acquiring a business plan

Business Acquisition Plan: What to Include in 2024 (+ Template)

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

A business acquisition plan is an important component of planning for an M&A transaction, regardless of whether you require external financing. A solid business acquisition plan should lay out the rationale for the investment, and how it will add value for the entity. In this article, FirmRoom takes a closer look at how these documents should be crafted.

Understanding Business Acquisition Plan

A business acquisition plan is a strategy document, which serves the purpose of a business plan for an M&A transaction.

It outlines the motives behind a transaction, profiles of the companies involved in the transaction, how the transaction will generate value for the entity which is driving it, how the two companies will be integrated, and how the merged company (or simply acquired company in the case of an investment firm acquiring a company) is expected to perform.

Reasons to Have a Business Acquisition Plan

An acquisition plan provides its users with a roadmap to making the transaction a success. Even before the transaction is initiated, it acts as a reminder to the sponsors, what they’re looking for, why they’re looking for it, and how they’re going to ensure that the transaction is a success.

In general terms, the reasons to have a business acquisition plan are:

Strategic alignment

The overriding goal of a business acquisition plan, as the opening text alludes to, is strategic alignment: ensuring that those undertaking the deal, for lack of a better expression, ‘stick to the plan’, around the motives and means for making the deal a success.

Valuation and pricing

The plan should include strategies and methodologies for valuing the target company. It should guide the deal participants on how to determine a fair value for the target, assess synergies, and estimate future financial returns. It also sets a limit on how much the company can extend itself financially for a deal to occur.

Financing and resource allocation

Financing (sources and uses of funds) is just one part of the resource allocation conundrum. The business acquisition plan also outlines the working capital needs, who works where, how expenditures are going to shift, what capital assets are required, and more.

Business Acquisition Plan Template

The insight that FirmRoom has gained from working with hundreds of companies on thousands of transaction, have been collated in a business acquisition plan template.

This provides a detailed roadmap of what should be included in an effective business acquisition plan, ensuring that its users have everything in place for the conclusion of a successful transaction.

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Creating a Business Acquisition Plan Step-by-Step

While developing a business acquisition plan is recommended, having an ineffective acquisition plan is worse than having none at all.

The document has to be watertight, creating no doubt in the reader’s mind about the benefits of an acquisition.

A strong business acquisition plan should make the reader think that it makes far more sense to go ahead with the transaction than for the company to continue in the status quo.

That being said, the following should only be seen as a rough step-by-step guide to putting together a business acquisition plan:

Strategy development

Best practice:

• Identify where the company wants to be in each of the next five years, possibly on a month-by-month basis, and how it plans to get there. See here for example.
• Identify the key performance indicators that need to be tracked to ensure that the company meets these objectives.
• Based on both of the above, ask whether an acquisition is a crucial part of the company achieving those objectives, before moving forward.

Identifying and evaluating target companies

• Understand where the companies that fit into the strategy will be found , and be thorough and objective in the search for them.
• Be realistic about the companies that can be acquired/merged with, including valuations ,  so as not to waste resources for other companies and your own.
• Remember that just because a company is the only one that’s available, it doesn’t mean that a transaction is a good idea.

Due Diligence

• Use technology ; any M&A practitioner that decides against using a sound technology platform for due diligence is doomed to failure.
• Adopt a mindset where due diligence is considered an investment in the acquisition, rather than a cost to your own company;
• Do not fall for the M&A acquirer’s fallacy of ‘we’ve come this far, so we can’t go back.’ If due diligence says the deal isn’t right, it isn’t.
• Begin the post-merger integration phase as soon as the deal begins to look like a realistic possibility (something which DealRoom is designed to cater for).

Deal structure and negotiation

• Leverage the findings of due diligence to create a more informed negotiation process.
• Remember that there will be back and forth with the seller, and they can be reasonably expected to overvalue their asset.
• Consider all market outcomes (i.e. downturns, current value of stock vs. future value, etc.) when creating an offer. Avoid irrational exuberance.

Post merger integration (PMI)

• Keep in mind at all times during the PMI phase that this is where most of the value can be generated and lost in a transaction.
• As mentioned, begin the process as soon as possible. If the transaction is visible on the horizon, you need to start thinking about its integration.
• Don’t write this off as a ‘soft’ or unnecessary part of the transaction - it won’t be soft when it impacts on your income statement.

Common mistakes to avoid when writing a business acquisition plan

Despite plenty of advice to the contrary, enthusiastic CXOs often write acquisition plans which fail to avoid the pitfalls.

These are among the most common:

Putting the acquisition before the strategy

The acquisition is part of the overall strategy, not the other way around. Companies that are approached by others about a deal, and then somehow convince themselves that there is a strong rationale for a deal, fall foul to this backwards logic.

Management hubris

M&A is an area ripe with management hubris (take a glance at Google Scholar at all the academic texts that link the two). That means management hubris inevitably finds its way into business acquisition plans. Avoid it at all costs - it’s a highly costly behavioural pattern for companies of all sizes.

Lack of detail

The business acquisition plan is a strategy document, not a marketing one. That is to say, it should break down in a step-by-step fashion how the deal will generate value. The more detailed the better. “Creating an outstanding organization” is great, but writing it in the business acquisition plan won’t add any value.

Business acquisition plan template

A business acquisition plan is a hugely worthwhile document that all M&A practitioners should write in order to discern the value of a transaction and how that value can be extracted. It is the business plan for an M&A transaction.

Get your free template below to receive guidelines on how to create the document and make it work for your transaction.

Frequently Asked Questions (FAQs)

Successful acquisition starts with a great plan

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How To Write an Acquisition Business Plan

In the world of business, acquiring another company is a bold move. It’s a venture filled with both opportunities and risks. To navigate this complex journey successfully, you need a well-structured acquisition business plan. This isn’t just any document; it’s your guiding star, your blueprint, and your key to making this business acquisition a triumphant success.

Acquiring a business is no small feat. It’s a defining moment in the life of any company, and the acquisition business plan is the compass that will lead you through this challenging journey. In this guide, we will not only emphasize the significance of having a comprehensive plan but also provide you with an in-depth understanding of the critical elements that should be present in your plan.

What is Acquisition Planning?

Acquisition planning is a structured process for identifying and acquiring goods or services to meet an organization’s needs. It is a critical part of the procurement process, as it helps to ensure that the organization gets the best value for its money.

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How to create an acquisition business plan step by step

Start with an executive summary.

The executive summary is like the opening scene of a blockbuster movie – it sets the tone and captures the audience’s attention. It’s a concise yet impactful overview of your acquisition strategy. This section serves as the very first impression potential investors and partners will have of your plan.

In your executive summary, include key highlights such as the purpose of the acquisition, the target business, and the expected benefits. Remember, it should be captivating, informative, and compelling.

Get to Know Your Company

In the ‘Get to Know Your Company’ section, you provide an extensive profile of your own organization. This is your opportunity to showcase your strengths, experience, and financial stability. It’s essentially the part where you introduce yourself before a crucial presentation.

Outline your company’s history, achievements, and expertise. Explain why your company is the right entity for this acquisition. Make sure to instill confidence in the minds of your readers and potential stakeholders.

Understand the Industry

An acquisition is not just about buying another company; it’s about entering a new landscape. Understanding the industry in which your target business operates is crucial.

Here, you need to delve deep into the industry. Share insights about market trends, potential for growth, and any challenges that might be on the horizon. This section serves as evidence that you’ve done your homework and are prepared for what lies ahead.

Evaluate the Target Business

Let’s talk about the business you plan to acquire. In this part of your business plan , it’s your chance to discuss the target business in detail. This includes its history, financial performance, and the assets it brings to the table.

Highlight the aspects of the target business that are promising, and also acknowledge where improvements can be made. This demonstrates your realistic approach and your clear vision for the future.

Lay Out Your Acquisition Strategy

This is where you outline your plan for acquiring the target business. Your strategy should include the deal structure, financing details, and a clear timeline. Explain how you intend to integrate the newly acquired business into your existing operations seamlessly.

In this section, it’s essential to exhibit your strategic thinking and your ability to execute the acquisition effectively.

Your Marketing and Sales Game Plan

Once the acquisition is complete, what’s your strategy for marketing and selling? How will you use this new addition to your portfolio to grow your customer base and, consequently, your revenue?

This part of your plan should outline your marketing and sales strategies post-acquisition. It’s the place to showcase your vision for the future and your ability to drive results.

Crunch the Numbers

This is where the hard numbers come into play. Provide detailed financial projections, including income statements, balance sheets, and cash flow forecasts. These projections should offer a clear picture of the expected financial benefits of the acquisition.

These figures are not just dry statistics; they are the financial backbone of your plan, demonstrating the potential return on investment.

Deal with Potential Risks

Every business venture comes with its share of risks. In this section, you should identify potential risks associated with the acquisition and explain how you plan to address them.

This shows your meticulousness and your commitment to risk mitigation, which is crucial for building trust and confidence among your stakeholders.

Navigate Legal and Regulatory Matters

Acquisitions often involve complex legal and regulatory matters. It’s essential to discuss these aspects in your plan. If there are compliance issues, explain in detail how you intend to address them.

This section assures your readers that you’re well-prepared to navigate the legal intricacies involved in the acquisition.

Meet the Team

A successful acquisition is a team effort. Introduce the key players involved in the acquisition and explain their roles. Highlight their experience, qualifications, and achievements.

By showcasing the strength of your team, you demonstrate that you have the right people in place to execute the plan effectively.

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Merger and acquisition business plan template.

Grab our Merger and Acquisition Business Plan Template to make your merger or acquisition journey smoother. This template is packed with key sections and detailed insights, ensuring you cover all aspects of your acquisition strategy. Let this template be your roadmap as you navigate the complexities of business acquisitions. Start your journey toward a triumphant merger or acquisition business plan today! Download M&A Business Plan Template

Optimizing a Business Acquisition Plan with Structured Processes

Crafting a business acquisition plan isn’t just about signing papers; it’s about blending smart strategies that supercharge success. By weaving organized methods into this plan, you’re making sure that the merging companies don’t just coexist but flourish together.

Making It Work Together

Think of it as putting puzzle pieces together. Show how a carefully planned approach isn’t just about buying a company; it’s about merging their ways of doing things into a cohesive strategy. This part is about combining different systems, rules, and methods smoothly.

Sharing the Secrets

Talk about finding and using the best ways of doing things from the company you’re acquiring. Explain how mixing their successful methods with yours makes everything run smoother and more efficiently.

One Size Fits All

Show why having a set way of doing things helps. Discuss how having consistent methods, from handling money to everyday tasks, helps the new company grow without unnecessary overlaps.

More Bang for Your Buck

Explain how having a well-thought-out plan gets you more than just a new company—it increases your profits too. Highlight how bringing in smart strategies boosts how well the business works and makes it stronger.

What Makes You Special

Talk about the advantage you have—the ability to look at different ways companies work. Explain how this helps you find and use the best ideas, making all your businesses better.

The Big Picture

Wrap it up by saying this plan isn’t just a bunch of papers—it’s a map to a successful future. It brings together the best parts of different companies, wipes out any problems, and sends everyone toward success.

In the concluding section of your plan, summarize the key points. Emphasize the potential for success that your acquisition business plan represents. Leave your readers with confidence in your approach and a sense of optimism about the future.

In conclusion, an acquisition business plan is more than just a document; it’s the heart and soul of your acquisition strategy. A meticulously crafted plan, like the one described here, can be your key to not only a successful acquisition but also a confident and prosperous future in the complex world of business acquisitions.

By following these steps and adding depth to each section of your plan, you can create a compelling narrative that instills trust and confidence in your stakeholders. This detailed roadmap will position you to excel in the intricate and rewarding realm of business acquisitions.

What is acquisition in business strategy?

An acquisition is a business deal where one company acquires and assumes control of another company. These transactions are a fundamental component of mergers and acquisitions (M&A), which represents a professional field in corporate law and finance centered on the acquisition, sale, and merging of businesses.

What is acquisition in business example?

An acquisition is a business deal in which one company obtains companies, organizations, or their assets in exchange for some form of consideration from another company. Examples of such transactions include Google’s purchase of Android for $50 million in 2005 and Pfizer’s acquisition of Warner-Lambert for $90 billion in 2000.

How do I prepare my business for acquisition?

• Perform an internal audit.
• Establish a well-organized company structure.
• Tidy up your financial statements.
• Renew your most crucial contracts.
• Create a strategic plan for the next five years.
• Address any pending legal and tax matters.
• Optimize your business operations.
• Ensure you have a top-notch team in position.

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The six types of successful acquisitions

There is no magic formula to make acquisitions successful. Like any other business process, they are not inherently good or bad, just as marketing and R&D aren’t. Each deal must have its own strategic logic. In our experience, acquirers in the most successful deals have specific, well-articulated value creation ideas going in. For less successful deals, the strategic rationales—such as pursuing international scale, filling portfolio gaps, or building a third leg of the portfolio—tend to be vague.

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Empirical analysis of specific acquisition strategies offers limited insight, largely because of the wide variety of types and sizes of acquisitions and the lack of an objective way to classify them by strategy. What’s more, the stated strategy may not even be the real one: companies typically talk up all kinds of strategic benefits from acquisitions that are really entirely about cost cutting. In the absence of empirical research, our suggestions for strategies that create value reflect our acquisitions work with companies.

In our experience, the strategic rationale for an acquisition that creates value typically conforms to at least one of the following six archetypes: improving the performance of the target company, removing excess capacity from an industry, creating market access for products, acquiring skills or technologies more quickly or at lower cost than they could be built in-house, exploiting a business’s industry-specific scalability, and picking winners early and helping them develop their businesses.

Six archetypes

An acquisition’s strategic rationale should be a specific articulation of one of these archetypes, not a vague concept like growth or strategic positioning, which may be important but must be translated into something more tangible. Furthermore, even if your acquisition is based on one of the archetypes below, it won’t create value if you overpay.

Improve the target company’s performance

Improving the performance of the target company is one of the most common value-creating acquisition strategies. Put simply, you buy a company and radically reduce costs to improve margins and cash flows. In some cases, the acquirer may also take steps to accelerate revenue growth.

Pursuing this strategy is what the best private-equity firms do. Among successful private-equity acquisitions in which a target company was bought, improved, and sold, with no additional acquisitions along the way, operating-profit margins increased by an average of about 2.5 percentage points more than those at peer companies during the same period. 1 1. Viral V. Acharya, Moritz Hahn, and Conor Kehoe, “Corporate governance and value creation: Evidence from private equity,” Social Science Research Network working paper, February 19, 2010. This means that many of the transactions increased operating-profit margins even more.

Keep in mind that it is easier to improve the performance of a company with low margins and low returns on invested capital (ROIC) than that of a high-margin, high-ROIC company. Consider a target company with a 6 percent operating-profit margin. Reducing costs by three percentage points, to 91 percent of revenues, from 94 percent, increases the margin to 9 percent and could lead to a 50 percent increase in the company’s value. In contrast, if the operating-profit margin of a company is 30 percent, increasing its value by 50 percent requires increasing the margin to 45 percent. Costs would need to decline from 70 percent of revenues to 55 percent, a 21 percent reduction in the cost base. That might not be reasonable to expect.

Consolidate to remove excess capacity from industry

As industries mature, they typically develop excess capacity. In chemicals, for example, companies are constantly looking for ways to get more production out of their plants, even as new competitors, such as Saudi Arabia in petrochemicals, continue to enter the industry.

The combination of higher production from existing capacity and new capacity from recent entrants often generates more supply than demand. It is in no individual competitor’s interest to shut a plant, however. Companies often find it easier to shut plants across the larger combined entity resulting from an acquisition than to shut their least productive plants without one and end up with a smaller company.

Reducing excess in an industry can also extend to less tangible forms of capacity. Consolidation in the pharmaceutical industry, for example, has significantly reduced the capacity of the sales force as the product portfolios of merged companies change and they rethink how to interact with doctors. Pharmaceutical companies have also significantly reduced their R&D capacity as they found more productive ways to conduct research and pruned their portfolios of development projects.

While there is substantial value to be created from removing excess capacity, as in most M&A activity the bulk of the value often accrues to the seller’s shareholders, not the buyer’s. In addition, all the other competitors in the industry may benefit from the capacity reduction without having to take any action of their own (the free-rider problem).

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Accelerate market access for the target’s (or buyer’s) products.

Often, relatively small companies with innovative products have difficulty reaching the entire potential market for their products. Small pharmaceutical companies, for example, typically lack the large sales forces required to cultivate relationships with the many doctors they need to promote their products. Bigger pharmaceutical companies sometimes purchase these smaller companies and use their own large-scale sales forces to accelerate the sales of the smaller companies’ products.

IBM, for instance, has pursued this strategy in its software business. Between 2010 and 2013, IBM acquired 43 companies for an average of $350 million each. By pushing the products of these companies through IBM’s global sales force, IBM estimated that it was able to substantially accelerate the acquired companies’ revenues, sometimes by more than 40 percent in the first two years after each acquisition. 2 2. IBM investor briefing 2014, ibm.com.

In some cases, the target can also help accelerate the acquirer’s revenue growth. In Procter & Gamble’s acquisition of Gillette, the combined company benefited because P&G had stronger sales in some emerging markets, Gillette in others. Working together, they introduced their products into new markets much more quickly.

Get skills or technologies faster or at lower cost than they can be built

Many technology-based companies buy other companies that have the technologies they need to enhance their own products. They do this because they can acquire the technology more quickly than developing it themselves, avoid royalty payments on patented technologies, and keep the technology away from competitors.

For example, Apple bought Siri (the automated personal assistant) in 2010 to enhance its iPhones. More recently, in 2014, Apple purchased Novauris Technologies, a speech-recognition-technology company, to further enhance Siri’s capabilities. In 2014, Apple also purchased Beats Electronics, which had recently launched a music-streaming service. One reason for the acquisition was to quickly offer its customers a music-streaming service, as the market was moving away from Apple’s iTunes business model of purchasing and downloading music.

Cisco Systems, the network product and services company (with $49 billion in revenue in 2013), used acquisitions of key technologies to assemble a broad line of network-solution products during the frenzied Internet growth period. From 1993 to 2001, Cisco acquired 71 companies, at an average price of approximately $350 million. Cisco’s sales increased from $650 million in 1993 to $22 billion in 2001, with nearly 40 percent of its 2001 revenue coming directly from these acquisitions. By 2009, Cisco had more than $36 billion in revenues and a market cap of approximately $150 billion.

Exploit a business’s industry-specific scalability

Economies of scale are often cited as a key source of value creation in M&A. While they can be, you have to be very careful in justifying an acquisition by economies of scale, especially for large acquisitions. That’s because large companies are often already operating at scale. If two large companies are already operating that way, combining them will not likely lead to lower unit costs. Take United Parcel Service and FedEx, as a hypothetical example. They already have some of the largest airline fleets in the world and operate them very efficiently. If they were to combine, it’s unlikely that there would be substantial savings in their flight operations.

Economies of scale can be important sources of value in acquisitions when the unit of incremental capacity is large or when a larger company buys a subscale company. For example, the cost to develop a new car platform is enormous, so auto companies try to minimize the number of platforms they need. The combination of Volkswagen, Audi, and Porsche allows all three companies to share some platforms. For example, the VW Toureg, Audi Q7, and Porsche Cayenne are all based on the same underlying platform.

Some economies of scale are found in purchasing, especially when there are a small number of buyers in a market with differentiated products. An example is the market for television programming in the United States. Only a handful of cable companies, satellite-television companies, and telephone companies purchase all the television programming. As a result, the largest purchasers have substantial bargaining power and can achieve the lowest prices.

While economies of scale can be a significant source of acquisition value creation, rarely are generic economies of scale, like back-office savings, significant enough to justify an acquisition. Economies of scale must be unique to be large enough to justify an acquisition.

Pick winners early and help them develop their businesses

The final winning strategy involves making acquisitions early in the life cycle of a new industry or product line, long before most others recognize that it will grow significantly. Johnson & Johnson pursued this strategy in its early acquisitions of medical-device businesses. J&J purchased orthopedic-device manufacturer DePuy in 1998, when DePuy had $900 million of revenues. By 2010, DePuy’s revenues had grown to $5.6 billion, an annual growth rate of about 17 percent. (In 2011, J&J purchased Synthes, another orthopedic-device manufacturer, so more recent revenue numbers are not comparable.) This acquisition strategy requires a disciplined approach by management in three dimensions. First, you must be willing to make investments early, long before your competitors and the market see the industry’s or company’s potential. Second, you need to make multiple bets and to expect that some will fail. Third, you need the skills and patience to nurture the acquired businesses.

Harder strategies

Beyond the six main acquisition strategies we’ve explored, a handful of others can create value, though in our experience they do so relatively rarely.

Roll-up strategy

Roll-up strategies consolidate highly fragmented markets where the current competitors are too small to achieve scale economies. Beginning in the 1960s, Service Corporation International, for instance, grew from a single funeral home in Houston to more than 1,400 funeral homes and cemeteries in 2008. Similarly, Clear Channel Communications rolled up the US market for radio stations, eventually owning more than 900.

This strategy works when businesses as a group can realize substantial cost savings or achieve higher revenues than individual businesses can. Service Corporation’s funeral homes in a given city can share vehicles, purchasing, and back-office operations, for example. They can also coordinate advertising across a city to reduce costs and raise revenues.

Size is not what creates a successful roll-up; what matters is the right kind of size. For Service Corporation, multiple locations in individual cities have been more important than many branches spread over many cities, because the cost savings (such as sharing vehicles) can be realized only if the branches are near one another. Roll-up strategies are hard to disguise, so they invite copycats. As others tried to imitate Service Corporation’s strategy, prices for some funeral homes were eventually bid up to levels that made additional acquisitions uneconomic.

Consolidate to improve competitive behavior

Many executives in highly competitive industries hope consolidation will lead competitors to focus less on price competition, thereby improving the ROIC of the industry. The evidence shows, however, that unless it consolidates to just three or four companies and can keep out new entrants, pricing behavior doesn’t change: smaller businesses or new entrants often have an incentive to gain share through lower prices. So in an industry with, say, ten companies, lots of deals must be done before the basis of competition changes.

Enter into a transformational merger

A commonly mentioned reason for an acquisition or merger is the desire to transform one or both companies. Transformational mergers are rare, however, because the circumstances have to be just right, and the management team needs to execute the strategy well.

Transformational mergers can best be described by example. One of the world’s leading pharmaceutical companies, Switzerland’s Novartis, was formed in 1996 by the $30 billion merger of Ciba-Geigy and Sandoz. But this merger was much more than a simple combination of businesses: under the leadership of the new CEO, Daniel Vasella, Ciba-Geigy and Sandoz were transformed into an entirely new company. Using the merger as a catalyst for change, Vasella and his management team not only captured $1.4 billion in cost synergies but also redefined the company’s mission, strategy, portfolio, and organization, as well as all key processes, from research to sales. In every area, there was no automatic choice for either the Ciba or the Sandoz way of doing things; instead, the organization made a systematic effort to find the best way.

Novartis shifted its strategic focus to innovation in its life sciences business (pharmaceuticals, nutrition, and products for agriculture) and spun off the $7 billion Ciba Specialty Chemicals business in 1997. Organizational changes included structuring R&D worldwide by therapeutic rather than geographic area, enabling Novartis to build a world-leading oncology franchise.

Across all departments and management layers, Novartis created a strong performance-oriented culture supported by shifting from a seniority- to a performance-based compensation system for managers.

The final way to create value from an acquisition is to buy cheap—in other words, at a price below a company’s intrinsic value. In our experience, however, such opportunities are rare and relatively small. Nonetheless, although market values revert to intrinsic values over longer periods, there can be brief moments when the two fall out of alignment. Markets, for example, sometimes overreact to negative news, such as a criminal investigation of an executive or the failure of a single product in a portfolio with many strong ones.

Such moments are less rare in cyclical industries, where assets are often undervalued at the bottom of a cycle. Comparing actual market valuations with intrinsic values based on a “perfect foresight” model, we found that companies in cyclical industries could more than double their shareholder returns (relative to actual returns) if they acquired assets at the bottom of a cycle and sold at the top. 3 3. Marco de Heer and Timothy Koller, “ Valuing cyclical companies ,” McKinsey Quarterly , May 2000.

While markets do throw up occasional opportunities for companies to buy targets at levels below their intrinsic value, we haven’t seen many cases. To gain control of a target, acquirers must pay its shareholders a premium over the current market value. Although premiums can vary widely, the average ones for corporate control have been fairly stable: almost 30 percent of the preannouncement price of the target’s equity. For targets pursued by multiple acquirers, the premium rises dramatically, creating the so-called winner’s curse. If several companies evaluate a given target and all identify roughly the same potential synergies, the pursuer that overestimates them most will offer the highest price. Since it is based on an overestimation of the value to be created, the winner pays too much—and is ultimately a loser. 4 4. K. Rock, “Why new issues are underpriced,” Journal of Financial Economics , 1986, Volume 15, pp. 187–212. A related problem is hubris, or the tendency of the acquirer’s management to overstate its ability to capture performance improvements from the acquisition. 5 5. R. Roll, “The hubris hypothesis of corporate takeovers,” Journal of Business , 1986, Volume 59, Number 2, pp. 197–216.

Since market values can sometimes deviate from intrinsic ones, management must also beware the possibility that markets may be overvaluing a potential acquisition. Consider the stock market bubble during the late 1990s. Companies that merged with or acquired technology, media, or telecommunications businesses saw their share prices plummet when the market reverted to earlier levels. The possibility that a company might pay too much when the market is inflated deserves serious consideration, because M&A activity seems to rise following periods of strong market performance. If (and when) prices are artificially high, large improvements are necessary to justify an acquisition, even when the target can be purchased at no premium to market value.

By focusing on the types of acquisition strategies that have created value for acquirers in the past, managers can make it more likely that their acquisitions will create value for their shareholders.

Marc Goedhart is a senior expert in McKinsey’s Amsterdam office, Tim Koller is a partner in the New York office, and David Wessels, an alumnus of the New York office, is an adjunct professor of finance and director of executive education at the University of Pennsylvania’s Wharton School. This article, updated from the original, which was published in 2010, is excerpted from the sixth edition of Valuation: Measuring and Managing the Value of Companies , by Marc Goedhart, Tim Koller, and David Wessels (John Wiley & Sons, 2015).

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How to Write a Business Plan Outline

How to amend the business name on a court document, how to overcome corporate cultural issues in mergers & acquisitions.

• How to Write a Wedding Planning Business Plan
• Step-Ups in Valuation of Assets for a Newly Acquired Business

Many considerations come with a business acquisition. Not only do you have to consider the cost of the purchase, you have to consider how your business will integrate the newly purchased assets and utilize, or relieve, the employees that come along with the business. The business plan takes these and other acquisition considerations, along with their pros and cons, and organizes them into reusable research and analysis.

Create the business description for your business plan. List the legal business description of your business and indicate that your business is acquiring a business. Provide a detailed account of that business’ history, including staff size, location, legal business description and financial history. Identify the business’ short- and long-term goals and projections.

Create your business plan’s staffing section. List the managers and staff required to complete the business’ operations in a timely and efficient manner. Explain the functions of each manager and identify each of your business’ departments.

Identify the number of acquired employees and show how those employees will be integrated into the business. List the costs of all employment aspects, including costs, such as payroll, training, benefits and severance packages. Create an organizational chart to show the chain of command.

List the location of your business, as well as the locations of any acquired property. Explain how the properties are utilized by the business, as well as the costs for each. Include items such as zoning compliance fees, utilities and taxes in your expense list.

Show if the properties are owned, leased or rented. Address which properties will be retained and which will be released. Determine how your business will utilize the equipment and inventory acquired during the acquisition. Explain the steps that your business will use to control its losses and increase its assets.

Identify the external threats and opportunities that accompany the business acquisition. Look at areas such as customer demands, government regulation and industry competition. Research the identified areas thoroughly. Develop strategies to overcome the threats that accompany the acquisition and ascertain how your company will take advantage of its underlying opportunities.

Identify the products and services that your business will focus on after the acquisition. Categorize the original products and services against the newly acquired ones. Show and explain the costs and procedures of implementing the change requirements and merging the businesses. Identify any newly created products that result from the merge of company resources and identify any new equipment or inventory that will be required.

Identify the target market for your business. Explain how this market has changed as a result of the acquisition. Differentiate the market by separating it into categories of original, acquired and new markets. Address each category separately. Ascertain how your business will maintain its original customer base, and welcome its acquired and new customers.

Create financial statements for your business acquisition. Include personal financial statements for each owner of the business. Provide a balance sheet, income statement and cash flow statement for the business at a point just after the acquisition. Use realistic figures and assumptions when forecasting the business. Include complete financial statements for your original business and acquired business, for the past three years, to support and justify your forecasts.

Use the executive summary to introduce your business, along with the new products and services that result from the acquisition. Highlight your company’s various target markets and briefly review the trends within the industry. Review the reasons for the acquisition and explain how the acquisition will make your company stronger. Limit the executive summary to no more than three pages.

Include a copy of the acquisition contract in the appendix of your business plan, along with supporting documents, such as lease agreements, warranties and building appraisals. Begin the appendix with a content page. Label the documents accordingly and place the appendix at the end of your business plan.

• 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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Business Plan for Buying an Existing Business

Published Oct.18, 2023

Updated Apr.19, 2024

By: Alex Silensky

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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 Acquisition Plan Template

Our comprehensive template provides you with actionable insights on valuation metrics, due diligence checklists, synergy tracking, and much more. Plus, master SMART objectives, risk mitigation, and seamless integration—download now and navigate your acquisition with confidence.

What are the benefits of using this template?

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Export this template to Excel with just one click. Also, Import your Excel spreadsheet easily - turn it into a nice dealroom.net board.

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Track your projects progress from start to finish, know if a task is stuck or behind schedule.

Eliminate Excel trackers, emails and disconnected tools with DealRoom

Our "Business Plan for an Acquisition" template includes guidelines for creating a business plan in preparation for an acquisition. This template goes over categories such as:

• market analysis
• external environmental analysis
• acquisition plan
• financing plan
• integration plan

What Tasks does the 

What is due diligence.

Due diligence is a critical aspect of any deal that begins very early in the process and can continue right up until closing. During due diligence, the potential buyer asks questions and requests documentation from the seller that helps the buyer understand the target company and its business. These requests are usually general to start and become more specific as the buyer develops a greater understanding of the target. Buyers use the information provided by the seller to evaluate the opportunities and risks associated with the potential transaction. It is important for sellers to stay organized throughout the process. Buyers often submit thorough, detailed request lists that require input from numerous members of the seller’s deal team.

What is a due diligence checklist?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction. However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

What Questions Does the Master Due Diligence Questionnaire Include?

Key considerations when using our m&a due diligence template.

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

• Start 14-day Free Trial of DealRoom and sign-up
• Select a Master Due Diligence Template while creating a new room
• Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Can I change requests in this checklist or add new?

Every M&A process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.

Does this questionnaire provide all the necessary integration information?

This checklist was created by and for M&A professionals. It includes a comprehensive starting point for the integration process. However, every deal is different and may require additional requirements and tasks.

How to use this template with DealRoom?

• Select an Integration Template while creating a new workspace
• Start planning, assigning, adding to, and completing integration tasks. The Requests tab is automatically populated with the tasks from the integration template.

Download your free template by simply filling out the form below

Utilizing a checklist is just step one. In order to have a seamless process, M&A checklists need to be utilized with the proper deal workflow tool.

‍ Request a demo to learn how you can turn a checklist into an automated process and workflow with the DealRoom platform. With DealRoom, you can tackle any type of due diligence.

How DealRoom can help you execute due diligence

By using our master due diligence template, alongside DealRoom’s M&A lifecycle management software, you can create a smooth diligence process.

How DealRoom can help you execute integration

By using our integration template, alongside DealRoom's M&A lifecycle management software, you can create a smooth integration process

With this solution you’ll receive:

Professional template, a built-in data room, project management capabilities, collaboration tools.

Interested in utilizing this template with DealRoom's project management capabilities?

More templates, information technology m&a integration checklist, hr due diligence playbook, oil and gas due diligence playbook.

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• Overview of the M&A Process
• 10-Step M&A Process
• Structuring an M&A Deal
• Rival bidders in M&A
• Strategic vs Financial Buyers in M&A

Analyzing Mergers and Acquisitions

• Careers Involved in the M&A Process
• More M&A Transaction Resources

Mergers Acquisitions M&A Process

This guide outlines all the steps in the M&A process

Overview of the M&A Process

The mergers and acquisitions (M&A) process has many steps and can often take anywhere from 6 months to several years to complete. In this guide, we’ll outline the acquisition process from start to finish, describe the various types of acquisitions (strategic vs. financial buys), discuss the importance of synergies (hard and soft synergies), and identify transaction costs. To learn all about the M&A process, watch our free video course on mergers and acquisitions .

10-Step M&A Process

If you work in either investment banking or corporate development, you’ll need to develop an M&A deal process to follow. Investment bankers advise their clients (the CEO , CFO , and corporate development professionals) on the various M&A steps in this process.

A typical 10-step M&A deal process includes:

• Develop an acquisition strategy – Developing a good acquisition strategy revolves around the acquirer having a clear idea of what they expect to gain from making the acquisition – what their business purpose is for acquiring the target company (e.g., expand product lines or gain access to new markets)
• Set the M&A search criteria – Determining the key criteria for identifying potential target companies (e.g., profit margins, geographic location, or customer base)
• Search for potential acquisition targets – The acquirer uses their identified search criteria to look for and then evaluate potential target companies
• Begin acquisition planning – The acquirer makes contact with one or more companies that meet its search criteria and appear to offer good value; the purpose of initial conversations is to get more information and to see how amenable to a merger or acquisition the target company is
• Perform valuation analysis – Assuming initial contact and conversations go well, the acquirer asks the target company to provide substantial information (current financials, etc.) that will enable the acquirer to further evaluate the target, both as a business on its own and as a suitable acquisition target
• Negotiations – After producing several valuation models of the target company, the acquirer should have sufficient information to enable it to construct a reasonable offer; Once the initial offer has been presented, the two companies can negotiate terms in more detail
• M&A due diligence – Due diligence is an exhaustive process that begins when the offer has been accepted; due diligence aims to confirm or correct the acquirer’s assessment of the value of the target company by conducting a detailed examination and analysis of every aspect of the target company’s operations – its financial metrics, assets and liabilities, customers, human resources, etc.
• Purchase and sale contract – Assuming due diligence is completed with no major problems or concerns arising, the next step forward is executing a final contract for sale; the parties make a final decision on the type of purchase agreement, whether it is to be an asset purchase or share purchase
• Financing strategy for the acquisition – The acquirer will, of course, have explored financing options for the deal earlier, but the details of financing typically come together after the purchase and sale agreement has been signed
• Closing and integration of the acquisition – The acquisition deal closes, and management teams of the target and acquirer work together on the process of merging the two firms

Structuring an M&A Deal

One of the most complicated steps in the M&A process is properly structuring the deal. There are many factors to be considered, such as antitrust laws, securities regulations, corporate law, rival bidders, tax implications, accounting issues, market conditions, forms of financing, and specific negotiation points in the M&A deal itself. Important documents when structuring deals are the Term Sheet (used for raising money) and a Letter of Intent (LOI) which lays out the basic terms of the proposed deal.

To learn more, watch CFI’s free Corporate Finance 101 course .

Rival bidders in M&A

The vast majority of acquisitions are competitive or potentially competitive. Companies normally have to pay a “premium” to acquire the target company, and this means having to offer more than rival bidders. To justify paying more than rival bidders, the acquiring company needs to be able to do more with the acquisition than the other bidders in the M&A process can (i.e., generate more synergies or have a greater strategic rationale for the transaction).

Strategic vs Financial Buyers in M&A

In M&A deals, there are typically two types of acquirers: strategic and financial. Strategic acquirers are other companies, often direct competitors or companies operating in adjacent industries, such that the target company would fit in nicely with the acquirer’s core business. Financial buyers are institutional buyers, such as private equity firms, that are looking to own, but not directly operate the acquisition target. Financial buyers will often use leverage to finance the acquisition, performing a leveraged buyout (LBO) .

We discuss this in more detail in the M&A section of our Corporate Finance course .

One of the biggest steps in the M&A process is analyzing and valuing acquisition targets. This usually involves two steps: valuing the target on a standalone basis and valuing the potential synergies of the deal. To learn more about valuing the M&A target see our free guide on DCF models .

When it comes to valuing synergies, there are two types of synergies to consider: hard and soft. Hard synergies are direct cost savings to be realized after completing the merger and acquisition process. Hard synergies , also called operating or operational synergies, are benefits that are virtually sure to arise from the merger or acquisition – such as payroll savings that will come from eliminating redundant personnel between the acquirer and target companies.

Soft synergies , also called financial synergies, are revenue increases that the acquirer hopes to realize after the deal closes. They are “soft” because realizing these benefits is not as assured as the “hard” synergy cost savings. Learn more about the different types of synergies .

To learn more, check out CFI’s Introduction to Corporate Finance course .

Careers Involved in the M&A Process

The most common career paths to participate in M&A deals are investment banking and corporate development. Investment bankers advise their clients on either side of the acquisition, either the acquirer (buy-side) or the target (sell-side). The bankers work closely with the corporate development professionals at either company. The Corp Dev team at a company is like an in-house investment banking department and sometimes is referred to internally as the M&A team. They are responsible for managing the M&A process from start to finish.

To learn more, explore our  Interactive Career Map .

More M&A Transaction Resources

We hope this has been a helpful overview of the various steps in the M&A process. CFI has created many more useful resources to help you more thoroughly understand mergers and acquisitions. Among our most popular resources are the following articles:

• How to Get a Job in Investment Banking
• Why Investment Banking?
• M&A Project Names
• Deal Origination
• See all valuation resources
• See all equities resources
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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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How to Buy a Business: Everything You Need to Know

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Buying a business is a big decision — but when you pull the trigger on buying an existing business, you get the opportunity to become an entrepreneur without starting a small business completely from scratch. Every year, more than 500,000 businesses change hands, and that number is expected to skyrocket in the next several years as millions of baby boomers begin retiring and selling their businesses.

Buying an existing business is so popular because it lets you skip past some of the pain points and costs of starting a new business. But the journey from finding a business for sale to closing the deal can be long and complicated.

Before you begin the journey of buying a business of your own, find out everything you need to know to avoid buyer’s remorse. Our buying an existing business checklist will give you a step-by-step guide. We'll also cover the pros and cons of buying a business when you’re still just thinking about the idea, and end with how to buy a business when you're ready to close the deal and get the keys.

Buying an existing business checklist

If you’re set on the idea of buying a business, then it’s crucial to make sure you pick the right business for you . The easiest way to set yourself up for success is buying a business that you’re passionate about improving and taking to the next level. But passion alone isn’t enough — experience and knowing which questions to ask when buying a business are also important when making your choice.

Here is your buying an existing business checklist:

1. Figure out what type of business you want to buy

Narrow down your passions, interests, skills and experience. You’ll be happier if you buy a small business that dovetails with what you already like and have some experience in.

For example, if you’ve been a line cook at a restaurant for several years, maybe you’ve decided you’d like to own your own restaurant. Or maybe you’ve been an employee for a long time at a company that’s now on the market. In that case, who better to buy the business than someone who knows it as intimately as you?

Although you might just want to buy a business for the financials alone — by its expected return on investment — it’s also important to align yourself with the business's immaterial goals. After all, the more knowledgeable and familiar you are with the business's model, products or services, customers, industry and trends, the more innovative and successful your new ideas will be.

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.

2. Search for businesses that are for sale

There are plenty of ways to find the right business for sale that fits the criteria you’ve decided on. These include:

Online business marketplaces such as bizbuysell.com, the largest site of its kind with more than 45,000 active listings.

Craigslist ads.

Classified newspaper ads under the “Businesses for Sale” category.

Asking people in your network of small-business owners.

Going to meetups or industry conferences to ask other business professionals.

Working with a business broker.

Business brokers legally represent the seller, so you should be careful about conveying certain information to them (such as how far you’re willing to go in negotiations). However, a broker can help you understand what kind of business you want, prescreen businesses to cut out all the failing companies, keep negotiations civil and smart and help you with all the necessary paperwork. Brokers do earn a commission when a sale goes through, but it’s typically paid by the seller.

3. Understand why an existing business is up for sale

There are plenty of reasons a business owner might put their business up for sale, including something as simple as an innocuous lifestyle choice like retirement. Or, there might be a more worrisome reason, like a fundamental problem with the business. If you’re about to buy a business, you’ll want to know exactly why the businesses you're considering are no longer working for their current owners.

You should ask the current owners what challenges they've encountered, what they’ve done to try solving those problems and how those attempts fared. During every conversation with the current owner, you should ask yourself, “Do I have what it takes to meet these challenges with different or better solutions?”

Be on the lookout for:

A poorly conceptualized business plan (there’s just not a market for the product or service).

Competitors that are far ahead.

Existing business debts.

Location problems.

A brand issue.

Inventory difficulties (the cost of production is too high, low quality is losing the business customers, storage is difficult, there’s no supply and demand balance, etc.).

Bad equipment (it’s outdated and too expensive to upgrade).

Make sure you know as much as you can about the existing business's successes, failures, challenges and future opportunities. In addition to speaking with the owner about these concerns, also talk to existing customers, existing employees, locals in the area, neighboring businesses and so on. They’ll give you an honest view of how the business is doing, without the bias of the seller trying to convince you to buy.

4. Narrow in on a business that aligns with your budget, goals and resources

Until now, you might have been considering several different businesses, but now it's time to hone in on the best option. The best option is the business that aligns with your budget, goals and resources.

Calculating the ideal size, location, sales, staff and so on of your prospective business is an important step in your plan of buying a business, since it will give you a scale to keep in mind when you’re shopping around. Figure out how much you’d ideally want to change a business, and assess how much that will cost you.

Money isn’t the only thing you’ll be spending. Look at the time and energy commitments you’re planning to invest to make the business your own. Some managers prefer to be “on” at all times, in the weeds with their employees, while others prefer to delegate and, one day, own multiple businesses.

The amount of resources you’ll have to invest depends in large part on the people and processes already in place and on the experience you have in the industry. For example, if you’re buying a tech company but lack technical expertise, you’ll need to invest time learning the ropes or hiring people who have the experience.

5. Do your due diligence

Due diligence is the process of gathering as much information and intel as you can before buying a business, and it is a critical step in your journey to becoming a business owner. During this period, you should work with an accountant and lawyer to make sure you have all the information you need to move forward.

As the buyer, you’ll want to have a good accountant on your side to review the business's financials. It's also beneficial to have a good business attorney to represent you in negotiations and to help you understand how the transaction will be structured.

Before you can begin your due diligence, the seller will most likely ask for a signed confidentiality agreement or nondisclosure agreement. By signing, you agree not to disclose any confidential information about the business that’s uncovered during the due diligence process. This protects the seller in case you decide buying the business is not for you after reviewing all the documents.

There are many business documents, files, agreements and statements that you’ll want to collect and analyze, ideally with the help of a lawyer and accountant. Here are some of the must-have documents when doing due diligence in the process of considering whether to buy a business:

Business licenses and permits

First up is to make sure that the business you’re looking at has all the business licenses and permits it needs. If you’re buying a business, you want to make sure that the current owner hasn’t run afoul of any local business licensing laws. Businesses in certain industries, particularly highly regulated ones like food services and childcare, need a valid permit to stay open.

Organizational paperwork and certificate of good standing

If the business you’re buying is a sole proprietorship or partnership, there may not be official “founding” paperwork. However, a registered business entity, such as an LLC or corporation, will have organizational documents on file with the state. For an LLC, this is the articles of organization. For a corporation, this is the articles of incorporation.

The secretary of state in your state should also be able to produce a certificate of good standing for the business you’re interested in buying. This certifies that the business is approved to operate in the state.

Zoning laws

Check with your area’s local zoning laws to make sure that you're buying a business that isn’t violating any restrictions. While some localities allow mixed-use commercial and residential zoning, others have tight restrictions on where businesses can be located. This especially goes for businesses like bars and nightclubs that may not be desirable in a residential area.

Environmental regulations

Has this business been secretly dumping chemicals into the nearby reservoir or violating other environmental laws? Make sure the answer is a firm no before moving forward with buying the business. Double-check that this business abides by all of the area’s small business environmental regulations .

Letter of intent

As you move forward with buying a business, the seller issues a letter of intent, or LOI, to the buyer when both sides have agreed on a price point and about which business assets and liabilities will be included in the transaction. The price proposal, along with the terms and conditions of the business sale, should all be included in the seller’s LOI.

The LOI is an indication from the seller that they are serious about seeing the deal through to the end. Once you have it in hand, you can feel more comfortable forging ahead with the remainder of due diligence.

Contracts and leases

Half the fun of the decision to buy a business is all the stuff it comes with. Whether that means a lease for the location, equipment or something else, you’ll want to make sure the landlord is alright with transferring over these legal documents to your name. Otherwise, you’ll need to negotiate a new lease, which can significantly add to your expenses.

You’ll also want to review any outstanding agreements that the owner has with vendors or customers. This can be very revealing. For example, if your review indicates that 90% of the business's revenue comes from a single client, you’ll want to think twice before buying. If that client parts ways with the business, it could put a serious dent in the business's potential.

Business financials

Before buying a business, make sure to examine its past few years of financials, including:

Tax returns.

Balance sheets.

Cash flow statements.

Sales records and accounts receivable.

Accounts payable.

Debt disclosures.

Advertising costs.

Double-check that the tax returns and financial statements have passed an audit by a certified public accountant; don’t accept those financials from the sellers themselves.

Use the business's financials as an opportunity to analyze its income stream. The business you purchase doesn’t necessarily have to be profitable yet (particularly if it’s a young business), but there should be a clear path to profitability.

Be in the know on whether the business's debts and liabilities will be included in the transaction or not, and be wary of taking these on. For example, if some of the outstanding receivables the ex-owner was dealing with are too old — 90 days or more, for example — then they’ll be pretty tough for you to collect on. You might be better off asking the seller to insure them or contact the customers themselves.

Organizational chart

If you buy a business with employees, make sure you understand how they rank and relate to one another by asking for a business organizational chart. This should also include compensation data, management practices and processes, benefit plans, insurance and vacation policies.

Status of inventory, equipment, furniture and building

Make sure to critically analyze these aspects of the businesses, since their values will directly impact the cost of the business. You’ll want to check:

What’s on hand.

Its quality.

How sellable it is, both in terms of market viability and its condition.

How fast and for how much each type of inventory has sold in the past.

The present condition of equipment and furniture versus its original selling price.

Whether it was maintained well or needs repairs.

Whether the furniture will be useful to you or if you’ll need to replace it to be operational or for aesthetic reasons.

If you’ll need to make larger modifications to the building.

And other similar questions.

Sites like whayne.com can be used to look up equipment and obtain price estimates.

Other important documents

This list of documents will tell you a lot of information about the business, but there’s probably more you’ll want to examine. Your attorney or accountant should be able to identify additional documents specific to the business you’re interested in.

For example, ask the seller for property documents, equipment/asset listing, brand assets for advertising materials, an account of intellectual property assets, business insurance coverage, employee policies and contracts, incorporation information and customer lists.

Once due diligence comes to a close, you’ll need to make your final decision about whether buying the business is right for you. If you decide to go ahead, the sales agreement is what ties it all together.

The agreement will enumerate the final purchase price and everything you’re purchasing, including:

Tangible assets (inventory, equipment, furniture, building).

Intangible assets (goodwill, brand value, etc.).

Intellectual property (patents, copyrights, etc.).

Customer lists.

Have a lawyer help you put this document together or, at the very least, review it carefully before you sign.

6. Evaluate the price of the business with the earnings, assets or market approach

This is where many deals fall apart because buyers and sellers often place very different values on the same business, and several factors affect a business's value.

Buyers and sellers usually use some kind of pricing model to get a ballpark number and frame negotiations. During this process, it can be very helpful to call in an independent business valuation professional to make an objective determination of value. Valuation services, which can be found online or through word of mouth, cost around $3,000 to $5,000, but they can save you thousands more in the long run by coming up with a good estimate.

Whether you do this yourself or hire someone, it’s helpful to have some knowledge of different business valuation method s. To get some insight, we spoke with Mike Bilby, CPA and certified valuation analyst, at Concannon Miller.

Bilby said small businesses should understand three main approaches to valuing an existing company when they're considering how to buy a business:

Earnings approach

Best used for : buying existing businesses that are already turning a profit or have a positive forecast of earnings.

The earnings approach values a business based on its historical, current, and projected profits. Specific methods you may come across that fall into this approach include the capitalized earnings method and discounted cash flow method.

For businesses with a history of fairly stable profits, that history can be used to anticipate future earnings and value the business. Even if a business hasn’t generated a profit yet, earnings models can be used to predict how much the business might earn in the future. The disadvantage of the earnings approach is that it relies on a prediction of future earnings, which may not be accurate.

Assets approach

Best used for : buying capital-intensive businesses, such as manufacturing and transportation businesses, and businesses that aren’t profitable yet.

The assets approach measures the value of a business's tangible and intangible assets minus debts and liabilities. Tangible assets include things like equipment and real estate, and intangible assets include things like patents, trademarks and software. The assets approach considers the current fair-market value of the business's assets but also the future return on investment that the owner could get from those assets.

Market approach

Best used for : accounting for local factors or confirming a price that you arrived at based on one of the other two approaches.

The market approach measures the value of a business based on how much comparable businesses have sold for. It’s a good way to get a ballpark range for a business's value and to account for local factors that the other approaches may miss, such as the business's location in a particular neighborhood.

It might be confusing to get all these approaches straight in your head, but the point of all of them is to assess the current financial health of the business, as well as its growth potential. In reality, Bilby says, none of these methods exists in isolation. All three of these approaches can be used to arrive at a fair price for a business, and the final price will always be the one that both the buyer and the seller agree on.

7. Secure capital to make the purchase

Once you and seller agree on a number, the next step in buying a business is to get the money. There are a few different ways you can gather the capital you’ll need to purchase a business — some specific to buying an existing business, others pretty standard.

Here are some of the ways to finance a business acquisition:

Use personal or family money

If you’re able to cover the costs of buying an existing business, that’s always an option. This is more likely if you're buying a small business rather than a chain. Of course, you’ll want to consult your accountant before ponying up a large lump sum of your own cash. Also, make sure that you’re not using all your money buying a business because running a business takes capital, too.

Many businesses are also funded with money borrowed from family. If you go this route, you should understand the tax implications for gifts and family loans. Make sure that you and your family member put the exchange of money in writing and follow IRS rules for family loans.

Seller financing

Some sellers will agree to holding a note, or accepting staggered payments — sort of like a lender. This way, they get guaranteed income for the coming months (or years, depending on your plan).

There are rules around seller financing, particularly if you plan to use another form of debt financing as well. For example, sellers have to be on “standby” if you’re also getting an SBA loan, meaning they have to agree that they won’t be paid back until you pay off the SBA loan.

Some sellers might also be willing to trade in some assets, like some furniture they really loved or the company car, for a lower price.

By turning to a partnership instead of buying a business solo, you can divide the payments you’ll be making while still owning that company.

Taking on a partner when buying a business isn’t only useful to cut costs, though: You can also bring someone on board with more specific experience or a different skill set. Just don’t forget to draw up a partnership agreement, so co-ownership doesn’t cause any problems down the line.

Sell stock to employees

By selling company stock to your employees, you can get a big discount — making up 50% or even 90% of the business price by some measures. You’ll probably want to sell non-voting stock, if possible, to retain ownership over the business. In order to issue stock, you’ll have to organize the business (or re-organize it) as an S corporation or C corporation.

Start by leasing the business

It might be possible for you to lease the business instead of buying it outright — with the option to make the big purchase down the road once you’re able to afford it.

Understandably, not all sellers will be open to this option, since they more likely than not want to wash their hands and walk away from the sale. However, if leasing is something you’d be more comfortable with — even though it may cost more money in the long run — you might as well ask.

Debt financing

Buying a business will give you tons of documents to approach a bank or alternative lender with for financing: financial histories, tax returns, employee records, cash flow analyses, inventory and equipment valuations, and much more. This wealth of data makes business acquisitions a good candidate for loans because lenders aren’t working with a risky blank slate.

If you’re looking for a small-business loan , here are a few potential financing options that might help in buying a business:

Asset-based financing.

Getting a business acquisition loan is typically easier because the lender has a history to assess. But just like with any business loan, lenders will scrutinize all of the following:

Borrower’s personal credit score.

Business credit report and score.

Annual revenue.

Time in operation.

Balance sheet.

Outstanding debts.

For term loans and SBA loans for when you buy a business, banks typically require buyers to put down a 20% to 25% down payment on acquisition loans. However, the SBA recently made some changes that make it easier for buyers to obtain SBA 7(a) loans for buying a business. Now, the SBA requires the buyer to put down just 10%, and only half of that (5%) has to come from the buyer's own cash. The rest can come in the form of a seller's note as long as the seller agrees to be on full standby — meaning that the seller won't be paid back on their note until after the bank is paid.

When getting a business acquisition loan to help with buying a business, you’ll also have to provide a formal business valuation (like we discussed before), explain your relevant experience, offer an updated business plan, and show financial projections for the business under your command. In short, you’ll want to tell a story of how you'll improve the business.

» MORE: Compare the best business acquisition loans

8. Close the deal with the appropriate documents

The last step in our buying an existing business checklist is to close the deal.

When you’ve finally found the right business, done your due diligence, agreed on a fair price and gathered the capital you need, make sure you (or a broker) have all of these documents, notes and agreements in place before you officially buy a business:

Bill of sale

When buying an existing business, this document will prove the actual sale of the business, officially transferring ownership of the business's assets from the seller to you.

Adjusted purchase price

This is the final count of the cost of your purchase, including all prorated expenses—like rent, utilities, and inventory.

If you’re taking over the business's lease, make sure your future landlord is in the know. On the other hand, if you’re negotiating a new lease, double-check that everyone understands its terms.

Vehicle documentation

Does the business you're buying come with any vehicles? If so, you might have to transfer ownership with the local DMV — make sure to get the right forms completed by the time of sale.

Patents, trademarks and copyrights

Similarly, when buying an existing business, all patents, trademarks, and copyrights might require certain forms to get transferred to you, the new owner.

Franchise paperwork

Check the SBA’s Consumer Guide to Buying a Franchise to see if you’ll need to file any franchise documents.

Non-compete agreement

It’s standard practice — and generally a good idea — to ask for a non-compete from the former owner. This way, the previous owner won’t set up a competing shop right across the street.

Consultation/employment agreement

This document should be drafted in the case that the seller is staying on as an employee. Make sure to file this agreement if so.

Asset acquisition statement

The IRS Form 8594 will list the assets you’ve acquired, and for how much. This document is pretty important in the "buying an existing business" checklist for your tax returns, so don’t forget it.

Bulk sale laws

Bulk sale laws have to do with the sale of business inventory and are designed to prevent business owners from evading creditors by transferring ownership of the business to someone else. To comply, prospective buyers usually have to notify the local tax or financial authority about the pending sale.

And that's everything you need to know about how to buy a small business. But knowing how to do it is one thing, knowing why you're doing it is another. So let's talk about reasons for buying a business.

LLC Formation

Reasons to buy a business

Buying a business is kind of like being in the market for a home. Although some people like the history and character that comes with an older home, others don’t want the baggage that can saddle an older home and prefer something turnkey. Similarly, there are plenty of advantages when you buy a business that’s already been around for a while, but there are drawbacks, as well.

Pros of buying a business

Proven business concept.

When launching a brand-new business, the bulk of your time will be spent on the planning phase. You’ll have to write a business plan and figure out how to turn that plan into a reality.

But when you buy a business that's already up and running, you’ll typically have all of this in place:

A building or office space.

Inventory and equipment.

An established brand and business brand identity (whether or not you want to change it, people know it).

Customer base.

Vendor and supplier base, plus manufacturing resources.

Existing employees who can share their knowledge and expertise.

Management processes and policies.

An understanding of your competition and market.

Granted, each of these things may not be in great condition, and the business might not be turning a profit yet. However, buying an existing business means it has some structure already in place, which will save you time upfront, letting you quickly see what you need to zero in on. Particularly if you’re testing a new market or entering an industry that you don’t have much experience in, zipping past the difficult startup phase can be a huge advantage.

Lower operating costs

One of the major benefits of buying a business is that the operating costs are lower. For example, startup costs for a brand-new restaurant can run upward of $450,000 for initial supplies, food and beverage, signage and a customized kitchen design. With an existing business, your initial operating costs are lower because — unless your acquisition is pretty atypical — many parts of the business are already in place and ready to go once you’re at the helm.

You don’t need to spend as much of your budget on hiring employees, developing marketing strategies or building a customer base because those come with the transaction. Instead, you can pour more cash into expanding the business and adapting it to your vision.

Easier to obtain financing

While the move to buy a business isn’t always a safe bet, lenders and investors see it as lower-risk than launching a new company. This is because there’s a history of financial performance that a lender or investor can use to gauge how the business has performed to date and to predict future performance. Plus, there’s also existing data around the company’s market position, competitors, brand recognition and customer base.

All this makes investors more likely to invest in the business and can make lenders more comfortable in giving you a business acquisition loan. The current owners can even participate in financing the transfer of ownership by giving you a loan.

Intellectual property is on the table

If your business-to-be has patented their products or has a copyrighted slogan or trademarked logo that wins over customers, then that intellectual property value will probably transfer over to you in the acquisition. That means when you buy a business, you sometimes buy more than what the eye can see.

This isn’t on the table with every business acquisition, but it could be critical if you’re dealing with something that you think could be expanded even more. What if you turned this small business into a national franchise? All of a sudden, that patent and copyright becomes a lot more valuable. Patents, copyrights and trademarks are often included in sales of software companies, tech businesses and creative businesses (e.g., music, design and art).

Cons of buying a business

Higher upfront purchasing costs.

By buying an existing business, you’ll be able to save money on operating costs, such as inventory and equipment. However, you’ll probably face some pretty sizable purchasing costs. In fact, those purchasing costs might be greater than what it would take you to start a new business.

That’s because, in addition to the obvious assets, you’re also buying ownership over the following:

Built-out brand.

Design work, from logo to store interior.

Business concept and plan.

Time, effort, and money spent testing out products.

Refined processes, procedures and policies.

Income stream (if the business is already profitable).

Assets and equipment.

Intellectual property, such as copyrights, patents and trademarks.

All of these items will be the subject of negotiations between the buyer and seller and factor into the final purchase price when buying an existing business.

Unfamiliarity with the details

If you’re buying a business you didn't start, you’ll understandably be a bit less familiar with its inner workings and the details of its products, processes, employees and financials than if you built the business yourself. This could be a bit of an obstacle, especially when you’re just starting out. This is especially true if you are entering an industry that you lack experience in. You’ll need to spend a lot of time learning the ropes, and prepare for the learning curve to be steep.

Risk of a hidden problem

As a prospective business buyer, you’ll go through a fairly intensive due diligence process, where you’ll gather information about the business and the current owner. But no matter how much information you uncover, you always run the risk of taking on an issue that you’re not aware of or that’s worse than it appeared. For example, equipment could be damaged, or the brand might have a bad reputation. Once you buy a business, you buy those issues, like it or not.

On a similar note...

How to Buy an Existing Business (7 Steps)

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March 29, 2022

This article is Tax Professional approved

Having your own business is great. Building one from scratch? Really hard. Which is why some entrepreneurs opt to buy an existing business outright. There are other reasons to buy a business too, like acquiring an up-and-coming competitor, or just building your investment portfolio.

I am the text that will be copied.

Whatever your reason, the process of buying a small business follows the same pattern. From finding and evaluating the right business, to closing the transaction, we’ll walk you through the whole process so you know what’s coming.

Step 1: Find a business to purchase

The first step is not just finding an available business, but finding one that’s worth buying. There’s plenty of businesses for sale. But ones with financial promise that actually hold your interest aren’t so common. You need to find a business that’s primed for profitability, and isn’t hiding any skeletons.

When you’re ready to buy a business you should look for these things:

• Positive cashflow (or a trajectory that shows potential)
• An industry you’re familiar with
• A diversity of customers (no one client should be more than 20% of revenue, roughly)
• A long-term growth plan
• A business that you could see yourself enjoying

Where to find a business to purchase

The wider your search, the more likely you are to find a gem. Don’t just stop looking when you’ve found a business that ticks all the boxes. Look in as many places as possible before you start ranking your favorites.

Some of the rocks you can turn over include:

• Online broker sites like BizBuySell
• Local business brokers
• Local attorneys
• Franchisors
• Existing small business owners in your ideal industry

Step 2: Value the business

Once you’ve identified a business you’re interested in, it’s time to figure out how much the business is worth. You’ll find plenty of sellers that overvalue their business, and it’s important to make sure you don’t overpay.

When valuing a business you have two options:

• Do it yourself
• Hire a professional

The problem with hiring a professional is it can be expensive—up to $5,000 or more. But if you’re not confident in your ability to make an objective assessment, we’d recommend this.

A business valuation is typically calculated through either business revenue, net income, or EBITDA . We can’t give just one answer about how to value a business , because each type of business is handled differently.

Step 3: Negotiate a purchase price

Once you’ve decided you want to move forward with a business acquisition and you think you have a good idea of what the business is worth, it’s time to negotiate the price. You’ll typically do this by making an unbinding offer, either written or verbal. If your offer is close to what the seller is willing to sell for, they will start negotiating with you.

With most business transactions, you’ll go back and forth, negotiating different purchase prices and terms before you come to a tentative agreement. These terms can be changed later if you find something during due diligence that changes your opinion on the company’s value.

As part of the negotiation, you’ll decide whether you want to purchase the assets of the business or if you want to make it a stock sale.

A stock sale is preferred by most sellers for tax purposes . In a stock sale you’ll be agreeing to take on any outstanding legal liability because the company operations will continue as is, just with a new owner. Some sellers will even give you a discount on the purchase price for agreeing to a stock sale.

Step 4: Submit a Letter of Intent (LOI)

Once you have a general idea of the terms and structure of the business purchase, you’ll submit a letter of intent . This is a letter that outlines everything you’ve previously negotiated, including the purchase price, and states your intent to buy the business. This is a non-binding agreement that just furthers the business acquisition process. It shows the seller you’re ready to commit and move forward in the process.

The letter of intent will also typically give you exclusive rights to buy the business for a time period, usually up to 90 days. This means that you’ll be the only one that can purchase the business during the time frame, and the seller has to act in good faith to close your transaction if you’re able to meet the terms of your LOI.

Step 5: Complete due diligence

When the LOI is signed by you and the seller, then you’ll get access to more information about the business. Typically, when you first show interest in purchasing a business you’ll get a basic overview of how the business is performing. But when you enter due diligence, you’ll get access to any financial or legal information that you feel is needed to close the transaction.

We suggest making sure you review the following documents, at a minimum, before you close:

• Organizational documents for the business (e.g. incorporation docs, certificates of good standing, business licenses, etc.)
• Previous 3 years of business tax returns
• Current year income statements, balance sheets, and cash flow statements
• Revenue broken out by customer for the last 3 years
• Information on existing business debt
• Customer lists with proprietary information blocked out as necessary
• Existing contracts—can these be assigned to the new owner?
• Commercial lease or other property documents
• Rent rolls if the property has tenants
• Uniform franchise disclosure document (if the business is a franchise)
• Employee and manager information
• Marketing and advertising materials
• Legal records for pending litigation, if any

Step 6: Obtain financing

During due diligence you should also be working on financing for the transaction. Most businesses are purchased with a combination of debt and equity, meaning you’ll come up with part of the purchase price and the rest through a loan. You’ve got lots of options here, including SBA loans , traditional bank loans, and using a Rollover for Business Startups (ROBS). If you have a strong 401K, going for a ROBS is the best solution, as you can finance the purchase without having to pay back debt or interest.

Before you enter due diligence you should know whether or not seller financing is an option, which could alleviate some of the financial burdens of finding a loan. Seller financing is a loan provided by the owner of the business instead of an outside lender. This typically takes a lot of documentation from you as the new business owner and from the business itself. That is why it’s important to work through this process during due diligence. You’ll want to make sure your lender is ready to fund when you need to close the transaction.

7. Close the transaction

If there were no surprises during due diligence, then it’s time to close the transaction. This is where you’ll draft a final purchase agreement and agree to every term of the deal with the seller.

You should always hire a lawyer to help you negotiate this part of the process. At the very least, they can review the purchase agreement to make sure you’re getting what you negotiated through the contract.

After both parties sign the purchase agreement, you’re ready to choose a closing date and have your lender fund the purchase. Your funds will typically go into escrow (meaning a bank or law firm will hold the money for sake keeping) on the day you’re supposed to close, until all documentation is final. Once both parties give their approval then the money will be given to the seller and you’ll own the business outright.

As soon as closing is finalized , you’ll need to apply for any necessary business licenses to make sure your business operations have a smooth transition. Some states will let you operate with the existing licenses during the transition period, but don’t let it slip out of your mind. If your business acquisition is a stock purchase then you may not have to worry about this at all since the business entity won’t change.

At some point, while jumping through legal hoops, you might have forgotten that you just became a small business owner. Congrats! Your new life awaits. And if your brand new business needs bookkeeping, Bench can help with that.

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Developing A Business Plan For An Acquisition

When the buyer of a company is preparing to make an acquisition he or she should begin to prepare a business plan on what they plan to do as the business is carried forward after the acquisition. This business plan for the acquisition should include the short-term and long-term goals, changes from the current business model, and the method for carrying out the transition.

Short-Term and Long-Term Goals

When you begin looking at a company it is usually because you believe there are some qualities that the company can add to your existing platform, or because there are some qualities that you can add to its existing platform. For example, one of the buyers looking at our client has extensive skills in developing websites, the client has the physical store in place but a very minimal amount of website development. It is important for the buyer so get his plans of development on paper regarding what he will do with the website and what changes he will make with the store itself.

Changes in the Business Model

If the buyer is planning on making any dramatic changes in the business model it could be very beneficial for him or her to get those changes on paper and run them past the selling party. The previous owners of the company may have some additional insight that could add value or a new perspective to the ideas of the buyer.

During the transition the buyer will need to outline the goals and the plans that will ensure the goals’ success. These will need to outlined in detail to help the buyer and management team stay on track and avoid getting caught up with the unimportant details of the day-to-day busy-work.

Once the buyer has this plan outlined and reviewed it is much easier to determine how profitable the organization can become as well as avoid paying much more than the business is worth to that individual buyer. If you need professionals to review your business plan , or if you would like Deal Capital’s professionals to assist you in the development your business plan contact us for more details on how we can assist you.

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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.

More From Forbes

How to maximize investment returns in commercial real estate.

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Matias Recchia is Co-Founder and CEO of Keyway , the AI- powered real estate investment manager.

In commercial real estate, investors monitor multiple financial metrics to assess the quality of an investment, such as capitalization rates, internal rates of return and cash-on-cash returns. These financial metrics are used to acquire, exit and value commercial real estate assets and measure their success. Investors want to maximize valuation upon the sale of an asset, but they’re not always sure how to drive investment returns through financial, strategic and technological enhancements.

Now, with the proliferation of artificial intelligence and machine learning, investors can automate manual tasks, aggregate public data and make data-driven decisions quickly and with fewer resources. This is something I've seen firsthand through my own company, which provides AI tools for real estate teams and investors. Let’s explore how investors can maximize their net operating income (NOI) in commercial real estate to increase the value of their underlying assets—and what they should know if they plan to use AI to help.

1. Strategic Acquisition

Location, location, location.

Choosing the right location is pivotal in real estate investment. High-demand areas with economic stability and rent growth, proximity to key amenities, transportation, central business districts and good schools are important to most buyers and tenants. Locating properties in these areas can help establish a foundation to drive valuations and rent yields higher. Investors should conduct market research to help identify neighborhoods and properties that have the potential for growth.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024, 2. financial levers.

NOI is a financial metric, so, naturally, pulling financial levers is one of the best ways to drive NOI. Before agreeing to acquire a commercial real estate property, conducting detailed financial due diligence is critical. This includes reviewing financial statements, scrubbing cash flow, calculating debt service coverage ratios and assessing cap rates. Investors should also consider potential economic shifts that could impact rent and property value, including interest rates and inflation.

While financial due diligence can mitigate risk before acquiring a property, ongoing financial analysis is also essential to drive profitability. Once you own a property, implement strict financial controls to stabilize and improve NOI. Review each line item of operating expenses, make energy-efficient upgrades and rightsize staff and service contracts. I also recommend evaluating current rent, assessing rent increases and evaluating other on-property revenue enhancement opportunities, such as parking, that could increase profitability.

3. Property Upgrades

Improving the condition of the property and optimizing space usage are two smart ways to help increase NOI. For example, investors can yield a higher NOI through direct physical improvements on the property. This can lead to higher rents, increased tenant satisfaction and lower turnover. What are some high-impact improvements? Consider updating the facade and signage, improving landscaping, offering modern and smart appliances, and modernizing common areas.

4. Risk Control

Protecting your commercial real estate investment is as important as operating your assets. You have to protect the value of your property from a legal and risk perspective. Conduct a deep legal review to ensure the property complies with all local ordinances, laws and codes. This includes the physical building; environmental, social and governance pursuits; and understanding how modifications might impact legal requirements.

Also, NOI can be adversely impacted if you don’t have robust risk management strategies in place. Consider whether your insurance protects against unforeseen losses, and regularly conduct compliance audits to ensure your property meets all regulatory requirements.

5. Exit Strategies

Investors often think about an exit prior to an acquisition. It’s never too early to start thinking about a potential sale of your commercial real estate asset. The foundational improvements you establish early can set the stage for NOI improvement over time, which ultimately will drive your exit valuation upon sale. While it’s challenging to time the market, investors can monitor local market trends with real-time data analytics.

Leveraging AI To Help

Simply put, if you want to use AI as a commercial real estate investor, you need an AI strategy. How are you using AI to acquire and manage properties? While pen and paper or spreadsheets might still be used by some investors, I believe the future is gravitating toward AI. Generative AI and machine learning can help investors with many of the tasks I've outlined above, including forecasting local market conditions; pricing rent based on property, neighborhood and broader market dynamics; reviewing and managing contracts and more.

However, commercial real estate companies and operators who are considering AI for their business should be aware of several key challenges. First, real estate data can be fragmented and incomplete. Therefore, ensure your data is clean and organized before relying on its outputs.

Second, test your AI analyses alongside traditional analytical methods to ensure your results are accurate. If there is a discrepancy, assess your AI solution, the underlying data or both.

Third, when choosing an AI solution, ensure the solution integrates seamlessly with your existing data sources and current platform. If you are using, or plan to use, an outsourced AI vendor, you should also ensure the AI vendor provides robust and comprehensive training and support. Your real estate team will only be able to leverage the AI solution seamlessly when they understand its comprehensive features.

Maximizing NOI in commercial real estate is not solely financial and managerial; shrewd investors can also leverage technology to gain a competitive edge. By adopting these strategies, investors can enhance the profitability and value of their real estate assets and maximize NOI—even in a competitive market.

The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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Hedge funds added bearish bets in Japanese stocks at the fastest pace in over five years for a week between Aug. 2 and Aug. 8, as the Nikkei on Aug. 5 faced the worst day for the index since Black Monday in 1987, Goldman Sachs said in a note on Friday.

I started obsessing over my son's school supply list. I realized I was just anxious about him starting middle school.

• When my son started middle school, I was worried he'd face bullying, drugs, and self-harm.
• I channeled my nervous energy into buying him the perfect school supplies.
• I eventually learned to let go of my anxiety and instead trust in my son.

As my son wrapped up fifth grade and graduated elementary school , an unfamiliar, anxious feeling descended upon me. I started to worry about my son's future and what he would soon face.

That future loomed like a long, dark tunnel ahead: middle school .

The transition would rip us from the world of playdates , crayons, and construction paper and thrust us into the big, bad world of adolescence.

I struggled with this transition for my son , and it took me some time to accept that I have little control over what happens next.

My memories of middle school colored my fears for my son

I remembered my own middle school years as both fun and fraught. I loved having new freedoms, like being dropped off at the mall with my friends unsupervised for an afternoon.

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But it was also a time of intensifying peer pressure . I began pulling away from my parents, making choices I hoped classmates would judge as "cool."

My peers could be ruthless, cutting down anyone who didn't conform to their standards. I wasn't bullied as badly as some, but I swallowed their proclamations and promises as truth. If I looked and acted just so , I'd be infinitely more valuable to the world.

In middle school, I jumped on an external validation treadmill that became very hard to get off, eventually losing touch with my own wants and needs. Ignoring myself for so long had lasting consequences into adulthood, like dating abusive partners and overdrinking.

I badly wanted to spare my son the suffering I endured.

Today's kids face even harder challenges than I did growing up

While my son seemed to have more self-confidence than I did back in the 80s, the world has changed, too. My daily news feed often sends me spiraling: cyber-bullying , vaping, fentanyl, and self-harm. Was that going to be my kid? How could I possibly keep him safe?

Sure, we helped him tackle the small challenges of elementary school: making it out the door on time, remembering to put his name on his schoolwork, and resolving playdate disagreements. But drugs and alcohol ? Porn and internet predators? How could he possibly be ready for all of that?

I longed for a way to crisis-proof my kid with self-esteem bubble wrap, ensuring he could somehow leave middle school with his sense of self intact.

I channeled my anxiety by trying to make things perfect for my kid

By August, anxiety over the unknowns ahead squeezed me like a scratchy, too-tight sweater. When I received the email with a recommended school supply list for the upcoming year, I pounced.

While I knew I couldn't forestall every landmine ahead , I could make sure he showed up to school with a fierce array of school supplies. I printed out the list and flew into action.

I researched pens (erasable! left-hand friendly! continuous flow ink!), locker shelves, and binders. The pile of boxes towering on my doorstep had me second-guessing my strategy — as did my husband's eyebrows, which raised higher and higher with each delivery truck. But my anxiety and uncertainty kept me clicking " Add to Cart ."

The night before school started, I sat in the living room unboxing, unpackaging, organizing, and arranging. With each swish, zip, and click of the binder rings, I sent out a silent prayer to the universe: May you be happy, safe, and free from adolescent angst and insecurity.

I need to rely on my kid to show me his needs

Maybe the prayers worked, or maybe he never needed them at all because two months into middle school, my son was thriving. He was making new friends easily and managing the increased workload better than I'd imagined possible. He was not the victim of any vicious bullying or inescapable peer-validation treadmills.

He was doing great — not because of some protective shield of perfectly tabbed binder folders I'd curated, but because of his resilience and resourcefulness. And most of the supplies I bought? They remained totally untouched.

I'd let the noise of the outside world and my own fears drown out the one person I needed to pay attention to most: my son.

Though there will be more twists and turns as we navigate teenagerhood, I learned my lessons from the Great School Supply Panic of 2022. There is no way to pen-proof my child against the challenges of adolescence .

All I can do is remember to be a parent who listens more closely to how her child is actually doing. I need to keep reminding him of who he is and try to enjoy the view from the passenger seat as he starts taking more of the wheel. (Theoretically, of course. There's no way I'm ready for the real thing.)

Watch: How a sheep wagon became one man's doomsday survival plan

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