How do I write a business plan for taking over an existing business?

A plan to buy a business differs from the plan for a start-up, because the target already has customers, staff, contracts and a financial history that you can examine. BDC describes a business plan as a roadmap for the business that helps you make a successful pitch to lenders, and says a professional plan can guide your actions, detail the steps to profitability and help you submit a successful funding application. If you are searching for how to write a buy a business plan, the approach below treats each step in the acquisition process as a source of material, and leaves the layout to whichever template you or your lender choose. BDC’s own template comes with a guide, instructions, a glossary and an example of a plan.

Start with what you can put in and what the bank will offer

BDC says that as negotiations start you will want to be clear about how much capital you can put toward the purchase, how much equity other investing partners can contribute and what terms your bank can offer. A funding section built on those three facts lets a lender see how the purchase fits your means. Where the figures are still estimates, label them as estimates and say what would settle them, such as a written indication from a lender.

Let due diligence write the business description

BDC says due diligence gives crucial information on a target’s finances, prospects and legal issues. Those three areas are the raw material for the plan’s description of the business: what it sells, to whom, how it has performed and what legal arrangements, such as leases, licences and permits, it depends on. BDC also asks whether the figures match the information you are getting from the owner and whether tax returns match the financial statements, and says to make sure key contracts, such as leases, regulatory agreements and customer contracts, can be assigned to you if necessary. Write from the records you have actually seen, and mark any item still waiting on the seller.

Address concentration and key people directly

BDC’s due diligence guidance asks whether most of the company’s sales come from a small number of customers, and whether the business relies heavily on one supplier. It also asks who is actually running the business day to day, whether the vendor or key employees, and what happens when the vendor leaves. Name these risks in the plan and say how you will respond, for example by meeting key employees or planning how to keep them, so a lender can test your answer. BDC also notes you may need to meet key employees to learn whether they see themselves continuing, and suggests asking to meet key suppliers, especially if there is high supplier concentration. It adds that if sales are trending downward and the vendor cannot convincingly explain why, you may need to rethink the transaction.

Say what you are buying: shares or assets

BDC states that purchasing shares comes with a very different set of responsibilities compared to purchasing assets. Your plan should say which structure you propose and what you have done about liabilities that come with it. BDC suggests searching the Personal Property Security Registry (the Register of Personal and Movable Real Rights in Quebec) for liens on the assets you are about to purchase, and getting an indemnity agreement from the seller for unforeseen liability arising for a period after the sale. A lender reading the plan can then see which protections you have asked for.

Show how you will run it after closing

BDC says you will need an integration plan to avoid missing essential steps, and that the first months after the acquisition are crucial to its success. In your plan, set out who takes over which responsibilities, what you will leave unchanged at first, and how you will communicate with staff and customers. BDC’s acquisition financing page says its advisory services can support merger and acquisition planning, including integration planning, change management and the future operating model. For a detailed timeline after closing, see writing a hundred-day plan for a newly acquired business.

• A funding section showing your capital, partners’ equity and the terms your bank can offer
• A description of the business drawn from the financial, commercial and legal records you reviewed
• A frank statement of customer, supplier and key-person dependence, with your response to each
• A list of assumptions you could not verify, and what you will do to verify them before closing
• An integration plan that covers the first months after you take over

Keep the plan honest and current

The plan will change as due diligence reveals more, so keep each version. Date your drafts, record which findings caused each change, and keep the supporting documents together. If a finding cuts against your plan, say so in the document rather than rewriting around it. Keep the plan to what you can support from documents you hold. See taking over a business after closing for what comes next.