Business Plan Basics

The best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support is to show them a great business plan. This is especially true for those who want to purchase a going-concern business. Even if you are expecting that the business seller will be financing part of the purchase price you will need to convince him/her of your credit-worthiness. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Your business plan is like your calling card, it will get you in the door where you'll have to convince business sellers, investors and loan officers that you can put your plan into action.
Once you have raised the money to buy, start or expand your business, your plan will serve as a road map for you. It is not a static document that you write once and put away. You will reference it often, making sure you stay focused and on track, and meet milestones you have set out. It will change and develop as your business evolves.


Do I need a Business Plan?

Not everyone who buys, starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a business seller or venture capitalist, you will certainly need a comprehensive business plan that is well thought out and contains sound business reasoning.

If you are approaching a banker for a loan to buy a business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favorably on your application if you have one.

Reasons for writing a business plan include:

Support a loan application to buy or start a business
Raise equity funding to expand a business
Define and fix objectives and programs to achieve those objectives
Create regular business review and course correction
Define a new or newly purchased business
Define agreements between partners
Set a value on a business for sale or legal purposes
Evaluate a new product line, promotion, or expansion

What's in a business plan?

A business plan should prove that your business will generate enough revenue to cover your expenses and make a satisfactory return for bankers or investors.

Executive Summary--features the highlights of your plan and sells your idea in two pages or less.
Company Summary--a factual description of your company, ownership, and history.
Products (or services or both)--describes your products and/or services and how they stand out from competitive products and services.
Market Analysis-provides a summary of your typical customers, competitive landscape, market size, and expected market growth.
Strategy and Implementation-describes how you will sell your product, how you will put your plan into action, and establishes milestones.
Management Summary-provides background on the management team, their experiences, and key accomplishments.
Financial Plan-contains key financials including sales, cash flow, and profits.


What makes a successful business plan?

A well thought out idea and strategy
Clear and concise writing so nothing is ambiguous
A clear and logical structure that show's that you know what you are doing
Illustrates management's ability to make the business a success
Shows realistic sales, expense and profitability projections

How do I write a business plan?

Sitting down looking at a blank computer screen as you prepare to start your business plan can be daunting. You may want to look at some alternatives that will make the process a bit easier.

Hire a Professional
A professional consultant will create the business plan for you, but you still have to be prepared to think through your business and understand the underlying concepts in your business idea. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business or business idea.

Use Business Planning Software
A good business planning software package will provide you with an outline for a well-developed, objective-based and professional business plan. Software packages will remove the problem of starting from scratch by structuring your plan for you. The software should ask you the right questions that will pull out the most important underlying concepts within your business idea.

Find The Right Business to Buy

So you're thinking of buying a profitable operating small business. Well, congratulations! Small business ownership and its operation can be one of the most financially rewarding and intellectually stimulating pursuits that you can follow in life. However, the actual process of purchasing an operating business is an extremely challenging and complicated undertaking and you'll want to be as fully prepared as you can be. You need to gather as much information as you can which will help you to find a suitable operating business for sale, to properly value the business, to successfully conduct negotiations, and finally, to actually close the deal and transfer ownership. The good news is that tens of thousands of small business sales occur every year with little or no real problems and the new owners and the sellers both realize their goals. But, you must be fully prepared and knowledgeable for this success to occur! In this article, I'll address the first aspect of finding a profitable operating business for sale; finding the right business for you!

The first step in this process is to find out whether or not you are truly a fully motivated buyer. Ask yourself these questions:
• Do you know what kind of business you want to buy?
• Are you "technically" qualified and experienced enough to run the business?
• Do you have the temperament to deal with fickle customers, demanding creditors, and difficult employees?
• Do you have the attention to detail that most businesses demand?
• Can you deal with the bookkeeping requirements of the business?
• Are you prepared to "eat, sleep, and drink" the business 24-hours a day, 7 days a week (because that's what it frequently takes)?
• Are you a good "people person" who can successfully deal with both customers and employees?

Next, you need to determine what your key reason is for buying and operating a business in addition to the obvious reason of making money:
• buying a job to earn a living
• buying prestige (many business owners are respected community leaders)
• eliminating competition if you already have a business
• buying a hobby or retirement occupation
• seeking self-fulfillment and control of your own destiny
• seeking an opportunity for a child or other family member

Now ask yourself, what is it that I really like to do, and what is it that I'm really good at? If you have determined that you are a truly motivated buyer and you know the reasons that you want to own and operate a business, then you should begin searching only for those businesses that match what you like to do and ones that match your skills, capabilities and knowledge.

Some good sources of information about businesses for sale include:
Newspaper classified advertising under Business Opportunities
Classified ads in the Business Opportunity section of your local or nearby major metropolitan newspaper remain as one of the best sources of locating businesses for sale, especially for businesses priced under $1 million. Most newspapers have a particular day of the week that features the most active day for these listings; usually the Sunday edition.
Newsletters of various kinds (in-house brokerage publications, regional and national independent publications, etc..)
There are various newsletter type publications throughout the country that collect various business for sale information to present to potential buyers. These newsletters are usually excellent sources of reasonably up-to-date information on a broad array of businesses for sale. These newsletters take the following general form:
• Local broker newsletters published by individual brokers that list only their listed businesses for sale.
• Regional and national newsletter publishers that combine many listings in a range of categories across regional and national markets.
Business brokers (most reputable ones are listed in the telephone yellow pages and with the national professional associations)
Business Brokers are also excellent sources of information regarding businesses for sale which they represent. Your local business broker should always be consulted when you're actively seeking a business for sale.
Word of mouth through friends, family, and colleagues from all walks of life
Word of mouth is probably one of the better ways to find out about a good business for sale, but it's also the most unreliable relative to conducting a specific search. However, this method shouldn't be ignored. In a way, it's like looking for a needle in a haystack; but it sometimes works very well. You just cannot sit back and let the information come to you. You should "put out the word" in your business, social, fraternal, and religious circles about your desire to purchase a business. If there are serious sellers in these groups, you may not know about it because of the need for confidentiality regarding a business for sale.
The Internet (but usually not under "business opportunities", but rather, "businesses for sale")
The Internet has become a great source of business listing information and is very useful in all parts of the country. To find information about businesses for sale just go to your favorite search engine, such as Yahoo.com, AskJeeves.com, or Google.com and conduct a key word search. The best key words are, "businesses for sale," "buy business," "sell business," or "buy sell business." It's usually best to use the advanced search capability on the search engines to better target the results you want.