7 Topics to Cover During the Small Business Planning Stage
Author: Elliott Holland
Writing an effective business plan is an essential part of buying a business
Key Takeaways
Writing a business plan is a critical step when purchasing a small company
Including all the necessary information improves your chance of success
This plan should outline the business, its purpose, and its goals
You might need some assistance researching the company's finances
Writing a small business plan is an essential step before purchasing a company because it provides an overview of the organization's goals, strategies, and framework. You'll want to know where you're heading and how you'll get there before you invest, and this plan provides that information.
It’s advisable to determine the type of business plan you'll be writing before you begin. You can choose a mini plan, a working plan, or a presentation plan, and the type you select will depend on your business goals. Generally, you'll begin with a mini plan as a starting point and then develop a working plan if you have a serious interest in purchasing a particular business.
No matter the type of document you create, it should include some essential information. Here's a look at some small business planning topics you'll want to address before buying any company.
1. Company description
Writing a company description is a good start because it ensures you understand what the business does and where it fits into the marketplace. This section of your business plan will evaluate your ideal customers and how you can achieve your goals by selling your product or service to those individuals or organizations.
For instance, if you're buying a bakery, your ideal customers might be local restaurants that can use your products as part of their menu or grocery stores that will resell your creations. You might also want to attract early-morning commuters on their way to work with some breakfast and coffee offerings. The choice is up to you, but identifying what the company does and how you'll succeed is vital.
2. Market analysis
The next step is to write a market analysis where you'll identify your competitors, list their strengths and weaknesses, and evaluate their impact on your ability to succeed. Using the bakery example again, if a similar business already has contracts with your town's most popular restaurants, you might need to find a different route to success.
Every business has competition, so it's doubtful you'll uncover a niche without any obstacles in your area. However, your small business planning should map out how you'll find success despite your competition by creating a unique angle or market for selling your goods or services.
3. Organizational structure
Find out who already works for the company and what they do. Your business plan should outline your organizational structure while focusing on management and other key personnel. These people could be responsible for driving your success in the early days. They could also hold you back if they aren't suitable for their roles.
If possible, speak with team members about how decisions are made within the organization and if the current owners have an industry-specific background. The idea is to find out how much knowledge the existing management team has on the goods or services you'll be selling to determine if it's worth keeping them around.
4. Product or service review
You probably have an idea of the products or services the company sells before reaching this stage of your business plan, but you'll want to dig deeper to answer some questions:
What are you selling?
How is it better than what other small businesses offer?
Does your product or service uniquely benefit the customer?
Answering these questions helps you determine your place in the market and can make your decision on whether to buy the company easier. You can also examine the product's lifecycle and any additional products or services you plan to offer in this section.
5. Marketing strategy
Your small business plan should examine your marketing strategy. It is essential to explain how you intend to improve the company's existing market share, manage its growth, and communicate with customers. You can also explain how you'll distribute products or services.
Of course, the marketing strategy you'll use comes down to the company type and what works in your local area. This section of your marketing strategy should go in-depth on your plans for attracting new customers.
6. Executive summary
An executive summary is like an introduction to the business plan that provides vital information like a mission statement and an overview of your products and services. This section goes at the beginning of the document, but you'll probably want to write it last after you've gathered in-depth data on the organization.
Your executive summary might also highlight the company's past achievements, mention current clients, and summarize your plans for the future. The result is an easily scannable document providing a clear picture of the company.
7. Funding information
Your business plan could contain a funding request if you need financing to acquire the business. Self-funded businesses can also include some financial information in this section, including how much money you're budgeting to make the necessary changes to the company after buying it.
You'll also want to gather company financial statements that include all historical and projected financial information. These statements include balance sheets, cash flow statements, profit and loss statements, and projected cash flows in the coming years.
Due Diligence with an expert can help
Collecting and making sense of a business's financial data takes significant work, and many first-time buyers don't have the expertise necessary to handle the job. However, a due diligence expert can create a Quality of Earnings (QoE) report on the company in question, allowing you to proceed with confidence.
Guardian Due Diligence helps self-funded investors reach their goals by condensing a company's financial information into a QoE report. Your small business planning will benefit from this because you'll better understand how the company is doing financially. Visit the Guardian Due Diligence website to download a free QoE sample report.