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WebYou can search the web to find free templates to build your business plan. We discuss nine components of a model business plan here: Key partnerships Note the other WebSep 14, · We feature the best business plan software, to make it simple and easy to plan your business finances in order to present this information to a bank or investors WebAug 20, · Describe Your Services or Products. The business plan should have a section that explains the services or products that you’re offering. This is the part where WebJul 28, · 3. Secure financing for the business acquisition. Financial institutions typically provide 4- to year term loans to buy a business. They’re usually more WebBuying an existing business. When you are considering becoming a business owner, you have the option of buying an existing business or starting a new one. The option you ... read more
Step 1. Start narrowing those 1 billion search results by answering these 5 questions: What do you know how to do? What do you like to do? Do you like interacting with people all day? Or do you prefer working from home? What do you want from the business? Is it to build up an existing business so that you can sell it at a really high price? Are you buying an existing business for side income? What will you do in the business? Or, are you hoping to hire a manager and be relatively hands-off? How much time are you willing and able to commit to the business? What can you pay to buy a business? Make sure to check them out! Determine Your Budget and Financing Options Many of your answers to the questions in step 1 will help you to think about what your budget for buying a business should be and decide realistically what you can afford, taking into account that running a small business presents a set of financial risks.
So, what are they? There are generally 3 categories of financing used to buy a small business: Seller financing Business purchase loan Alternative financing 1. Seller financing from the business owner Sixty to ninety percent of small business loans involve some degree of seller financing. Business purchase loan from a bank Since a seller is unlikely to finance the entire purchase price, many folks who are buying an existing small business will consider taking out a loan to fund the difference. What about other types of bank loans? Alternative financing methods There are many reasons to explore alternative methods of financing including a lack of immediate funds for a down payment, poor credit, or simply because you want to diversify your financial obligations.
What does this mean for you? Lending platforms Technology has enabled new types of personal and business lending platforms. Friends and family Remember Apple was started in a garage? Step 3. Now what? How on earth do you buy a business? Another reason to make sure you do enough due diligence? People lie gasp! Stakeholders Those with a stake in the business include employees, a customer base, suppliers, landlords, financiers, etc. Legal Make sure to investigate if the business has had any lawsuits. Required seller disclosures Speaking of sellers not disclosing information, there are Federal laws that mandate certain disclosures by sellers.
So here are some other factors to nail down in your due diligence: Buying assets vs. business entity — Are you buying just the corporation, partnership, or LLC? Owner involvement — Is the owner willing to remain for a while after the sale to teach you the business? Key employees — Will they stay and under what conditions? Do you want them to stay on? Can you let them go? Taxes — What items might the business allow you to write off? For what taxes is the business liable? Insurance — What kind is required and what does the business currently have? Will you be able to take over the policy? How to evaluate a business to buy Determining a fair value or price at which to buy a small business is, like budgets, a bit of art and science.
Asset-based method — This is what it sounds like. The value is determined by adding up the value of all company assets. Asset value minus liabilities equals company value. Revenue Method — This method of valuation simply relies on taking the top-line revenue or gross sales and applying a multiplier to determine the maximum value of a small business. The multiplier can be less than one, or up to 2x typically. It will depend on the industry, economic environment, and business performance. Discounted Cash Flow DCF — DCF is one of the most heavily used methods to value a business. Alternatively, it uses other income streams such as net profit, earnings before taxes, operating profit, or earnings from a specific period only. These are then discounted at a rate reflecting the business risk.
Range of Values — This method combines each of the previous methodologies and tries to derive an agreed-upon valuation through triangulation. With this method, the business owner or buyer can add other factors that affect business value. Do numbers freak you out? Step 5: Create a Business Sale Agreement Drum roll, please. Following is a high-level outline of what should be in your sales agreement. Who is selling the business Who is buying the business What the business is — assets or entity, and what assets are included. Sales price — for assets such as inventory, equipment, and receivables.
Liabilities — who is responsible for pre-sale debts, lawsuits, liens, back taxes. Payment terms — deposit required, payment to be made at the closing, promissory note, other seller security. Liabilities — how they will be addressed and by whom Representations — seller and buyer Noncompete agreement — restrictions on the seller Seller agreement to stay on — doing what, when and for how long There are other legal clauses and language that will need to be in the agreement, but the above factors are some of the most important details to outline. Prev Post The 41 Essential Questions To Ask When Buying A Business. 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. 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. 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. 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. This protects the seller in case you decide buying the business is not for you after reviewing all the documents. Here are some of the must-have documents when doing due diligence in the process of considering whether to buy a business:. Businesses in certain industries, particularly highly regulated ones like food services and childcare, need a valid permit to stay open.
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. This certifies that the business is approved to operate in the state. 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. 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. 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 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. Half the fun of the decision to buy a business is all the stuff it comes with. This can be very revealing. If that client parts ways with the business, it could put a serious dent in the business's potential. Before buying a business, make sure to examine its past few years of financials, including:. Sales records and accounts receivable. Use the business's financials as an opportunity to analyze its income stream. 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.
You might be better off asking the seller to insure them or contact the customers themselves. 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. Make sure to critically analyze these aspects of the businesses, since their values will directly impact the cost of the business. 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.
Sites like whayne. com can be used to look up equipment and obtain price estimates. If you decide to go ahead, the sales agreement is what ties it all together. Tangible assets inventory, equipment, furniture, building. Intangible assets goodwill, brand value, etc. Intellectual property patents, copyrights, etc. Have a lawyer help you put this document together or, at the very least, review it carefully before you sign. 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.
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:. 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. The disadvantage of the earnings approach is that it relies on a prediction of future earnings, which may not be accurate. 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. 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 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. Once you and seller agree on a number, the next step in buying a business is to get the money. Here are some of the ways to finance a business acquisition:. This is more likely if you're buying a small business rather than a chain.
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. 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. 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.
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. 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. SBA loan. 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:. The true middle ground between the business model canvas and a traditional business plan is the one-page business plan.
This format is a simplified version of the traditional plan that focuses on the core aspects of your business. By starting with a one-page plan, you give yourself a minimal document to build from. You'll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance.
It holds all of the benefits of the single-page plan, including the potential to complete it in as little as minutes. However, it's even easier to convert into a full plan thanks to how heavily it's tied to your financials. The overall goal of Lean Planning isn't to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and remain stable through times of crisis. Ready to start writing your own plan but aren't sure where to start? Download our free business plan template that's been updated for This simple, modern, investor-approved business plan template is designed to make planning easy. It's a proven format that has helped over 1 million businesses write business plans for bank loans, funding pitches, business expansion, and even business sales.
It includes additional instructions for how to write each section and is formatted to be SBA-lender approved. All you need to do is fill in the blanks. How do you know what elements need to be included in your business plan, especially if you've never written one before? Looking at examples can help you visualize what a full, traditional plan looks like, so you know what you're aiming for before you get started. Here's how to get the most out of a sample business plan. You don't need to find an example business plan that's an exact fit for your business.
Your business location, target market, and even your particular product or service may not match up exactly with the plans in our gallery. But, you don't need an exact match for it to be helpful. Instead, look for a plan that's related to the type of business you're starting. For example, if you want to start a vegetarian restaurant, a plan for a steakhouse can be a great match. While the specifics of your actual startup will differ, the elements you'd want to include in your restaurant's business plan are likely to be very similar. Every startup and small business is unique, so you'll want to avoid copying an example business plan word for word. It just won't be as helpful, since each business is unique.
You want your plan to be a useful tool for starting a business —and getting funding if you need it. One of the key benefits of writing a business plan is simply going through the process. When you sit down to write, you'll naturally think through important pieces, like your startup costs, your target market , and any market analysis or research you'll need to do to be successful. You'll also look at where you stand among your competition and everyone has competition , and lay out your goals and the milestones you'll need to meet. Looking at an example business plan's financials section can be helpful because you can see what should be included, but take them with a grain of salt. Don't assume that financial projections for a sample company will fit your own small business.
If you're looking for more resources to help you get started, this guide on how to write a business plan is a good place to start. You can also download our free business plan template , or get started right away with LivePlan. Think about business planning as something you do often , rather than a document you create once and never look at again. If you take the time to write a plan that really fits your own company, it will be a better, more useful tool to grow your business. It should also make it easier to share your vision and strategy so everyone on your team is on the same page.
Keep in mind that businesses that use their plan as a management tool to help run their business grow 30 percent faster than those businesses that don't. For that to be true for your company, you'll think of a part of your business planning process as tracking your actual results against your financial forecast on a regular basis. If things are going well, your plan will help you think about how you can re-invest in your business. If you find that you're not meeting goals, you might need to adjust your budgets or your sales forecast.
Thinking about joining the club of 32 million small business owners by buying an established business? That certainly applies to the process of buying a small business. Becoming a business owner can be both an exciting and daunting prospect. The thing is, in order to get to your ribbon-cutting ceremony, you first have to go through several important steps that will ensure that you purchase your new business successfully. These 5 steps can serve as a roadmap to take you from where you are now — considering buying into a small business — to becoming a real live small business owner. Where do you start, then? Start narrowing those 1 billion search results by answering these 5 questions:. In addition to these 5 key questions, in our article 41 Essential Questions to Ask When Buying a Business , questions provide some ideas for what to think about before you start looking to buy a business.
But where, if not Google? Many of your answers to the questions in step 1 will help you to think about what your budget for buying a business should be and decide realistically what you can afford, taking into account that running a small business presents a set of financial risks. This is the first step in starting to think about how you will finance a business purchase. You will want to create a personal budget that takes into account how much you plan to spend on a business a down payment plus monthly payments , what kind of salary or income you hope to gain from the business, any income you will lose after leaving your current job, upcoming big expenses like a car purchase , business starting expenses, and so forth. Need more guidance in figuring out your financial situation? In the budgeting process, make sure you begin preparing financial information to present to a seller or bank who will want to determine your creditworthiness.
You can obtain your free credit reports here. Once you better understand your financial picture, you can turn your sights to financing options. Sixty to ninety percent of small business loans involve some degree of seller financing. With this type of funding, the business owner provides a loan to cover some or all of the purchase price. The buyer provides a down payment and pays the seller back with installment payments that include interest. This method of financing allows a lot more room for negotiation on financing terms such as the amount of down payment, interest rate, and monthly payments. Tip: The willingness of a seller to finance a sale, and the degree to which they are willing to finance you, is a good indicator of how much they believe in the business and how confident they are in its ability to generate enough cash flow, if not to pay you a big salary, at least to pay them back over several years.
Since a seller is unlikely to finance the entire purchase price, many folks who are buying an existing small business will consider taking out a loan to fund the difference. One of the most popular sources of loans to buy a business is the Small Business Association SBA loan program. The SBA provides a variety of government-backed loan programs to small businesses that are executed through approved banks and lenders. Contact your bank to find out if they are an SBA lender. If so, they can guide you through the requirements and the process. Tip: The Small Business Association provides a wealth of information, classes, and supportive resources for free that can assist you with buying an existing business.
The even have incentives for women businesses. In some cases, however, when the price paid is very close to the value of assets and equipment of the business, a bank may be willing to lend against the value of the business assets that are pledged as loan collateral. One other bank loan option, if you are sure about the viability of the small business you want to purchase, is a home equity loan. While somewhat risky, the advantage of these loans is that they typically have longer payback terms than personal loans. Tip 1: The SBA has a loan program specifically for women-owned businesses. You can find more information on it here.
The bank will know the business you are purchasing more intimately and so might be more receptive to lending. There are many reasons to explore alternative methods of financing including a lack of immediate funds for a down payment, poor credit, or simply because you want to diversify your financial obligations. A little-known secret is that the majority of business owners aka Baby Boomers do not plan their business exit, yet they expect the sale of their business to fund their retirement. Well, particularly, if you are planning on buying a small business with no money in the bank to commit, you might consider trying to buy out your current employer or targeting a company to buy where you can work while you buy out the owner.
Technology has enabled new types of personal and business lending platforms. These platforms offer an alternative to traditional banks. For more information on taking money out of your k, read this Investopedia article. We now live in a world of Go Fund Me and career entrepreneurship. Well, buying a business is a little like dating someone for a long time before putting a ring on their finger. As we said earlier, you need to do your research. Due diligence is a fancy word for research. Due diligence also affords you the time and opportunity to get to know the ins and outs of running your potential business before you sign on the dotted line. As they say, time is money.
The time you spend researching a small business for sale that has caught your interest will either save or earn you money down the road. According to Andrew Cagnetta, President of Transworld Business Advisors :. There are several critical factors to investigate when buying an existing business. We outline the major items to check off here. That means they have been running the business books according to their own rules. If the business has a bookkeeper or accountant, have them take you through the financials. Look for patterns in the financials such as increasing debt or increasing receivables that might signal trouble.
Are sales and net income growing or declining? Likewise, look for opportunities to better manage the financials once you take over to increase the value of your investment. Those with a stake in the business include employees, a customer base, suppliers, landlords, financiers, etc. Look at employee files including contracts, benefits, and compensation. Talk to employees to learn more about the business and identify issues. Talk to suppliers and assess if they are reliable. Most importantly, look at the customer base of the small business. This will be your bread and butter, what pays your bills.
Is the customer base growing or declining? What are customers saying on social media? What kind of reviews do they give? Make sure to investigate if the business has had any lawsuits. In addition, for any major contracts, you might want to have a lawyer review them to make sure they are sound. Other legal issues to watch out for include liens against property, business license requirements, regulatory and compliance requirements, and violations thereof. Speaking of sellers not disclosing information, there are Federal laws that mandate certain disclosures by sellers. So here are some other factors to nail down in your due diligence:. Feeling like you might need a checklist at this point? SCORE, a national organization that provides free mentoring to small business owners, has a downloadable checklist for what to investigate when buying a business.
You can download it here. Determining a fair value or price at which to buy a small business is, like budgets, a bit of art and science. For an in-depth guide to evaluating a business, we recommend you read our comprehensive guide here. In this guide, we outline the potential challenges of valuing a small business, and describe several different valuation methods, weighing the pros and cons of each. We also provide an example to use as a reference. SCORE provides free business mentors that can assist you with all aspects of buying and running a business including valuation. Drum roll, please. You do this by executing a business sale agreement.
The sale agreement should capture every detail of the sale so that the seller can transfer ownership to you on the closing date without issue. Yes, it sounds complicated and it is. This is because you want to protect yourself and make sure to cover all the potential risks in the agreement. If you have some degree of trust in the business owner and feel pretty confident about the transaction you can access templates for sale agreements from a variety of sources such as LawDepot. com , nolo. com , and LegalZoom. There are other legal clauses and language that will need to be in the agreement, but the above factors are some of the most important details to outline. In addition to the sale agreement, other legal documents will need to be drawn up including the promissory note for seller financing , a bill of sale, a lease assignment, and others.
Jen DuBois is a former corporate banker and management consultant with an MBA from London Business School. She has spent much of the last decade advising a wide variety of entrepreneurs and small businesses around the globe on business planning, business model validation, finance, strategy, and marketing. She also volunteers as a SCORE mentor working with entrepreneurs in her local community to launch their business ideas. Save my name, email, and website in this browser for the next time I comment. This site uses Akismet to reduce spam.
Learn how your comment data is processed. With concern to the budgeting section, is there an expert you can hire who can help you with that? It would probably be more safer to have an expert in the field to help out with creating budgets like that. Please enter your username or email address. You will receive a link to create a new password via email. Home Courses Blog Hub YouTube Sponsor Us Podcast Login. Home Learn How to Buy a Business: The Ultimate Guide
500+ Free business plan examples,I Want to Buy Business Plan – What's Next?
WebBuying an existing business. When you are considering becoming a business owner, you have the option of buying an existing business or starting a new one. The option you WebAug 20, · Describe Your Services or Products. The business plan should have a section that explains the services or products that you’re offering. This is the part where WebNov 28, · A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road WebYou can search the web to find free templates to build your business plan. We discuss nine components of a model business plan here: Key partnerships Note the other WebSep 14, · We feature the best business plan software, to make it simple and easy to plan your business finances in order to present this information to a bank or investors WebJul 28, · 3. Secure financing for the business acquisition. Financial institutions typically provide 4- to year term loans to buy a business. They’re usually more ... read more
You don't need to find an example business plan that's an exact fit for your business. How fast and for how much each type of inventory has sold in the past. You'll find that the plans in this library and most investor-approved business plans will include the following sections: Executive summary The executive summary is an overview of your business and your plans. Our shortest deadline option is 6 hours. You can also download our free business plan template , or get started right away with LivePlan. Bill of sale.
com can be used to look up equipment and obtain price estimates. You'll find that the plans in this library and most investor-approved business plans will include the following sections:. What's the best fit for your business? There are generally 3 categories of financing used to buy a small business: Seller financing Business purchase loan Alternative financing 1, where to buy a business plan. Like the rest of your financials, this can always be updated later on. Here are the things that make us a top business plan writing service:. Buy a business plan from the best experts in the sphere!
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