Lets talk about plans for a business purchase. How do they differ from other plans? What do you need to take into account and what to prepare for?
When a person or a business is going for the acquisition of an existing business, the plan is indeed slightly different. The main difference here, as compared to the startup business plan for example, is that there is an existing business that already has assets, clients and revenues. When you are going to purchase an existing business, the structure of the business plan that we will need to create is going to be different in this significant way. The main difference will be expressed in the numerical aspect of the plan. The reason for this is that the financial forecasts in this case are not based on a startup stage. The forecasts will have a starting point that is based on the previous performance of the business.
The Plan Writing Process
We will begin by reviewing the recent financial statements of the business proceed to structure the financial forecast for the new operator based on those statements. From there on, it is very much the same as any other business plan, with some small differences in the details.
When you are buying an existing business, you will be essentially paying for two elements of investment. The first of those is what’s called the business’ assets. Essentially this means the material aspect of the purchase – the business’s equipment and renovation costs. The second element that comprises the purchase price is what’s known as the “goodwill”. This encompasses the fluid assets of the business at its current state, starting from inventory, through existing clientele and on to brand awareness and additional expenses that are not included in the business assets category.
In order to assure that the business purchase transaction is financed, we will be structuring a business plan that shows the lender exactly how you, the investor, intend to run the business. This will have to include basic expenses, business structure changes, and predicted growth.
The Business Appraisal Requirement
In case of existing business purchases, the lender will require to hire a business appraisal company that will appraise the business’ assets. The appraisal will determine the amount that the lender will be willing to finance. Depending on the lender you work with, the sum of financing can vary between 50% (bank) and 90% (if you are getting financing via a government program).
Another question we are asked often is whose responsibility will it be to set up the appraisal, connect to the other parties, such as the lawyers, accountants, etc?
This is a very valid question, and the answer is that if you work with BPE Business Plan Writers, you have all of those aspects covered by us.
What is Demanded of the Client for the Business Plan?
There is a checklist that we provide to our customers, listing all the documents that are needed and specifying which are needed at what stage of the application. We can start working as soon as you submit the first batch of documents on this checklist, providing you a preliminary assessment within 24 hours.
The next steps are the same ones typical to other business plan applications. We will create a draft, keeping you informed every step of the way, and proceed to produce a final result in short order once the draft is approved.
Once the process is complete, you will have a business plan in hard copy that you will be able to take to any lending institution or that we can submit on your behalf, with a professionally prepared presentation.