Preparing to Sell Your Business -
Writing the Buyer's Business Plan

Preparing to Sell Your Business - Writing the Buyer's Business Plan

In the last issue (#37), we discussed Preparing to Sell Your Business - Identifying Assets. This issue will discuss Preparing to Sell Your Business - Writing the Buyer's Business Plan.

A Favorite Famous Quote
"The very best financial presentation is one that's well
thought out and anticipates any questions ...
answering them in advance."  Nathan Collins

Preparing to Sell Your Business - Writing the Buyer's Business Plan

Ultimately, to secure financing for an acquisition, the buyer of your business will be required to write a business plan.  Although loan decisions are primarily driven by quantitative numbers regarding ratios between profitability and debt service requirements, to some extent lenders will judge the capabilities of the buyer based on qualitative aspects of the business plan submitted.  The prospective buyer is at a severe disadvantage in trying to accomplish that task because they don't really have a great handle on all the information required in the component aspects that comprise a business plan.

If you are interested in facilitating a smooth business sale transaction that is completed on a timely basis with minimal heartaches, writing the buyer's business plan before putting your business on the market is a great way to help assure success.

Selling a business is never easy, and the less prepared the seller is, the more painful and time-consuming the process will be.  Taking the time to write the buyer's business plan is an excellent step to help you mentally prepare for discussions with buyers.  It will help identify issues and obstacles that must be addressed as well as identify all the key benefits and positive selling points of acquiring your business.

Increase the efficiency of the business sale process

Because most buyers' questions are already answered in the presentation of the plan, the documentation created in the business plan helps facilitate a much faster transaction.  It enables you to spend much less time with buyers who would ultimately not be interested because the business plan provides enough information to enable them to determine their true level of interest.  For those who do have serious interest after reading the business plan, the buyer meetings will be much more productive.  With a pre-prepared business plan, it could be possible to expect to receive an offer after one meeting with a buyer.

Reduce the time required for financing approvals

In addition, once an offer has been received, the financing process will proceed much quicker and the likelihood of success is greatly improved because of the improved qualitative aspects of a business plan prepared by the seller.  It can take ... f..o..r..e..v..e..r ... for a buyer to write a business plan.  It is one of the longer lead time items in the process of buyers trying to obtain business acquisition financing.  During that period, you will be asked to contribute over and over as a buyer struggles to develop the required information for their business plan.  So you will be involved anyway, but it will be piecemeal.  On the other hand, a buyer editing a business plan prepared by the seller completes the process much sooner and the plan’s quality will be much better that the alternative buyer-prepared business plan.

Save time in due diligence

The seller-prepared business plan can also save significant time in the due diligence process.  In the course of writing the business plan, you will gather and organize information that is likely to be part of due diligence.  It will also help you and your advisors anticipate due diligence requests.  In fact, the business plan itself may answer many due diligence questions that might have been asked had there been no seller-prepared business plan.

Put yourself in the buyer's shoes.  Imagine how difficult it would be for you to write a business plan for your business if you had only seen information on paper and spent a few hours talking with the owner to try to understand it.  No one can write a business plan for your business faster or better than you.  This is the sizzle that sells the steak!  And there are tools to help.

Where to start?

The SBA has an interactive business plan website that automatically creates a Word document after you've entered the requested written information.  Take a look at this website: http://web.sba.gov/busplantemplate/BizPlanStart.cfm.  The table of contents for the template includes the following sections: Executive Summary, Business Description and Vision, Definition of the Market, Description of the Products and Services, Organization and Management, Marketing and Sales Strategy, Financial Management, and Appendices.  Each section provides further directions as to the type of information that should be considered for inclusion.

Also, the website http://www.business-plan.com/automate.html offers business plan software for under $100 and the webpage also reads, "The SBA in Washington D.C. evaluated ‘Automate Your Business Plan’ and requested software and book packages for use in their training programs throughout the U.S. By request of the SBA, our book, "Anatomy of Business Plan" (Ben Franklin Award - Best Business Book of the Year), was also condensed into SBA Publication MP-32, How to Write a Business Plan."  This is not an endorsement of the software, which we've never tried.  However, it may be a resource worthy of investigation.

Concentrate on the qualitative aspects of the business plan

One final thought: .....