In order to know where your business is going, you must have a business plan. Without one, it would be like attempting to drive to a location with no knowledge of how to get there. Besides being a guide, it must get the attention immediately of Venture Capitalists, Angel Investors or Bankers by being neat, accurate and organized.
You have decided you want to be a business owner, have found a business you like, have gone over the marketing package prepared by your business broker, and have met with the owners to view the business and get answers to your questions. The business seems to be a good fit for you, and you like what you have seen. At this point, most business owners expect an offer before giving you all of the detailed information of the business. It would be contingent on proof of everything presented to you when you conduct your due diligence.
A beautiful transition happens when the owner hands you the business plan for the business. If you are fortunate enough to receive that, you have something to follow as you prepare your business plan. Having the history of the business, along with the future plans, will save you lots of time. You can then look for ways to improve the business, writing your own plan. In most cases, you will not be so lucky. You will get the information together by going over the past financials and discussing the business with the owner. As you always want to find ways to improve the business you are purchasing, writing everything together in a business plan you can follow will start you on the road to success.
Whether you start with the current owner’s plan or start from scratch, it is best to write your own business plan so you will be able to defend it. There are lots of books and people to help you. A good place to get help and a good place to start is the Small Business Administration.
Probably the most difficult thing about writing a business plan is getting started. The Executive Summary is the first part and is basically a summary of the entire business plan. Many times, it is the only thing a Venture Capitalist, Angel Investor or banker reads. You must have a mission statement that tells why you are in business. You must have a purpose. You will be working to accomplish your purpose, so lots of thought must go into that so you will go in the right direction.
Some topics to include in your business plan are:
• Executive Summary
• Company Analysis
• Industry Analysis
• Customer Analysis
• Competitive Analysis
• Marketing Plan
• Operations Plan
• Management Team
• Financial Plan
Although this short article cannot give you enough information to write your business plan, it will likely give you an idea of what to expect and encourage you to get started.
It is important to look at what the company is selling. Is the product or service something that will be needed or wanted for years in the future. What brings customers to the business and why do they go to this business instead of a competitor? Is a large competitive chain going in down the street next year? It is important to do your homework. The chances are great that you are buying a profitable business with room to be more profitable, but do not just assume that is correct.
Many times, new business owners make the mistake of spending too much on marketing, mostly advertising. If you don’t have a certain amount in your budget for advertising and stick with it, you can easily spend more than you planned. It is an advantage when buying an ongoing business, as you have the history of marketing and the amount spent in each area. You can use that information to plan for the future.
When buying a business, you are buying the history. The pro forma financials will show what you plan to do to keep the business strong and improve it. You must instill confidence in those with whom you wish to get money. A good business plan will help you get money and help you reach your business goals; and if you have enough money and a powerful business plan, your chance of succeeding is very strong. Follow your business plan, grow your business, and when you get ready to sell, it will be worth much more than you paid and be a nice retirement fund.
