a lenders perspective, the lender wants to be assured that once the owner of the business leaves, you the buyer (or the employees) are capable of replacing the owner with no negative effect to the operation, or revenues, of the business.
Clearly document in your business plan how you plan to replace the skill set and role of the current owner.
Business Location – is it suitable for conducting its operations?
You need to determine if the location of the business is suitable for conducting its operations. You want to get the business owners opinion on this. Most times, there will be no issues with the location of the business, but if there are any issues with the location, your business plan needs to outline the details as to how you intend to rectify the issue.
Over the years I’ve found one consistent theme when it comes to business owners – they all have great business ideas that they simply have had no time, or desire, to explore.
As a buyer – this is juicy information!
So when you meet the business owner, ask them, “If you were to keep the business, what business ideas / opportunities would you explore?”. TAKE NOTES!
Furthermore, prior to the meeting with the business owner, take some time to think of a few of your own ideas of growing the business. Discuss your ideas with the business owner at the meeting. Not only will your proactive approach resonate positively with the business owner, you might find they tried your business idea and it did not work for some reason. They will give you the details of why the idea did not work and that will in turn save you tons of time and lots of money!
When you meet the owner of the business, you should ask them about their competition and what differentiates their business from the competition. Again, take notes, review the competition for your self and summarize the details in your business plan.
Let’s review and summarize the discussion.
Creating a business plan template is an essential activity that helps ensure you are buying the right business opportunity for the right price. Furthermore, it is essential to “impressing” a lender and solidifying the financing you need in order to purchase that business.
You can find many business plan templates online. There are even some very good business plan advisors out there who you might want to consult with.
Finally, when it comes to creating a business plan, I’d highly recommend you be conservative with your numbers, you stick to provable facts and you keep your business plan template super simple. Don’t create a monster. Enjoy the process, it will be very rewarding.
Thank you for taking the time to read my article on creating a Business Plan Template – as it pertains to buying a business. My hope is that you will include all this information in your business plan (be it a doc, excel or powerpoint presentation) – it’s what a lender will want to see.
If you enjoyed reading this article and found it helpful and informative, please do take a moment to Comment & Share! Doing so really will help me get my message out to other people just like you, who are searching for such expert advice.