Business Succession: A Viable Alternative to Starting a New Company
An idea and a precise plan are essential for any start-up. However, you don’t always have to begin with a new business. Business succession can be a highly effective alternative to launching a new company. There are many compelling reasons to take over an existing business, and we provide a step-by-step guide for business succession.
What Is a Continuation Plan?
Whether you’re starting fresh or taking over an existing company, the requirements are the same. A business plan is a must, and for successors, it’s referred to as a continuation plan.
The continuation plan closely resembles that of a new start-up but has key differences. It involves detailing the business idea throughout its continuation and building upon the business already in operation. You’ll need to assess the market, competition, target audience, and internal structure before and after the takeover.
Key Aspects of a Continuation Plan
To create a solid continuation plan, you must outline the current business status and set clear goals for where you aim to take the business after the acquisition. Addressing these factors helps in aligning your vision and determining necessary changes.
Finding an Entrepreneur Willing to Transfer Their Business
There are various “successor exchanges” where entrepreneurs looking to pass on their businesses can connect with potential successors. We’ve compiled a list of the most popular platforms for you to explore.
Create a Financial Plan
Similar to the start-up checklist, creating a financial plan for your succession is crucial. Be sure to calculate acquisition costs and plan for potential risks. Download the Startup Kitchen Checklist for more insights.
Key Elements in a Continuation Plan
When crafting your continuation plan, detailed facts and figures become essential. You should include specifics like:
- Timeline for company transfer
- Purchase price
- Legal structure of the business after takeover
- Contingency plan for management in case of unforeseen absence (illness, accident)
As with any business plan, capital requirements, liquidity, and risk planning should be part of your financial projections.
Business Model and Products
In the continuation plan, you should provide a thorough analysis of the existing business model and product offerings. What should stay, and what needs to be changed? Consider the following:
- Which products/services already exist?
- Which products/services should be introduced post-acquisition?
- Which target audiences are served and which should be targeted after the takeover?
- Will pricing change?
- Are current supplier contracts adequate?
Market and Competitive Analysis
A comprehensive market and competitor analysis is vital for understanding where your company stands and how it can evolve post-acquisition. Key questions to address include:
- Will market volume change?
- How will the sales area evolve?
- Who are the competitors, and will new ones emerge?
- Will the marketing strategy change?
Personnel, Equipment, and Premises
Understanding the operational side of the business you’re acquiring is critical. Here’s what to consider:
- What’s the state of the premises? Do they need renovation?
- Are lease agreements long-term or flexible?
- Is the equipment sufficient for future needs? Any repairs or replacements needed?
- How many employees does the business currently have, and how many will be needed after the takeover?
Creating a Robust Continuation Plan
A well-crafted continuation plan requires diligent research and a critical approach to every aspect of the business. It will not only help you gain the trust of potential lenders but also provide a roadmap for managing the business post-acquisition.
Helpful Tools for Writing Your Continuation Plan
Writing a detailed continuation plan can be time-consuming. Using business plan software can help streamline the process. Check out our list of the top 5 business plan tools to get started.