buying process in business plan

How to Buy an Existing Business (7 Steps)

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March 29, 2022

This article is Tax Professional approved

Having your own business is great. Building one from scratch? Really hard. Which is why some entrepreneurs opt to buy an existing business outright. There are other reasons to buy a business too, like acquiring an up-and-coming competitor, or just building your investment portfolio.

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Whatever your reason, the process of buying a small business follows the same pattern. From finding and evaluating the right business, to closing the transaction, we’ll walk you through the whole process so you know what’s coming.

Step 1: Find a business to purchase

The first step is not just finding an available business, but finding one that’s worth buying. There’s plenty of businesses for sale. But ones with financial promise that actually hold your interest aren’t so common. You need to find a business that’s primed for profitability, and isn’t hiding any skeletons.

When you’re ready to buy a business you should look for these things:

• Positive cashflow (or a trajectory that shows potential)
• An industry you’re familiar with
• A diversity of customers (no one client should be more than 20% of revenue, roughly)
• A long-term growth plan
• A business that you could see yourself enjoying

Where to find a business to purchase

The wider your search, the more likely you are to find a gem. Don’t just stop looking when you’ve found a business that ticks all the boxes. Look in as many places as possible before you start ranking your favorites.

Some of the rocks you can turn over include:

• Online broker sites like BizBuySell
• Local business brokers
• Local attorneys
• Franchisors
• Existing small business owners in your ideal industry

Step 2: Value the business

Once you’ve identified a business you’re interested in, it’s time to figure out how much the business is worth. You’ll find plenty of sellers that overvalue their business, and it’s important to make sure you don’t overpay.

When valuing a business you have two options:

• Do it yourself
• Hire a professional

The problem with hiring a professional is it can be expensive—up to $5,000 or more. But if you’re not confident in your ability to make an objective assessment, we’d recommend this.

A business valuation is typically calculated through either business revenue, net income, or EBITDA . We can’t give just one answer about how to value a business , because each type of business is handled differently.

Step 3: Negotiate a purchase price

Once you’ve decided you want to move forward with a business acquisition and you think you have a good idea of what the business is worth, it’s time to negotiate the price. You’ll typically do this by making an unbinding offer, either written or verbal. If your offer is close to what the seller is willing to sell for, they will start negotiating with you.

With most business transactions, you’ll go back and forth, negotiating different purchase prices and terms before you come to a tentative agreement. These terms can be changed later if you find something during due diligence that changes your opinion on the company’s value.

As part of the negotiation, you’ll decide whether you want to purchase the assets of the business or if you want to make it a stock sale.

A stock sale is preferred by most sellers for tax purposes . In a stock sale you’ll be agreeing to take on any outstanding legal liability because the company operations will continue as is, just with a new owner. Some sellers will even give you a discount on the purchase price for agreeing to a stock sale.

Step 4: Submit a Letter of Intent (LOI)

Once you have a general idea of the terms and structure of the business purchase, you’ll submit a letter of intent . This is a letter that outlines everything you’ve previously negotiated, including the purchase price, and states your intent to buy the business. This is a non-binding agreement that just furthers the business acquisition process. It shows the seller you’re ready to commit and move forward in the process.

The letter of intent will also typically give you exclusive rights to buy the business for a time period, usually up to 90 days. This means that you’ll be the only one that can purchase the business during the time frame, and the seller has to act in good faith to close your transaction if you’re able to meet the terms of your LOI.

Step 5: Complete due diligence

When the LOI is signed by you and the seller, then you’ll get access to more information about the business. Typically, when you first show interest in purchasing a business you’ll get a basic overview of how the business is performing. But when you enter due diligence, you’ll get access to any financial or legal information that you feel is needed to close the transaction.

We suggest making sure you review the following documents, at a minimum, before you close:

• Organizational documents for the business (e.g. incorporation docs, certificates of good standing, business licenses, etc.)
• Previous 3 years of business tax returns
• Current year income statements, balance sheets, and cash flow statements
• Revenue broken out by customer for the last 3 years
• Information on existing business debt
• Customer lists with proprietary information blocked out as necessary
• Existing contracts—can these be assigned to the new owner?
• Commercial lease or other property documents
• Rent rolls if the property has tenants
• Uniform franchise disclosure document (if the business is a franchise)
• Employee and manager information
• Marketing and advertising materials
• Legal records for pending litigation, if any

Step 6: Obtain financing

During due diligence you should also be working on financing for the transaction. Most businesses are purchased with a combination of debt and equity, meaning you’ll come up with part of the purchase price and the rest through a loan. You’ve got lots of options here, including SBA loans , traditional bank loans, and using a Rollover for Business Startups (ROBS). If you have a strong 401K, going for a ROBS is the best solution, as you can finance the purchase without having to pay back debt or interest.

Before you enter due diligence you should know whether or not seller financing is an option, which could alleviate some of the financial burdens of finding a loan. Seller financing is a loan provided by the owner of the business instead of an outside lender. This typically takes a lot of documentation from you as the new business owner and from the business itself. That is why it’s important to work through this process during due diligence. You’ll want to make sure your lender is ready to fund when you need to close the transaction.

7. Close the transaction

If there were no surprises during due diligence, then it’s time to close the transaction. This is where you’ll draft a final purchase agreement and agree to every term of the deal with the seller.

You should always hire a lawyer to help you negotiate this part of the process. At the very least, they can review the purchase agreement to make sure you’re getting what you negotiated through the contract.

After both parties sign the purchase agreement, you’re ready to choose a closing date and have your lender fund the purchase. Your funds will typically go into escrow (meaning a bank or law firm will hold the money for sake keeping) on the day you’re supposed to close, until all documentation is final. Once both parties give their approval then the money will be given to the seller and you’ll own the business outright.

As soon as closing is finalized , you’ll need to apply for any necessary business licenses to make sure your business operations have a smooth transition. Some states will let you operate with the existing licenses during the transition period, but don’t let it slip out of your mind. If your business acquisition is a stock purchase then you may not have to worry about this at all since the business entity won’t change.

At some point, while jumping through legal hoops, you might have forgotten that you just became a small business owner. Congrats! Your new life awaits. And if your brand new business needs bookkeeping, Bench can help with that.

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Purchasing Process: Definition, Steps, and Best Practices

• Written by Lyle Del Vecchio
• 21 min read

KEY TAKEAWAYS

• The purchasing process is a series of steps a company goes through to purchase the goods and services they need to operate.
• Purchasing is a part of the overall procurement process, which also includes sourcing and accounts payable.
• Following best practices can help you extract more value from the purchasing process.
• Automation is one of the most important best practices, as it frees up your team to create more value while saving you time and money.
• Formalizing your purchasing process helps create a healthy supply chain and be a value-driver for your business.

Businesses will always need to purchase goods and services to meet their needs. Using a formalized purchasing process to do so can extract the maximum value from every dollar spent.

The way a company executes its purchasing process can have a major influence on not just expenses, but competitive performance, profitability, and efficiency.

By learning and implementing a few best practices for your purchasing process—particularly with help from modern procurement software—you can help reduce waste, protect against needless risk and expense, and maximize efficiency, profits, and value recovered from every dollar invested.

What Is Purchasing?

Purchasing is the practice of purchasing goods and services. Sounds obvious, but it can get confused with other areas of procurement.

To be more specific, purchasing is part of the procurement process that involves making the actual purchase. It includes identifying a need, getting internal approval, and sending a formal purchase order (PO) to vendors.

What Is the Difference Between Purchasing and Procurement?

The difference between purchasing and procurement is that purchasing is actually just a part of the greater procurement process.

While procurement is the entire process from sourcing through accounts payable, purchasing is the part where needs are met through purchasing goods and services.

The greater procurement process is referred to as procure-to-pay (P2P) . Procurement involves all of the P2P process, including sourcing and vetting suppliers, negotiating yearly contracts, and ensuring that vendors are paid on time.

Purchasing teams focus solely on the purchasing part of the P2P process.

Another way of looking at it is that procurement refers to the overall framework for optimizing purchasing for maximum value, savings, and efficiency while purchasing is confined to actually obtaining goods and services.

Procurement will also incorporate all sourcing activities as well as purchasing.

What Is the Purchasing Process?

The purchasing process is the steps a company goes through when purchasing goods and services.

When looked at as a whole, the purchasing process is better described as the procure-to-pay (P2P) process. At its most basic level, the process can be as simple as conducting a transaction.

In the P2P process, procurement teams requisition goods and services through your supply chain, much in the same way a consumer might research and purchase the best appliance for their home.

The main benefit of a formal purchasing process is avoiding waste due to fraud, maverick spend , and other non-optimized buying habits.

Whether you’re a small business or a multinational corporation, having a formalized purchasing process can help you stay competitive in the modern marketplace.

Incorporating software that implements guided buying can ensure compliance with purchasing policies and maximize realized cost savings and cost avoidance .

Manual workflows and paper-based record-keeping are no longer sufficient for modern purchasing processes. Procurement software and automation have eliminated the challenges that come with these outdated methodologies.

What Are the Steps in the Purchasing Process?

The steps in the purchasing process are a cycle, with each step requiring information to be exchanged and either internal or external approval to move forward.

Every business will have its own unique purchasing process, but the purchasing process below is a standard that many companies can follow, and is a great place for any company to start.

Needs Analysis

Before a purchase can happen, a business need must be identified. The need should solve a specific problem and be documented by either the purchase requester or the procurement team. The procurement team can work with other teams on how to best justify a need and document it.

For example, a company that has recently adopted a remote-first policy may need more advanced video conferencing software.

The operations team might identify and source the best tool themselves, or can work with procurement to understand and document exactly what is needed and why before sourcing the best tool.

Purchase Requisition Created

Once a need has been identified, a purchase requisition is submitted to either the procurement department or purchasing manager of the department making the request.

The purchase requisition form contains full details on the items or services to be obtained, including the justification for why they need to be purchased from the needs analysis.

When using a procurement software system, an important step of the requisition process can be automated. If the requisition is below a certain threshold and there is budget available, the purchase request can be automatically approved.

If it is above that threshold, it can get automatically routed to the necessary approvers for expedited processing.

Purchase Order (PO) Review and Approval

Once the requisition is approved, it gets turned into a purchase order (PO). This can also be automated with e-procurement software, or done manually with Excel, Word, or a paper form.

Rejected purchase requisitions are returned to the requester to ask for a correction or clarification on why the purchase can’t be made.

The purchase order contains everything a vendor needs to fulfill the order, including quantity, price, item number, payment information, and payment terms.

The procurement team should review purchase orders to ensure that they include accurate pricing and match the purchase requisition.

They also need to verify the funds exist in the appropriate budget to cover the purchase.

This can be done by sending the purchase order to accounting, but if procurement software is being used, the budget should be immediately available for procurement teams to verify. This helps simplify the purchase order process .

Requests for Proposal

In some cases, approved POs are sent to the procurement department and used to create either an RFP (request for proposal) or RFQ (request for quotation). These, or some other sourcing documents , can be used in a sourcing event.

These requests are dispatched to potential vendors to solicit bids. Vendors are carefully reviewed based on important characteristics such as performance history, compliance records, average lead times, reputation, and price.

Note: When purchasing routine goods or services from preferred suppliers that have already been vetted, this step and the next can be skipped. Steps four and five are more important when working with new suppliers.

Contract Negotiation and Approval

If the RFP or RFQ process is used, the vendor with the winning bid is awarded a contract. The contract is further refined to ensure optimal terms and conditions and a mutually satisfactory arrangement for both parties.

Once the contract is signed, the purchase order becomes a legally binding agreement between the buyer and seller when the supplier accepts it.

This gives both parties recourse in the event that the order is not delivered by the vendor or paid for by the customer.

Shipping and Receiving

The supplier delivers the goods or services within the agreed-upon timeframe. Relevant documentation, like a goods received note for goods or timesheets for services, can be tracked and recorded as evidence for future audits.

Once they’ve been received (in the case of goods) or performed (in the case of services), the purchaser reviews if what they’ve received is what was ordered and notifies the vendor of any issues.

Three-Way Matching

Three-way matching is a verification process that accounts payable teams use to ensure that they are paying the correct amount and for the correct items. The process compares receipts/packing slips against the purchase order and invoice.

If all the information matches, then the invoice can be paid. If there is a discrepancy on the invoice or receipt, the vendor is asked for clarification or a correction to the invoice. This will follow an invoice dispute management process .

Discrepancies should be rectified as soon as possible to avoid late payment charges , production delays, or damage to supplier relationships.

Invoice Approval and Payment

Invoices that pass three-way matching are approved for payment. Payment is issued to the vendor via the payment information provided on the invoice.

Ideally, such payments are made with the goal of capturing early payment discounts and other incentives while avoiding late payment fees.

Using AP Automation software as part of a procurement software suite can speed up the payment process and capture more early payment discounts . It also helps solidify positive vendor relationships when payments are consistently made early or on time.

Accounting Records Update

Completed orders are recorded in the company’s books, and all documents related to the transaction are securely stored in a centralized location.

When using procurement software that integrates with your accounting software or ERP , this happens automatically and shouldn’t require any extra work from either accounting or procurement.

What Are the Best Practices for Purchasing?

Following a set purchasing process is helpful, but it doesn’t solve all of your procurement headaches. To level up your purchasing process into a well-oiled machine, it’s helpful to follow the best practices laid out below.

Automate As Much as You Can

Manual and paper-based workflows are not sufficient for companies that want a streamlined purchasing process and healthy supply chain.

Adding automation at each step of the process eliminates many of the headaches that these outdated methods have traditionally caused.

Using a modern procurement solution to automate as much of the purchasing process as you can provides the following benefits:

• Eliminates waste and expense from paper workflows and storage
• Significantly reduces time-consuming, high-volume tasks
• More accuracy, speed, and consistency
• Reduced human error
• Better ability to capture early payment discounts and avoid late payment fees
• Speeds up the approval process for requisitions, POs, and invoices

Automation isn’t just about cost savings or reducing labor, it frees your staff up to work on more meaningful tasks, creating a flywheel effect of value creation as people find better ways to use their time.

Use POs Whenever Possible

It can be tempting to allow teams to make purchases on company credit cards without a formal PO, especially for small purchases. However, using a PO safeguards your business.

Once it is signed, the PO becomes a legally binding document that ensures the seller will provide the goods or services being purchased.

Also, using POs helps out later in the procurement cycle. When it’s time for payment the PO can be used to verify that payment is for exactly what was ordered as part of the three-way matching process.

Always Do Three-Way Matching

It can also be tempting to ‘just pay the invoice’ when dealing a stack of invoices to sort through. Creating policies where invoices are paid below a value threshold can save time but will leave you open to accounts payable fraud just like respected companies like Google and Facebook .

It’s highly recommended to always match the invoice against the purchase order and receipt. This ensures that you’re paying the correct price, not paying a duplicate invoice, and are paying for the correct items.

Three-way matching is much easier when procurement software keeps track of invoices, purchase orders, and receipts in a central location.

Planergy’s accounts payable system automatically matches invoices and purchase orders, which means you can manage by exception and save time while ensuring your invoice payments are correct.

Improve Vendor Collaboration

Your best vendors aren’t just suppliers; they’re partners and stakeholders in your success.

If you succeed, they succeed with you. By working closely and collaborating with them, you can help each other grow your businesses.

Consider how vendors can help you:

• Discover new markets
• Develop innovative new products with better raw materials
• Further streamline your workflows through contracted services
• Boost your bottom line with better pricing terms and exclusive agreements

Don’t just think about how your vendors can help you, but how you can help them. The best vendors are thrilled to have you as a customer and excited about the growth opportunities that you can achieve by working together.

Focus on TCO Over Price

The price isn’t the only cost behind a purchase. There can also be other costs such as maintenance, training, labor hours, and other items associated with making a purchase or investment.

Shifting your perspective to the total cost of ownership (TCO), which considers all of the expenses related to owning something rather than just the price tag, can change the way your procurement function makes decisions.

Considering purchases and their related costs and benefits throughout their entire lifecycle can help you create more long-term value.

Build Social Responsibility Into Your Purchasing Process

Consumers take social and political issues seriously when considering their purchases—and so should your business.

Responsible sourcing and having a focus on ESG (environment, social, and governance) in procurement is not just about complying with environmental or labor regulations, but protecting your reputation and showing your customers that you care.

When evaluating potential suppliers, pay attention to their compliance history and environmental and social reputation. If you choose suppliers that match your company’s ethics, you’ll minimize the chance of violating them.

How to Get The Best Value from Your Purchasing Process

Extracting the maximum value from the purchasing process requires care and skill—especially in a competitive and fast-moving global marketplace.

Along with following the best pratices above, using the right tools to automate and streamline the purchasing process will help you derive the most value.

Choosing a complete procure-to-pay software solution like Planergy can help you:

• Standardize processes for every purchase
• Reduce labor through automation
• Create more value at every step of the process
• Speed up your approval and purchasing flows
• Help you build better supplier relationships
• Improve spend visibility and reporting
• Identify savings opportunities with spend analytics
• Automate three-way matching and invoice processing

Having a solid purchasing process and reliable procurement software does more than just get solve your immediate purchasing needs. It adds value, savings, sustainability, and greater productivity to your overall business.

What’s your goal today?

1. use planergy to manage purchasing and accounts payable.

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

• Read our case studies, client success stories, and testimonials.
• Visit our Purchase Order Software page to see how Planergy can digitize and automate your purchase order process saving you time and money.
• Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. learn best practices for purchasing, finance, and more.

Browse hundreds of articles , containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

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Buying a business is a big decision — but when you pull the trigger on buying an existing business, you get the opportunity to become an entrepreneur without starting a small business completely from scratch. Every year, more than 500,000 businesses change hands, and that number is expected to skyrocket in the next several years as millions of baby boomers begin retiring and selling their businesses.

Buying an existing business is so popular because it lets you skip past some of the pain points and costs of starting a new business. But the journey from finding a business for sale to closing the deal can be long and complicated.

Before you begin the journey of buying a business of your own, find out everything you need to know to avoid buyer’s remorse. Our buying an existing business checklist will give you a step-by-step guide. We'll also cover the pros and cons of buying a business when you’re still just thinking about the idea, and end with how to buy a business when you're ready to close the deal and get the keys.

Buying an existing business checklist

If you’re set on the idea of buying a business, then it’s crucial to make sure you pick the right business for you . The easiest way to set yourself up for success is buying a business that you’re passionate about improving and taking to the next level. But passion alone isn’t enough — experience and knowing which questions to ask when buying a business are also important when making your choice.

Here is your buying an existing business checklist:

1. Figure out what type of business you want to buy

Narrow down your passions, interests, skills and experience. You’ll be happier if you buy a small business that dovetails with what you already like and have some experience in.

For example, if you’ve been a line cook at a restaurant for several years, maybe you’ve decided you’d like to own your own restaurant. Or maybe you’ve been an employee for a long time at a company that’s now on the market. In that case, who better to buy the business than someone who knows it as intimately as you?

Although you might just want to buy a business for the financials alone — by its expected return on investment — it’s also important to align yourself with the business's immaterial goals. After all, the more knowledgeable and familiar you are with the business's model, products or services, customers, industry and trends, the more innovative and successful your new ideas will be.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

2. Search for businesses that are for sale

There are plenty of ways to find the right business for sale that fits the criteria you’ve decided on. These include:

Online business marketplaces such as bizbuysell.com, the largest site of its kind with more than 45,000 active listings.

Craigslist ads.

Classified newspaper ads under the “Businesses for Sale” category.

Asking people in your network of small-business owners.

Going to meetups or industry conferences to ask other business professionals.

Working with a business broker.

Business brokers legally represent the seller, so you should be careful about conveying certain information to them (such as how far you’re willing to go in negotiations). However, a broker can help you understand what kind of business you want, prescreen businesses to cut out all the failing companies, keep negotiations civil and smart and help you with all the necessary paperwork. Brokers do earn a commission when a sale goes through, but it’s typically paid by the seller.

3. Understand why an existing business is up for sale

There are plenty of reasons a business owner might put their business up for sale, including something as simple as an innocuous lifestyle choice like retirement. Or, there might be a more worrisome reason, like a fundamental problem with the business. If you’re about to buy a business, you’ll want to know exactly why the businesses you're considering are no longer working for their current owners.

You should ask the current owners what challenges they've encountered, what they’ve done to try solving those problems and how those attempts fared. During every conversation with the current owner, you should ask yourself, “Do I have what it takes to meet these challenges with different or better solutions?”

Be on the lookout for:

A poorly conceptualized business plan (there’s just not a market for the product or service).

Competitors that are far ahead.

Existing business debts.

Location problems.

A brand issue.

Inventory difficulties (the cost of production is too high, low quality is losing the business customers, storage is difficult, there’s no supply and demand balance, etc.).

Bad equipment (it’s outdated and too expensive to upgrade).

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. They’ll give you an honest view of how the business is doing, without the bias of the seller trying to convince you to buy.

4. Narrow in on a business that aligns with your budget, goals and resources

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.

Calculating the ideal size, location, sales, staff and so on of your prospective business is an important step in your plan of buying a business, since it will give you a scale to keep in mind when you’re shopping around. Figure out how much you’d ideally want to change a business, and assess how much that will cost you.

Money isn’t the only thing you’ll be spending. Look at the time and energy commitments you’re planning to invest to make the business your own. Some managers prefer to be “on” at all times, in the weeds with their employees, while others prefer to delegate and, one day, own multiple businesses.

The amount of resources you’ll have to invest depends in large part on the people and processes already in place and on the experience you have in the industry. For example, if you’re buying a tech company but lack technical expertise, you’ll need to invest time learning the ropes or hiring people who have the experience.

5. Do your due diligence

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.

As the buyer, you’ll want to have a good accountant on your side to review the business's financials. 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. By signing, you agree not to disclose any confidential information about the business that’s uncovered during the due diligence process. This protects the seller in case you decide buying the business is not for you after reviewing all the documents.

There are many business documents, files, agreements and statements that you’ll want to collect and analyze, ideally with the help of a lawyer and accountant. Here are some of the must-have documents when doing due diligence in the process of considering whether to buy a business:

Business licenses and permits

First up is to make sure that the business you’re looking at has all the business licenses and permits it needs. If you’re buying a business, you want to make sure that the current owner hasn’t run afoul of any local business licensing laws. Businesses in certain industries, particularly highly regulated ones like food services and childcare, need a valid permit to stay open.

Organizational paperwork and certificate of good standing

If the business you’re buying is a sole proprietorship or partnership, there may not be official “founding” paperwork. 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.

The secretary of state in your state should also be able to produce a certificate of good standing for the business you’re interested in buying. This certifies that the business is approved to operate in the state.

Zoning laws

Check with your area’s local zoning laws to make sure that you're buying a business that isn’t violating any restrictions. 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.

Environmental regulations

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. Double-check that this business abides by all of the area’s small business environmental regulations .

Letter of intent

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 price proposal, along with the terms and conditions of the business sale, should all be included in the seller’s LOI.

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.

Contracts and leases

Half the fun of the decision to buy a business is all the stuff it comes with. Whether that means a lease for the location, equipment or something else, you’ll want to make sure the landlord is alright with transferring over these legal documents to your name. Otherwise, you’ll need to negotiate a new lease, which can significantly add to your expenses.

You’ll also want to review any outstanding agreements that the owner has with vendors or customers. This can be very revealing. For example, if your review indicates that 90% of the business's revenue comes from a single client, you’ll want to think twice before buying. If that client parts ways with the business, it could put a serious dent in the business's potential.

Business financials

Before buying a business, make sure to examine its past few years of financials, including:

Tax returns.

Balance sheets.

Cash flow statements.

Sales records and accounts receivable.

Accounts payable.

Debt disclosures.

Advertising costs.

Double-check that the tax returns and financial statements have passed an audit by a certified public accountant; don’t accept those financials from the sellers themselves.

Use the business's financials as an opportunity to analyze its income stream. The business you purchase doesn’t necessarily have to be profitable yet (particularly if it’s a young business), but there should be a clear path to profitability.

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. For example, if some of the outstanding receivables the ex-owner was dealing with are too old — 90 days or more, for example — then they’ll be pretty tough for you to collect on. You might be better off asking the seller to insure them or contact the customers themselves.

Organizational chart

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.

Status of inventory, equipment, furniture and building

Make sure to critically analyze these aspects of the businesses, since their values will directly impact the cost of the business. You’ll want to check:

What’s on hand.

Its quality.

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.

Whether the furniture will be useful to you or if you’ll need to replace it to be operational or for aesthetic reasons.

If you’ll need to make larger modifications to the building.

And other similar questions.

Sites like whayne.com can be used to look up equipment and obtain price estimates.

Other important documents

This list of documents will tell you a lot of information about the business, but there’s probably more you’ll want to examine. Your attorney or accountant should be able to identify additional documents specific to the business you’re interested in.

For example, ask the seller for property documents, equipment/asset listing, brand assets for advertising materials, an account of intellectual property assets, business insurance coverage, employee policies and contracts, incorporation information and customer lists.

Once due diligence comes to a close, you’ll need to make your final decision about whether buying the business is right for you. If you decide to go ahead, the sales agreement is what ties it all together.

The agreement will enumerate the final purchase price and everything you’re purchasing, including:

Tangible assets (inventory, equipment, furniture, building).

Intangible assets (goodwill, brand value, etc.).

Intellectual property (patents, copyrights, etc.).

Customer lists.

Have a lawyer help you put this document together or, at the very least, review it carefully before you sign.

6. Evaluate the price of the business with the earnings, assets or market approach

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. Valuation services, which can be found online or through word of mouth, cost around $3,000 to $5,000, but they can save you thousands more in the long run by coming up with a good estimate.

Whether you do this yourself or hire someone, it’s helpful to have some knowledge of different business valuation method s. 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:

Earnings approach

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. Even if a business hasn’t generated a profit yet, earnings models can be used to predict how much the business might earn in the future. The disadvantage of the earnings approach is that it relies on a prediction of future earnings, which may not be accurate.

Assets approach

Best used for : buying capital-intensive businesses, such as manufacturing and transportation businesses, and businesses that aren’t profitable yet.

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.

Market approach

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’s a good way to get a ballpark range for a business's value and to account for local factors that the other approaches may miss, such as the business's location in a particular neighborhood.

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.

7. Secure capital to make the purchase

Once you and seller agree on a number, the next step in buying a business is to get the money. There are a few different ways you can gather the capital you’ll need to purchase a business — some specific to buying an existing business, others pretty standard.

Here are some of the ways to finance a business acquisition:

Use personal or family money

If you’re able to cover the costs of buying an existing business, that’s always an option. This is more likely if you're buying a small business rather than a chain. Of course, you’ll want to consult your accountant before ponying up a large lump sum of your own cash. Also, make sure that you’re not using all your money buying a business because running a business takes capital, too.

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.

Seller financing

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. For example, sellers have to be on “standby” if you’re also getting an SBA loan, meaning they have to agree that they won’t be paid back until you pay off the SBA loan.

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.

By turning to a partnership instead of buying a business solo, you can divide the payments you’ll be making while still owning that company.

Taking on a partner when buying a business isn’t only useful to cut costs, though: You can also bring someone on board with more specific experience or a different skill set. Just don’t forget to draw up a partnership agreement, so co-ownership doesn’t cause any problems down the line.

Sell stock to employees

By selling company stock to your employees, you can get a big discount — making up 50% or even 90% of the business price by some measures. You’ll probably want to sell non-voting stock, if possible, to retain ownership over the business. In order to issue stock, you’ll have to organize the business (or re-organize it) as an S corporation or C corporation.

Start by leasing the business

It might be possible for you to lease the business instead of buying it outright — with the option to make the big purchase down the road once you’re able to afford it.

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. However, if leasing is something you’d be more comfortable with — even though it may cost more money in the long run — you might as well ask.

Debt financing

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. This wealth of data makes business acquisitions a good candidate for loans because lenders aren’t working with a risky blank slate.

If you’re looking for a small-business loan , here are a few potential financing options that might help in buying a business:

Asset-based financing.

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:

Borrower’s personal credit score.

Business credit report and score.

Annual revenue.

Time in operation.

Balance sheet.

Outstanding debts.

For term loans and SBA loans for when you buy a business, banks typically require buyers to put down a 20% to 25% down payment on acquisition loans. However, the SBA recently made some changes that make it easier for buyers to obtain SBA 7(a) loans for buying a business. Now, the SBA requires the buyer to put down just 10%, and only half of that (5%) has to come from the buyer's own cash. The rest can come in the form of a seller's note as long as the seller agrees to be on full standby — meaning that the seller won't be paid back on their note until after the bank is paid.

When getting a business acquisition loan to help with buying a business, you’ll also have to provide a formal business valuation (like we discussed before), explain your relevant experience, offer an updated business plan, and show financial projections for the business under your command. In short, you’ll want to tell a story of how you'll improve the business.

» MORE: Compare the best business acquisition loans

8. Close the deal with the appropriate documents

The last step in our buying an existing business checklist is to close the deal.

When you’ve finally found the right business, done your due diligence, agreed on a fair price and gathered the capital you need, make sure you (or a broker) have all of these documents, notes and agreements in place before you officially buy a business:

Bill of sale

When buying an existing business, this document will prove the actual sale of the business, officially transferring ownership of the business's assets from the seller to you.

Adjusted purchase price

This is the final count of the cost of your purchase, including all prorated expenses—like rent, utilities, and inventory.

If you’re taking over the business's lease, make sure your future landlord is in the know. On the other hand, if you’re negotiating a new lease, double-check that everyone understands its terms.

Vehicle documentation

Does the business you're buying come with any vehicles? If so, you might have to transfer ownership with the local DMV — make sure to get the right forms completed by the time of sale.

Patents, trademarks and copyrights

Similarly, when buying an existing business, all patents, trademarks, and copyrights might require certain forms to get transferred to you, the new owner.

Franchise paperwork

Check the SBA’s Consumer Guide to Buying a Franchise to see if you’ll need to file any franchise documents.

Non-compete agreement

It’s standard practice — and generally a good idea — to ask for a non-compete from the former owner. This way, the previous owner won’t set up a competing shop right across the street.

Consultation/employment agreement

This document should be drafted in the case that the seller is staying on as an employee. Make sure to file this agreement if so.

Asset acquisition statement

The IRS Form 8594 will list the assets you’ve acquired, and for how much. This document is pretty important in the "buying an existing business" checklist for your tax returns, so don’t forget it.

Bulk sale laws

Bulk sale laws have to do with the sale of business inventory and are designed to prevent business owners from evading creditors by transferring ownership of the business to someone else. To comply, prospective buyers usually have to notify the local tax or financial authority about the pending sale.

And that's everything you need to know about how to buy a small business. But knowing how to do it is one thing, knowing why you're doing it is another. So let's talk about reasons for buying a business.

Start Your Dream Business

Reasons to buy a business

Buying a business is kind of like being in the market for a home. Although some people like the history and character that comes with an older home, others don’t want the baggage that can saddle an older home and prefer something turnkey. Similarly, there are plenty of advantages when you buy a business that’s already been around for a while, but there are drawbacks, as well.

Pros of buying a business

Proven business concept.

When launching a brand-new business, the bulk of your time will be spent on the planning phase. You’ll have to write a business plan and figure out how to turn that plan into a reality.

But when you buy a business that's already up and running, you’ll typically have all of this in place:

A building or office space.

Inventory and equipment.

An established brand and business brand identity (whether or not you want to change it, people know it).

Customer base.

Vendor and supplier base, plus manufacturing resources.

Existing employees who can share their knowledge and expertise.

Management processes and policies.

An understanding of your competition and market.

Granted, each of these things may not be in great condition, and the business might not be turning a profit yet. However, buying an existing business means it has some structure already in place, which will save you time upfront, letting you quickly see what you need to zero in on. Particularly if you’re testing a new market or entering an industry that you don’t have much experience in, zipping past the difficult startup phase can be a huge advantage.

Lower operating costs

One of the major benefits of buying a business is that the operating costs are lower. For example, startup costs for a brand-new restaurant can run upward of $450,000 for initial supplies, food and beverage, signage and a customized kitchen design. With an existing business, your initial operating costs are lower because — unless your acquisition is pretty atypical — many parts of the business are already in place and ready to go once you’re at the helm.

You don’t need to spend as much of your budget on hiring employees, developing marketing strategies or building a customer base because those come with the transaction. Instead, you can pour more cash into expanding the business and adapting it to your vision.

Easier to obtain financing

While the move to buy a business isn’t always a safe bet, lenders and investors see it as lower-risk than launching a new company. This is because there’s a history of financial performance that a lender or investor can use to gauge how the business has performed to date and to predict future performance. Plus, there’s also existing data around the company’s market position, competitors, brand recognition and customer base.

All this makes investors more likely to invest in the business and can make lenders more comfortable in giving you a business acquisition loan. The current owners can even participate in financing the transfer of ownership by giving you a loan.

Intellectual property is on the table

If your business-to-be has patented their products or has a copyrighted slogan or trademarked logo that wins over customers, then that intellectual property value will probably transfer over to you in the acquisition. That means when you buy a business, you sometimes buy more than what the eye can see.

This isn’t on the table with every business acquisition, but it could be critical if you’re dealing with something that you think could be expanded even more. What if you turned this small business into a national franchise? All of a sudden, that patent and copyright becomes a lot more valuable. Patents, copyrights and trademarks are often included in sales of software companies, tech businesses and creative businesses (e.g., music, design and art).

Cons of buying a business

Higher upfront purchasing costs.

By buying an existing business, you’ll be able to save money on operating costs, such as inventory and equipment. However, you’ll probably face some pretty sizable purchasing costs. In fact, those purchasing costs might be greater than what it would take you to start a new business.

That’s because, in addition to the obvious assets, you’re also buying ownership over the following:

Built-out brand.

Design work, from logo to store interior.

Business concept and plan.

Time, effort, and money spent testing out products.

Refined processes, procedures and policies.

Income stream (if the business is already profitable).

Assets and equipment.

Intellectual property, such as copyrights, patents and trademarks.

All of these items will be the subject of negotiations between the buyer and seller and factor into the final purchase price when buying an existing business.

Unfamiliarity with the details

If you’re buying a business you didn't start, you’ll understandably be a bit less familiar with its inner workings and the details of its products, processes, employees and financials than if you built the business yourself. This could be a bit of an obstacle, especially when you’re just starting out. This is especially true if you are entering an industry that you lack experience in. You’ll need to spend a lot of time learning the ropes, and prepare for the learning curve to be steep.

Risk of a hidden problem

As a prospective business buyer, you’ll go through a fairly intensive due diligence process, where you’ll gather information about the business and the current owner. But no matter how much information you uncover, you always run the risk of taking on an issue that you’re not aware of or that’s worse than it appeared. For example, equipment could be damaged, or the brand might have a bad reputation. Once you buy a business, you buy those issues, like it or not.

On a similar note...

Buying An Existing Business in 2024

• There are many opportunities to buy an existing business, offering an excellent way to break into entrepreneurship without starting from scratch.
• The positives of buying an existing business include inheriting a customer base and operational plan, while the negatives include a potentially high purchase price and perhaps having to deal with problems that may not be disclosed.
• Find out what you need to look for in a potential business purchase, the pros and cons, where to find the right one, and the best funding options to purchase an existing business.

Plan ahead – see what you qualify for today

State of the “businesses for sale” market.

The “businesses for sale” market refers to the sector that deals with selling and buying businesses already in operation. It’s made up of a wide range of industries and sectors, from small local businesses to large enterprises. The market is influenced by a variety of factors, including:

• The state of the economy : During times of economic growth and stability, the market tends to be more active, with a higher number of businesses being bought and sold. On the other hand, during economic downturns or recessions, the market may experience a slowdown as buyers become more cautious.
• Industry trends : Different industries have varying levels of demand. Some sectors, like technology, healthcare, and e-commerce, traditionally have more potential for growth and profitability. Other industries may experience fluctuations based on consumer preferences, regulatory changes, or market disruptions.
• Demographics : The aging population and retirement of baby boomers have had a significant impact on the “businesses for sale” market. Many business owners from this generation are looking to sell their businesses and transition into retirement, creating a supply of businesses for sale. This trend is expected to continue as more baby boomers reach retirement age.
• Online marketplaces : The invention of online platforms and marketplaces has transformed the way businesses are bought and sold. Websites and platforms dedicated to connecting buyers and sellers have made it easier to access a larger pool of potential buyers. These platforms offer various tools to streamline the buying and selling process.
• Financing and deal structure : The availability of financing options and deal structures can impact the market. Access to capital and favorable lending conditions can motivate buyers and make acquisitions more feasible. On the other hand, the market can go down when interest interest rates are high and credit is less easily available.

Like all markets, the “businesses for sale” market is dynamic and can vary significantly based on regional and local conditions. Factors like government regulations, tax policies, and cultural norms can also shape market dynamics. 

Pros and Cons of Buying an Existing Business

Buying an existing business can offer several advantages and disadvantages for small business owners. Here are some pros and cons to consider when finding the right business to purchase:

• Established operations: An existing business already has a foundation in place for things like operational systems and processes. This can save time and effort compared to starting a business from scratch.
• Brand recognition: You’ll get a brand name, reputation, and customer loyalty built into the deal. This can provide a head start in terms of market recognition and customer trust (although make sure that the brand reputation is a positive one).
• Established customer base: One of the biggest advantages is inheriting an existing customer base. This can generate immediate revenue and provide a platform for future growth and expansion.
• Cash flow and financial history: An established business often has a track record of financial performance, which can help in securing small business loans and assessing the business’s financial viability. Positive cash flow from day one can also reduce the risk of initial losses.
• Supplier and vendor relationships: Established businesses may already have established relationships with suppliers, vendors, and partners. This can make it easier to access reliable suppliers and favorable terms from the get-go.
• Higher cost: Buying an existing business can cost more than starting a new business. The value of an established business may reflect its assets, customer base, and potential for future earnings.
• Existing challenges: The business you acquire may come with existing problems or challenges that need to be addressed, like outdated equipment, inefficient processes, or legal issues. Assessing and fixing these issues can require time, effort, and investment on your part.
• Management challenges: It’s hard for a new owner to integrate into an existing business culture and manage employees who already work there. These challenges can lead to difficulties putting needed changes into place or achieving desired outcomes.
• Hidden liabilities: It’s crucial to conduct thorough due diligence to uncover any hidden liabilities — this could be pending lawsuits, unpaid taxes, or contractual disputes. If you don’t identify these risks ahead of time, you may end up paying for them down the road.

Ultimately, you’ll want to consider both the advantages and disadvantages, as well look closely at the specific business and its market conditions. Conducting due diligence, seeking professional advice from a business valuation expert, and creating a well-informed business plan can help mitigate risks and increase the chances of a successful acquisition.

Where to Find Existing Businesses

There are several ways to find businesses that are for sale. Here are some common strategies to help you locate businesses that are on the market.

Online business marketplaces

There are online platforms dedicated to buying and selling businesses. Websites like BizBuySell, BizQuest, and BusinessesForSale.com offer listings of businesses for sale across different industries and locations. These platforms let you search for businesses based on specific criteria, like industry, location, and price range.

Business brokers

Working with a business broker can help you access a wider range of businesses for sale. Brokers specialize in connecting buyers with sellers and often have a large network and access to confidential listings. They can help you navigate the buying process, negotiate deals, and provide guidance throughout the transaction.

Professional networks and associations

Engaging with professionals such as lawyers, accountants, and financial advisors who work with businesses can provide access to potential opportunities. They may be aware of businesses looking for buyers or have connections with business owners who are planning to sell.

Direct outreach

If you have a specific industry or location in mind, you can proactively reach out to business owners to ask about their interest in selling. This approach requires research and targeted communication, but it can lead to discovering businesses that are not actively listed for sale.

Industry-specific publications and websites

Some industries have specialized publications, websites, or newsletters that feature businesses for sale within their niche. These resources can provide insights into opportunities within your industry.

When searching for businesses to potentially buy, having a clear understanding of your own criteria, budget, and objectives will help streamline the search process and focus on opportunities that line up with your requirements.

Why Consider a “Boring” Business

When people think of successful businesses, they often first think of flashy startups like Google or household names like Target. But there are a lot of lesser-known businesses with less of the pizzazz that provide fantastic opportunities for any entrepreneur looking to buy an existing company. More localized businesses or family-owned companies can have a proven track record of success, be profitable, and provide stability for you as an investor. 

Types of “Boring” Businesses

There are many types of businesses that might be more low-key than a billion-dollar tech startup or high-profile company but are profitable and stable. These businesses include:

• Construction or landscaping companies
• Vending machines
• Personal training
• Online teaching
• Cleaning service
• Accounting and bookkeeping
• Real estate

When you’re looking to buy a business, it’s best to look at the financial details and potential for future performance rather than being drawn in by a shiny idea. Making sure the business is a stable investment is the best way to set yourself up for success.

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What Are the 7 Steps To Buying an Existing Business?

Though the exact steps may vary somewhat,  most buyers will want to incorporate the following 7 steps into the process of buying a business. 

1. Decide what you want. 

Running a business is hard work, so you want to carefully choose the kind of business you want to own. The right business should combine your skills and/or interests with the potential to build a profitable business. Everyone wants a high cash flow business , but if you really don’t like the business you may find it hard to stick with it or grow it. 

You’ll want to research the business model and industry, as well as the company itself. 

2. Prepare financially. 

How much money can you afford to put toward the purchase price? What are your credit scores, and how much will you be able to borrow for a business acquisition loan? How long will it take before you can pay yourself a salary, and how will you survive financially until then? 

3. Find a business to buy. 

If you’ve ever bought a house, you know that sometimes things fall together quickly and sometimes it takes a long time to find the right house, get your offer accepted, and close. Patience at this stage can pay off. Rather than rushing into a less-than-ideal business, be willing to take time to find the right deal using the resources in this article. 

4. Make your offer. 

Here’s where you decide how much you think the business is really worth. Like buying a house, it may involve some back and forth negotiations. A broker can prove very helpful here. Contingencies can protect you if the seller wasn’t completely truthful and you uncover issues during the next step of the process. 

Another option is to sign a letter of intent that will allow you to proceed to the next step before making a formal offer. 

5. Do due diligence

Thoroughly vet the prospective business, and enlist the help of professionals to minimize expensive surprises. (See more details about the due diligence process below.) 

6. Secure financing

If you need financing, and if the seller is willing to wait for you to get financing, you can apply for a loan at this stage. If you have already been preapproved, this step can go more quickly though that’s not always possible. 

7. Close the deal

You legally purchase the business and transition to full ownership.

Business Formation: Due Diligence and Legal Considerations  

With any new venture — whether that’s forming your own business or buying an existing one — you’ll need to both conduct due diligence and address legal considerations to ensure compliance, mitigate risks, and protect your interests. 

Due diligence is the process of thoroughly investigating and assessing a potential business opportunity before going ahead with it. You’ll need to gather relevant information (like the asking price vs. the fair price), analyze these details, and make informed decisions before agreeing to a sale of the business. Due diligence helps you understand the risks, opportunities, and overall viability of the business you’re forming or acquiring.

During due diligence, you’ll want to think through the following aspects:

• Compliance : Make sure that the business complies with all applicable laws, regulations, and licensing requirements. Assess any potential legal liabilities, ongoing litigation, or regulatory issues that may affect the business.
• Finances : Review financial statements, balance sheets, tax returns, and other relevant financial documents to assess the business’s financial health, revenue, expenses, profitability, and cash flow. Identify any outstanding debts and liabilities.
• Contracts and agreements : Examine contracts with customers, suppliers, landlords, and employees. Evaluate their terms, obligations, rights, and potential risks. Identify any limitations, exclusivity, clauses, or potential disputes that may impact the business.
• Intellectual property : Determine whether the business owns or has the right to use any patents, trademarks, copyrights, or trade secrets. Assess the protection and enforceability of its intellectual property.
• Assets and liabilities : Identify and evaluate the assets and liabilities of the business, including real estate, equipment, inventory, leases, loans, and outstanding obligations. Assess any potential environmental, legal, or operational liabilities.

In addition to due diligence, you’ll want to consider several legal aspects when forming or acquiring a business. While the specific legal requirements may vary depending on the jurisdiction and type of business entity, some common legal considerations include:

• Business structure : Make sure the business uses the appropriate legal structure, such as a sole proprietorship, partnership, corporation, or limited liability company (LLC). Each structure has different legal and tax implications.
• Registration and licensing : Check that the business is registered with the relevant government authorities and has the necessary permits and licenses required to operate legally in your area.
• Contracts and agreements : Review contracts, like partnership agreements, operating agreements, shareholder agreements, employment contracts, customer agreements, and vendor contracts. Make sure they’re comprehensive, clear, and protect your interests.
• Compliance with employment law : Ensure the previous owner understands and complies with employment laws, including hiring practices, wage and hour regulations, employee benefits, workplace safety, and anti-discrimination laws.
• Tax obligations : Check that the business complies with tax laws and obligations, including obtaining tax identification numbers, understanding tax reporting requirements, and fulfilling tax payment obligations.
• Data privacy and security: If the business handles customer data, make sure there are appropriate privacy and security measures to protect it in compliance with the law.

It’s a good idea to consult with legal professionals to ensure that all legal requirements and considerations are adequately addressed when you’re acquiring or forming a business. Using a business formation service is one of the best ways to form a business and make sure you’re compliant.

Financial Requirements and Funding Options for Buying a Business

When you buy a business, you may need a significant amount of money to cover startup costs like the purchase price and the down payment. You may also need working capital if the cash flow of the business isn’t currently strong, or if you want to introduce new products or services.

There may be a variety of sources for this capital, including private funding (from investors, personal savings, and/ or loved ones) or from lenders, including traditional banks or lines of credit. 

Some of the best business acquisition loans include term loans and SBA loans . Retirement funds ROBS accounts are also popular for this purpose. It may also be possible to buy a business with a business credit card if the price is right and your credit limits are large enough.

Most lenders require good credit, a down payment (or strong collateral), and will scrutinize financials carefully. 

You also may be able to use seller financing for some or all of the purchase price. Seller financing is an agreement between the buyer and the current owner to pay for the business over time. When structured properly, seller financing can benefit both parties. The seller may get a broader pool of buyers. The buyer may have time to ramp up revenues before getting a traditional loan. 

Examples of sources for business acquisition loans include:

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Frequently Asked Questions

Is it smart to buy an existing business.

Buying an existing business can be a very smart move, as long as you do your due diligence to understand any weaknesses and problems the business may be facing. It can often be easier to improve an existing business that’s doing OK, compared to starting a new business from scratch. 

How do I take over an existing business?

If you’re serious about buying a business, take the time to thoroughly research your options, and to investigate the type of business you want to buy as well as looking at specific opportunities. Avoid getting too emotionally invested in a specific business early on; make sure you thoroughly research how financially viable it is. 

It’s also a mistake to gloss over financial data or to make a “handshake” deal. Buying a business is a big investment of your time and money: do it correctly. Work with a business broker and/or an attorney with experience in business acquisitions.

What are disadvantages of buying an existing business?

Cost can be one disadvantage of buying a business. If a business is successful, the owners will want to sell for an attractive price. That may require the buyer to dig deep and exhaust personal resources or take on a significant loan to purchase the business. 

Undisclosed problems are another potential pitfall. If the buyer isn’t careful they could end up with financial or legal problems the seller didn’t share. 

An existing business may be set in its ways and easily challenged by startups with more innovative products or services. 

A new owner may find it necessary to change operations, or staff. They may find it necessary to create new revenue streams to make the company more competitive. Employees may resent those changes, even if they are necessary.

Equipment may be nearing the end of its useful life, and require new equipment leases or equipment financing that add to operating costs. 

This article was originally written on October 25, 2023 and updated on April 21, 2024.

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Tiffany Verbeck

Tiffany Verbeck is a Digital Marketing Copywriter for Nav. She uses the skills she learned from her master’s degree in writing to provide guidance to small businesses trying to navigate the ins-and-outs of financing. Previously, she ran a writing business for three years, and her work has appeared on sites like Business Insider, VaroWorth, and Mission Lane.

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4.4 Stages in the B2B Buying Process

Learning outcomes.

By the end of this section, you will be able to:

• 1 Explain and describe the stages in the B2B buying process.

The B2B Buying Process

The B2B buying process —the journey B2B buyers and the buying center take to complete a purchase—is significantly different and more complex than the consumer purchasing decision process. You’ll recall from Consumer Markets and Purchasing Behavior . That the consumer buying decision encompasses five stages—need recognition or problem awareness, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation. By contrast, the B2B process involves eight stages (shown in Figure 4.7 ). Let’s take a closer look at each of these stages.

Stage 1: Problem Recognition

Similar to the consumer purchasing decision process, the first stage in the B2B buying decision process begins when someone within the organization identifies a problem or a need that can be resolved through a purchase. For straight rebuy purchases, this stage may be as simple as the fact that the organization is running low on copier paper or toner. In a case like this, the B2B buyer simply places the order, and the process ends.

Modified rebuy purchases make the process more complex, as these may involve replacing outdated equipment, technological changes, or revising marketing brochures or advertisements. Now, instead of placing an order from an existing supplier for an already-purchased product, the B2B buyer has to follow through on more of the stages in the process.

New-task buying is the most complex. For example, your organization may decide that, due to the growth of the organization, it needs to purchase an accounting software system or a new piece of manufacturing equipment. In these cases, the B2B buying process will likely incorporate all of the steps listed in Figure 4.7 .

Stage 2: Need Description

Next, the buying center will need to further define what needs to be purchased. This often involves collaboration among members of the buying center in terms of describing what is needed from a technical perspective, desired features, quantity, etc.

Consider a firm that is developing a new electronic control for an appliance. The components are many—a printed circuit board, capacitors, resistors, microprocessors, etc. Members of the buying center will be called upon to develop a bill of materials —a list of parts, items, assemblies, subassemblies, documents, drawings, and other materials required to create the control. Think of the bill of materials as the “recipe” used to create the finished product.

Stage 3: Product Specification

B2B buyers often develop product specifications , a blueprint that outlines the product to be built, how it will look, what features it will have, and how it will function. The product specification needs to be concise and readable for everyone in the buying center and yet contain sufficient technical data to provide the product team with the information it needs to develop the new product or feature.

Stage 4: Supplier Search

Now that you’ve established the technical specifications for the product, it’s time to identify potential suppliers. This is where the experience of those in the buying center comes into play, as they attempt to determine which suppliers have the best quality, delivery, and price. Just like consumers in the “information search” stage of the consumer buying process, those in the buying center may look online to find suppliers, but there are many other resources available to B2B buyers, such as trade magazines, industry expert blogs, and webinars conducted by suppliers.

Stage 5: Proposal Solicitation

Once the list of potential vendors has been developed and whittled down, qualified vendors will be asked to submit proposals. If it’s a relatively straightforward purchase, this proposal may be as easy as a vendor sending the buyer a catalog or providing the buyer with a link to the company’s website. However, more complex purchases typically require the vendor to submit a detailed proposal outlining what the vendor can do to address the company’s needs. This proposal will likely contain product specifications, timing, and—of course—pricing.

Stage 6: Supplier Selection

After reviewing the proposals from the various vendors, the buying center makes a choice. This stage in the B2B buying process involves a thorough review of the proposals submitted, with a critical eye tuned to factors such as supplier capabilities, reputation, warranties, price, etc. If the purchase requires a substantial financial outlay and/or is extremely complex, or if many proposals were solicited, the buying center may narrow down the list of vendors to just a few and invite them to meet (either in person or virtually) to further discuss the proposal and address any questions or concerns.

Stage 7: Order-Routine Specification

After selecting suppliers, the B2B buyer negotiates the details of the order. The critical items here are what is needed (i.e., the technical specifications), how much is needed (i.e., the quantity required), and when it is needed (i.e., the expected time of delivery). This stage will likely also include negotiation of things such as return policies, warranties, and other critical items involved with the purchase.

Stage 8: Performance Review

Just as consumers evaluate purchases after they have made them, and similar to the way that your employer may conduct a performance review to assess your job performance, the B2B buyer periodically reviews the performance of the selected supplier to assess if the product and the supplier meet expectations. For example, the B2B buyer may solicit product feedback from users and/or rate the supplier on different criteria such as quality, promptness of delivery, etc. As a result of the performance review, the B2B buyer may decide to continue, modify, or even end a supplier relationship.

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

• project scope
• bill of materials
• product specification
• participant matrix
• Stage 2: Need description
• Stage 3: Product specification
• Stage 4: Supplier search
• Stage 5: Proposal solicitation
• Stage 1: Problem recognition
• Stage 6: Supplier selection
• Stage 7: Order-routine specification
• Stage 8: Performance review

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• Book title: Principles of Marketing
• Publication date: Jan 25, 2023
• Location: Houston, Texas
• Book URL: https://openstax.org/books/principles-marketing/pages/1-unit-introduction
• Section URL: https://openstax.org/books/principles-marketing/pages/4-4-stages-in-the-b2b-buying-process

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6.3: How the Buying Process Works

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Learning Objectives

• List the steps in the buying process and describe how and why the process is evolving.
• Understand the role of emotions in the buying decision.
• Learn how to use FAB for effective selling.

For years, the buying process was considered to be linear; scholars and researchers who closely monitored buying behavior identified several steps that the B2B customer goes through before she makes a purchase. It’s helpful to understand these steps to appreciate the changes that are taking place, even as you read this.

The Traditional View of the Seven Steps of the B2B Buying Process

You are probably familiar with buying as a consumer. But did you ever think about how Aéropostale decides what products will be in their stores for the spring season, how a restaurant determines which beverages it will offer, or how Hewlett-Packard (HP) identifies which parts it will use to manufacture its printers? The buying process outlines the steps that the B2B customer goes through when he is making a purchasing decision on behalf of the company. This process applies whether the buying decision is being made by an individual or by a buying center.

1. Recognizing the need . The buyer realizes there is a need for the product or service.Ron Brauner, “B2B Buying Process: 8 Stages of the Business Sales Funnel,” www.ronbrauner.com/?p=68 (accessed August 1, 2009). In the B2B environment, this might occur because of an internal need (e.g., the company needs more office space) or because of a customer need (e.g., green tea is becoming more popular, and so we want to offer it on our menu). This is the ideal opportunity for you to learn about your customers’ needs, although it may be difficult to know exactly when a customer or prospective customer is beginning this step. That’s why it’s important to engage your customer in dialogue to understand their current and future needs. Sometimes, you can help your customer see an opportunity that he didn’t realize.

2. Defining the need . This step usually involves users as well as initiators to put more definition around the type of product or service that will help meet the need.Ron Brauner, “B2B Buying Process: 8 Stages of the Business Sales Funnel,” www.ronbrauner.com/?p=68 (accessed August 1, 2009). For example, in the case of office space, the head of facilities would ask the head of human resources about the types of new positions that will be needed and the type of workspace each requires. He might also ask for insight from each hiring manager or department head in the company, such as the head of operations, marketing, finance, and other areas. This will help him more fully understand the general type of product or service that is needed. Salespeople can play a role in this step of the buying process by sharing information and insights from other customers, without divulging any confidential information.

3. Developing the specifications . This is the step at which the exact needs are outlined.Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships , 7th ed. (New York: McGraw-Hill Irwin, 2009), 93. For example, if Target identified the need to create its own brand of DVD player, the appropriate people in the company would determine the exact specifications of the product: what functions it will have, how large it will be, what materials it will be made of, how many colors will be offered, and all other attributes of the product. When a salesperson has a good relationship with a customer, the buyer might ask the salesperson for insights and advice on different features, functionality, and production costs to finalize the product or service specifications.

4. Searching for appropriate suppliers . This step is focused on researching potential suppliers. This research can be conducted online by doing a Google search for suppliers of the desired product or service.Ron Brauner, “B2B Buying Process: 8 Stages of the Business Sales Funnel,” www.ronbrauner.com/?p=68 (accessed August 1, 2009). Trade associations are also an excellent source as many provide unbiased evaluations of suppliers; for example, Forrester Research publishes a report on Web site analytic tools.

Forrester Research Reports on Web Site Analytics Tools

www.forrester.com/rb/Research/web_analytics_buyers_guide/q/id/53043/t/2

And industry trade shows can be an excellent source of information about prospective suppliers. One of the best ways to identify suppliers is by referrals; use your business network, including LinkedIn, to get feedback about reliable suppliers that might be able to meet your needs.

5. Requesting proposals . This is when the buyer or buying center develops a formal request for proposal , often called an RFP, and she identifies several potential vendors that could produce the product or service.Ron Brauner, “B2B Buying Process: 8 Stages of the Business Sales Funnel,” www.ronbrauner.com/?p=68 (accessed August 1, 2009). For example, if Home Depot decided that it wanted to upgrade its bags, the buyer would have determined the specification, quantity, shipping points, usage, and other requirements (e.g., being environmentally friendly), and put the information into a formal document that is sent to several bag manufacturers along with questions about the history of the company, key customers, locations, manufacturing capacity, turnaround time, and other relevant information. Each manufacturer would have the opportunity to respond to the RFP with a formal proposal , which means that each company would provide information about their company, capabilities, delivery, and pricing to manufacture the bags. This is an opportunity for a salesperson to respond with a complete proposal that addresses the customer’s needs and concerns. See the sample RFP template for a nonprofit organization below.

RFP Template for a Nonprofit Organization

http://www.npguides.org/guide/grant1.htm

6. Evaluating proposals . After the proposals are submitted, the buyer or buying center reviews each one and determines whether the company would be a good fit for the project. At this point, the number of potential vendor choices is narrowed to a select few. Usually, salespeople from each of the chosen companies are invited to meet with the buyer or buying center to discuss the proposal, capabilities, and pricing. Negotiation for pricing, quality, timing, service, and other attributes may also take place during this step.Ron Brauner, “B2B Buying Process: 8 Stages of the Business Sales Funnel,” www.ronbrauner.com/?p=68 (accessed August 1, 2009). This is the step where a salesperson may need to overcome objections, or the reasons why the customer may not want to choose her as the company of choice.Ron Brauner, “B2B Buying Process: 8 Stages of the Business Sales Funnel,” www.ronbrauner.com/?p=68 (accessed August 1, 2009).

7. Making the buying decision . The buyer or buying center chooses one (or the necessary number) of companies to execute the project, finalizes details, negotiates all aspects of the arrangement, and signs a contract. This step requires perseverance and attention to detail on the part of the salesperson. Once the decision is made, the real business of selling begins: delivering the product or service as agreed upon and building the relationship.

8. Postpurchase evaluation . Throughout the buying process, the buyer is provided all the good news: how the new product or service will solve her company’s problems, increase demand, reduce costs, or improve profitability. It is the postpurchase evaluation that tells the tale. Did the product or service perform as promised? Was the delivery and installation done correctly and on time? Are the business results in line with expectations? Is the relationship growing? Do the salesperson and his company really care about the performance of the buyer’s company? Does the salesperson add value to the buyer’s company? This is where the rubber meets the road; it presents an opportunity for the salesperson to communicate, anticipate, and solve any problems that may have arisen.Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart, Marketing: Real People, Real Choices , 5th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2008), 190.

The process makes sense and is a flow of systematic steps that leads a B2B buyer through a logical buying process. But there are two flaws in this thinking that significantly impact the buying process and, as a result, the selling process: (1) the Internet changes everything and (2) emotions dominate B2B buying.Geoffrey James, “Is Your Sales Process Obsolete?” BNET, March 30, 2007, blogs.bnet.com/salesmachine/?p=30 (accessed August 1, 2009). , Bryan Eisenberg, “Buying Is Not a Rational Decision,” ClickZ, November 26, 2001, http://www.clickz.com/927221 (accessed August 1, 2009).

The Internet Changes Everything

It used to be that B2B buyers relied on salespeople to get information, demonstrations, and cost about products and services. Salespeople sold, and buyers bought; the world was a simpler place.

Today, B2B buyers are doing the work of two or even three employees because there are fewer people working at companies due to cutbacks and restructuring. The fact is, buyers don’t have the time to meet with salespeople like they used to. And the Internet has been a game changer. Buyers can not only research product and supplier options online, but they can also see product specifications, view demonstration videos, participate in online forums, get real-time recommendations and feedback from users on social networks, and basically be smarter than any salesperson before he even calls for an appointment.Geoffrey James, “Is Your Sales Process Obsolete?” BNET, March 30, 2007, blogs.bnet.com/salesmachine/?p=30 (accessed August 1, 2009). The power has shifted from sellers to buyers. In fact, the Internet has had such a profound effect on how people make purchasing decisions that the Wall Street Journal has coined a new term: “new info shopper.” These are people who can’t buy anything without getting information online first. What’s even more important to note is the fact that 92 percent of new info shoppers have more confidence in the information they get online than from an ad, salesperson, or other company source.Mark Penn, “New Info Shoppers,” January 8, 2009, Wall Street Journal , http://online.wsj.com/article/SB123144483005365353.html?mod=dist_smartbrief# (accessed August 1, 2009).

So what’s a salesperson to do? Stop, listen, and help your customer make the best decision for her business, even if it means that she doesn’t buy your product. Despite the importance of the Internet in providing information throughout the buying process, B2B buyers still gather insight from a variety of sources that include salespeople. Successful salespeople are those that truly focus on the buyer’s needs, which may mean giving up the sale and bringing valuable feedback to your company to change the product, service, or other options that are reasons why customers might not buy from you. The new world order requires everyone to rethink the conventional wisdom. Selling used to be something you “do to” a customer; now it’s something you “do for” a customer.Geoffrey James, “Is Your Sales Process Obsolete?” BNET, March 30, 2007, blogs.bnet.com/salesmachine/?p=30 (accessed August 1, 2009). The salespeople who win are the ones who listen in person, on the phone, and online, then make the recommendation that is in the customer’s best interest.

Information is no longer the exclusive domain of the salesperson. But great salespeople bring value to their customers with ideas, insights, knowledge, and personal commitment that can’t be duplicated on a Web site, online forum, or even on a social network. And the role of the Internet in B2B buying decisions is changing quickly.

Sales 2.0 has changed the way people seek, receive, and interact online. The Internet used to be only an information source, a place to search Web sites for information. But static Web sites have given way to not only information gathering, but to problem solving. Crowdsourcing occurs when a company takes a job that is traditionally done by an employee and issues an “open call,” usually online, to people all over the world to solve the problem. This is a new way for businesses and individuals to leverage the Internet in an efficient and effective way.BrightSightGroup, “Jeff Howe: Crowdsourcing,” video, July 6, 2008, http://www.youtube.com/watch?v=F0-UtNg3ots (accessed August 3, 2009). Crowdsourcing uses the wisdom of the crowd in a virtual way to make information and solutions readily available to everyone. This video describes how crowdsourcing has changed the photography business forever.

Crowdsourcing . Learn how to make the crowd work for you.. Source: Jeff Howe

Salespeople can embrace crowdsourcing and bring the power of the crowd to solve any customer problem. Facebook, iPhone apps, and YouTube are just three examples of crowdsourcing. Consider this example of the power of the crowd: Apple offered more than 65,000 apps for its iPhone in less than two years, and the number is projected to rise to 300,000 in 2010.Will Park, “Apple Bans Hundreds of Spammer’s iPhone Apps,” Into Mobile , August 3, 2009, http://www.intomobile.com/2009/08/03/apple-bans-hundreds-of-spammers-iphone-apps.html (accessed August 3, 2009). , Daniel Ionescu, “Android Market Hits 20,000 Apps Milestone,” PC World , December 16, 2009, www.pcworld.com/article/184808/android_market_hits_20000_apps_milestone.html (accessed December 20, 2009).

Power Selling: Lessons in Selling from Successful Brands

What’s Next? Ask the Crowd

How do content companies know what people will want to read about in six months? How do retailers determine what color will be hot next season? How will car companies know what defines luxury next year?

Trendwatching.com, a global trend service, uses a team of global network of business and marketing-savvy “spotters” (a.k.a. the crowd) in 120 countries to gather data, observe consumers, and talk to the people who are innovators and trendsetters to identify what’s next. Trendwatching.com offers a free version of its basic trend reports on its Web site ( http://trendwatching.com ), but also sells premium and customized trend information to all types of companies such a retailers, media companies, manufacturers, and others.Trendwatching.com, http://trendwatching.com (accessed August 9, 2009).

The use of technology in B2B selling, especially social networking, will continue to explode as digital natives (people, probably like you, who are under the age of 27) move into the workplace and meet the digital immigrants , Generation X and baby boomers who accept technology, but developed their online habits during a different time. Processes, behaviors, communication, and decisions will occur differently in the future.

The B2B Buying Process

What will it be like in the future?

www.enquiro.com/b2bresearch

Emotions Dominate B2B Buying

Whether you look at the traditional buying process or the role the Internet plays in providing information, it appears that the B2B buying process is logical and rational, but appearances can be deceiving. Despite the implication and belief that companies make purchasing decisions based on facts, it’s a good idea to remember one of the key tenets of B2B buying mentioned earlier: business-to-business means person-to-person. That means that although a B2B buyer is making a decision on behalf of her company, she still behaves like a consumer and is subject to emotions and feelings. “People rationalize buying decisions based on facts, but they make buying decisions based on feeling,” according to Bryan Eisenberg from ClickZ.com.Bryan Eisenberg, “Buying Is Not a Rational Decision,” ClickZ, November 26, 2001, http://www.clickz.com/927221 (accessed August 1, 2009).

Fear and Trust

You learned in Chapter 3 how important trust is in a relationship. People won’t buy from someone they don’t trust, which is why some salespeople are more successful than others; they work to establish and develop trust with the customer. People buy when they feel comfortable with the product and the salesperson and when they believe it is the best decision they can make. They want to do business with someone who understands all their needs, not just the needs of the product or service. And because the B2B purchasing process usually includes multiple people, it means that the salesperson needs to develop a relationship and establish trust with as many people involved in the purchasing process as possible.

Although trust is a positive emotion that can influence a sale, an even stronger emotion in B2B buying is fear. B2B buyers have several fears, not the least of which is being taken for a fool. Many executives have had the experience of being told one thing by a salesperson only to learn the hard way that what he said just wasn’t true. “People are afraid of being sold,” according to Tom Hopkins, author of How to Master the Art of Selling .“Fear of Buying,” Selling Power Sales Management eNewsletter, August 18, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=296 (accessed March 16, 2010). The best way to overcome this fear is to demonstrate that you are trustworthy. That means something as simple as returning a phone call when you say you will, or following up with information as promised. Even the language that you use can signal trust. For example, “initial investment” is a better term than “down payment,” “fee” is more customer-friendly than “commission,” “agreement” says something different than “contract,” and “can’t” sounds more negative than “would you consider.” Understand your customer’s fear of buying and replace it with comfort, trust, and confidence—in you.“Fear of Buying,” Selling Power , August 18, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=296 (accessed June 21, 2010).

Power Player: Lessons in Selling from Successful Salespeople

Fear as an Opportunity

Norm Brodsky is the owner of an archive-retrieval business called CitiStorage. He is a master salesperson because he is an astute listener and understands how to “listen between the lines” to pick up on customers’ fears. One day he was showing a prospective customer through his facility when she saw all the boxes and said, “Gee, aren’t you afraid of having a fire in this place?” Norm was not concerned at all because he already had backup coverage. But he realized that she was afraid of a fire so instead of simply saying that he was not concerned, he took the opportunity to address and respect her fear, not gloss over it. He responded by saying, “Yes, certainly, I’ve thought about the danger of a fire, and let me show you what we’ve done about it.”Norm Brodsky, “Listen and Earn,” Inc. , March 1, 1997, www.inc.com/magazine/19980301/878.html (accessed August 9, 2009). He used the opportunity to put her fear to rest, even before his sales presentation.

Some consumer products such as virus protection, security systems, or insurance, appeal to the emotion of fear; consumers balance the assurance of owning it with the pain of acquiring it. (Let’s face it: It’s more fun to buy a new PC than to buy virus protection.) However, in the B2B buying process, the buyer is not the person who experiences the benefits of the product or service she purchased.“Beyond the B2B Buying Funnel: Exciting New Research About How Companies Make Complex Purchases,” Marketo, April 22, 2009, blog.marketo.com/blog/2009/04/beyond-the-b2b-buying-funnel-exciting-new-research- about-how-companies-make-complex-purchases.html (accessed August 1, 2009). The fact is if the product or service doesn’t perform as expected or doesn’t generate the desired results, the decision maker could put their job in jeopardy.“Fear of Buying,” Selling Power , August 18, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=296 (accessed June 21, 2010). “B2B buying is all about minimizing fear by minimizing risk,” according to a recent study by Marketo, a B2B marketing company.“Beyond the B2B Buying Funnel: Exciting New Research About How Companies Make Complex Purchases,” Marketo, April 22, 2009, blog.marketo.com/blog/2009/04/beyond-the-b2b-buying-funnel-exciting-new-research- about-how-companies-make-complex-purchases.html (accessed August 1, 2009). There are actually two kinds of risk: organizational risk and personal risk . Most salespeople address the organizational risk by discussing the rational aspects of the product or service with information such as, “This server accommodates more than five times as much traffic as your current server.” However, it is the personal risk, which is usually not articulated, that has a significant impact on the buying decision. This is especially true today given the focus on personal accountability, budgets, and performance. Imagine being the buyer at a fashion boutique that bought too many plaid skirts and has to request a budget for markdowns, or the decision maker who bought the computer system to power the United States’ government car rebate program, Cash for Clunkers, which was delayed for over three weeks because the system crashed.“Cash for Clunkers Launch Postponed Due to Computer Crash,” U.S. News and World Report , July 24, 2009, usnews.rankingsandreviews.com/cars-trucks/daily-news/090724-Breaking-News-Cash-for-Clunkers-Launch-Postponed-by-Computer-Crash (accessed August 4, 2009). Some purchasing decisions at certain companies have been so bad that people have been fired as a result. Every B2B purchaser thinks about nightmares like this, so she is naturally risk-averse. The best approach in these instances is for the salesperson to reassure her that you realize how important it is for her to look good to her boss and throughout her organization as a result of the decision and show her exactly how you will help her do that.“Fear of Buying,” Selling Power , August 18, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=296 (accessed June 21, 2010).

Fear is a strong motivator in a B2B buying decision, and it can’t simply be addressed in one meeting or conversation. Successful salespeople are aware of it in each contact and use every opportunity to demonstrate trustworthiness. “It’s how you handle the little things that show customers how you’ll handle the big ones,” says Tom Hopkins.“Fear of Buying,” Selling Power , August 18, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=296 (accessed June 21, 2010). It’s best to look at the situation from your customer’s vantage point; you’ll see more clearly how you can deliver value.Bryan Eisenberg, “Buying Is Not a Rational Decision,” ClickZ, November 26, 2001, http://www.clickz.com/927221 (accessed August 1, 2009).

The Evolving Buying and Selling Processes

The framework for the buying and selling processes has been in place for many years. The buying process changes literally every day and has dramatic impact on the selling process. As a result, the “new” processes are not yet clearly defined. One thing is for certain; the processes are no longer organized, controllable functions. “Linear is so twentieth century,” according to Michael R. Solomon, author of Consumerspace: Conquering Marketing Strategies for a Branded World .Michael R. Solomon, Conquering Consumerspace: Marketing Strategies for a Branded World (New York: AMACOM, 2003), 11. Cultural, social, and technological changes will continue to drive companies for even better performance, faster, and with ideas as currency, which will continue to drive change in the buying process.

To understand the impact of the rapid changes occurring in the buying process, it’s important to know the basic steps in the selling process. The next seven chapters review the selling process in detail and include insights into how the process is changing. A study by William Moncrief and Greg W. Marshall provides a roadmap for the evolution of the selling process in Table \(\PageIndex{2}\).

Source: Reprinted from Industrial Marketing Management, 34/1, William C. Montcrief and Greg W. Marshall, “The Evolution of the Seven Steps of Selling,” 13–22, Copyright (2005), with permission from Elsevier.

Buying Process Meets FAB

No matter how the buying process evolves, customers continue to make purchase decisions driven by emotions. You learned how motivating trust and fear are for people who are making B2B buying decisions. Comfort, vanity, convenience, pleasure, desire to succeed, security, prevention of loss, and need to belong are all emotions that motivate purchases. A company may want to build a new building that carries its brand name downtown to signal its importance to the city and business community; that would be an example of vanity as a motivator. Or perhaps the company wants to move its headquarters to a better part of town to provide better security for its employees. Maybe a prominent figure in the community donates a large sum of money to your college motivated by the desire to give back. The same types of motivations apply to B2C purchases: a woman purchases makeup in the hopes of looking as beautiful as the model in the ads, a man buys a sports car in the hopes of turning heads, a student buys a microwave for the convenience of having food when she wants it.

Emotions are the driving force in so many B2C and B2B purchases that you might not even realize it. Consider this: would you buy the product in Figure \(\PageIndex{10}\) ?

So how do you create the same type of emotional appeal with your customers? The answer is simple: FAB.

While you might not consider buying it based on only this factual information, you probably have bought this product based on the emotional appeal of the packaging, advertising, and other marketing messages that tell you that the product is the best late-night snack.

Consider this information that was on the home page of Amazon recently:

3G wireless means books in 60 seconds. No monthly fees, service plans or hunting for Wi-Fi hotspots. Over 300,000 of the most popular books, newspapers, magazines, and blogs available.Amazon.com, www.amazon.com (accessed August 4, 2009).

Amazon truly understands how to use FAB , a selling technique that focuses on F eatures, A dvantages, and B enefits, to sell its Kindle electronic reader. FAB is more than a way of selling; it’s a way of thinking like your customers. Using the Kindle as an example, here are the details about how to use the FAB approach for effective selling.

• A feature is a “physical characteristic” of the product.Charles M. Futrell, Fundamentals of Selling: Customers for Life through Service , 10th ed. (New York: McGraw-Hill Irwin, 2008), 114. In the Kindle example above, the feature is the 3G wireless capability. Features are characteristics of the product; a feature comparison chart between the Kindle and the Kindle DX is shown below.

• A product advantage is the “performance characteristic” of the product, or what the feature does.Charles M. Futrell, Fundamentals of Selling: Customers for Life through Service , 10th ed. (New York: McGraw-Hill Irwin, 2008), 114. In the information about Kindle included at the start of this section, the advantages of the 3G service are that the user doesn’t need to hunt for Wi-Fi hotspots and that over 300,000 of the most popular books, newspapers, magazines, and blogs are available in sixty seconds.
• The benefit is the “result” the buyer will realize from the product because of the product advantage, or in other words, what the feature does or the result it delivers.Charles M. Futrell, Fundamentals of Selling: Customers for Life through Service , 10th ed. (New York: McGraw-Hill Irwin, 2008), 114. The benefit of the Kindle is the fact that you can “rediscover reading anywhere, any time.”Amazon.com, www.amazon.com (accessed August 4, 2009).

Kindle FAB Story

Amazon created an entire video to tell the FAB story of Kindle.

www.amazon.com/Kindle-Amazons-Wireless-Reading-Generation/dp/B00154JDAI/ref=amb_link_ 84932831_1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-1&pf_rd_ r=1SBQSS8P947CD5QK29MC&pf_rd_t=101&pf_rd_p=485413371&pf_rd_i=507846.

Notice how Amazon skillfully reinforces the benefit of portability by showing someone reading on a beach or a bus.

Why does FAB work? Because customers want to know what a product or service will do for them—not just what it’s made of. B2C and B2B customers seek information before making a buying decision but are also driven by emotions. FAB helps you appeal to a customer’s rational and emotional buying behavior by providing the most compelling features and factual information and then showing how the features provide an advantage that delivers a benefit. This is how salespeople help customers establish an emotional connection with a product. You remember from Chapter 1 the power of an emotional connection between a customer and a brand.

You probably use FAB sometimes without even realizing it. “My new Lucky Brand jeans have a dirty wash, fit great, and make me look thin. The best part is they were on sale for only $89.00.” The features are the dirty wash and the fact that they were on sale for $89.00; the advantage is that they fit well (no easy feat when it comes to jeans); the benefit is that they make you feel like you look thin and, as a result, make you feel good when you wear them. Your statement is much more powerful when you frame it with FAB than if you simply say, “I got some new jeans today for $89.00.”

Or maybe you stopped into McDonald’s and tried one of their new Angus Third Pounders. The product feature is that the burger is one-third of a pound and is available in three flavor options; the advantage is that it is thick and juicy; the benefit is that you will enjoy the taste and your hunger is satisfied. The FAB message is more compelling than simply saying that you had a hamburger that was one-third of a pound; that would be stopping at the feature and not offering an advantage or benefit.

If you want to be able to use FAB in conversation, simply think in terms of the following:

• Feature : what the product has
• Advantage : what the features do
• Benefit : what the features mean Laura Clampitt Douglas, “Marketing Features vs. Benefits,” Entrepreneur , http://www.entrepreneur.com/magazine/homeofficemagcom/2000/december/34942.html (accessed August 4, 2009). , Bryan Eisenberg, “Want The to Buy? Sell Benefits,” ClickZ.com, April 9, 2001, http://www.clickz.com/840121 (accessed August 4, 2009).

Table \(\PageIndex{3}\) gives features, advantages, and benefits for some common products.

For example, if you were describing Netflix in terms of FAB, you might say something like the following:

For only $8.99 a month you can watch as many movies as you want and never be charged a late fee. You can order online and have a DVD delivered in about a day and exchange it as many times as you want without a late fee, or you can watch streaming video of your favorite movies online anytime. Now that’s total personalized entertainment.Netflix, www.netflix.com (accessed July 12, 2009).

Now look at this FAB statement with the features, advantages, and benefits in bold:

For only $8.99 a month [ feature ] you can watch as many movies as you want and never be charged a late fee [ advantage ]. You can order online and have a DVD delivered in about a day [ advantage ] and exchange it as many times as you want without a late fee [ advantage ], or you can watch streaming video of your favorite movies online anytime [ advantage ]. It definitely saves you time and money [ benefit ] and gives you total personalized entertainment [ benefit ].

It’s easy to remember by using the FAB framework as your guide.

[ Name feature ] means you [ name advantage ] with the real benefit to you being [ name benefit ].Charles M. Futrell, Fundamentals of Selling: Customers for Life through Service , 10th ed. (New York: McGraw-Hill Irwin, 2008), 116.

Here’s another example, based on research about the 2009 Nissan Cube:Ben Stewart, “2009 Nissan Cube vs. Kia Soul vs. 2009 Scion xB: 300-Mile Fuel-Economy Test-Drive,” Popular Mechanics , February 24, 2009, www.popularmechanics.com/blogs/automotive_news/4306145.html (accessed August 4, 2009).

The Nissan Cube has funky, Japanese-like design and is friendly to the environment with a fuel-efficient 1.8-liter, 4-cylinder engine that gets over 30 miles per gallon. It’s hip, cool, and fun to drive. At $15,585, it’s a great value for the money.

How to Use FAB

Now that you know what FAB is, you probably want to know how to use it most effectively in selling. Here are three easy steps to put FAB to work for you:

• Know your customer . Benefits speak emotionally to customers in a way that rational facts can’t. But you need to know what is important to each customer. The health club that’s open twenty-four hours might be attractive to a young professional because he can work out late in the evening after a long day, whereas the club’s day care center might be appealing to a young mother. Similarly, in a B2B selling situation in which a buyer is evaluating warehouse space, one customer might be interested in the warehouse because of its state-of-the-art systems, while another might be focused on location. Know what motivates your customer, and then you can craft an effective FAB statement.Laura Clampitt Douglas, “Marketing Features vs. Benefits,” Entrepreneur , http://www.entrepreneur.com/magazine/homeofficemagcom/2000/december/34942.html (accessed August 4, 2009).
• Think outside your box . If you want your FAB to work for your customer, you will need to deliver value in the form of benefits that she can’t get from anyone else. Think about your product or service in a different way; talk to people, watch the trends, see what else you can bring when you look at your product or service in a different way. Baking soda had traditionally been used as a leavening agent for baking. Arm & Hammer reinvented baking soda as a way to remove odors from refrigerators. Can you be as creative with the application for your product or service?Laura Clampitt Douglas, “Marketing Features vs. Benefits,” Entrepreneur , http://www.entrepreneur.com/magazine/homeofficemagcom/2000/december/34942.html (accessed August 4, 2009).
• Get in touch with your customer’s motivation . Listen, learn, and craft an FAB message that will “have your customer at hello.”IMDB, Jerry McGuire , written and directed by Cameron Crowe, released December 13, 1996, www.imdb.com/title/tt0116695 (accessed August 4, 2009). Although that might be an overly romantic notion of how selling works, your goal is to have your customer fall in love with your product or service so much that it’s something he can’t live without. Imagine living without iTunes, your cell phone, or your favorite pair of jeans. That’s how your customer should feel about the product or service you are selling. If you understand his motivation, you can deliver features, advantages, and benefits that not only tell him why he should buy, but why he can’t afford not to.

Key Takeaways

• The traditional B2B buying process has seven steps: need recognition, defining the need, developing the specifications, searching for appropriate suppliers, evaluating proposals, making the buying decision, and postpurchase evaluation.
• The Internet is a game-changer as it relates to the buying process because information is no longer the exclusive domain of the salesperson; the power has shifted from the seller to the buyer.
• Crowdsourcing occurs when a company takes a job that is traditionally done by an employee and issues an “open call,” usually online, to people all over the world to solve the problem. Salespeople can use crowdsourcing to get the best solutions for their customers.
• Emotions such as comfort, security, convenience, pleasure, and vanity are major motivations for buying decisions.
• Trust and fear are especially important in B2B buying because the decision maker has to consider organizational risk and personal risk as part of his buying decision.
• The buying process continues to evolve, which changes the selling process; the traditional selling process provides a foundation and insight into the evolution.
• A feature is what a product has .
• An advantage is what the feature does .
• A benefit is what the features mean to the customer.

Exercise \(\PageIndex{1}\)

• dentify a recent major purchase that you made recently. How did you recognize the need for the product or service? Where did you go to gather information about the options that were available to you? Did you use one method or a combination of methods?
• Contact a buyer at the headquarters of a retailer such as Dick’s Sporting Goods, GameStop, Costco, Urban Outfitters, or another company. Ask him about the process he uses to determine which products to put in the retail stores. Is his process similar to the process outlined in this chapter? How does it differ? How does his postpurchase evaluation impact his decision to buy the product again?
• Based on the comment that “customers don’t want to be sold,” what should a salesperson do to sell to a customer? Identify an example of a good buying experience and a bad buying experience that you have had recently. Did the salesperson “sell” to you?
• Describe a situation in which a salesperson might use crowdsourcing.
• Assume you are a salesperson for a major telecommunications company and you are calling on a major construction company that is considering buying smart phones for the key people in the company. Describe at least one organizational risk and one personal risk that might be involved in the customer’s decision.
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Purchasing Process: Definition, Key Steps & Best Practices

All businesses need to buy goods or services to meet their day-to-day needs. If you don’t have a formal way of buying things and services, you may be spending more than you need to. Here, the purchasing process comes.

How you set up your buying process will significantly affect your business, not just in terms of managing costs and expenses but also in terms of how well it runs. Learning and using a few steps and best practices for your buying process can help reduce waste and protect your business from unnecessary risk and cost. 

And you also can create workflows that make the most of every dollar spent in terms of efficiency, profits, and value recovered.

What is the purchasing process?

A business’s steps to make a purchase are called the purchasing process. Businesses usually have to go through a formal process when they buy something. Also, when they want to buy something, they may need to research, get input from different departments, negotiate, and send out payments. 

The purchasing process involves simple and essential procedures that organizations and individuals use to buy things they need.

It may differ depending on how a company works and what it needs, but the steps in this process usually include the following:

• Reviewing and approving requests for purchases
• Making and sending out a purchase order
• Negotiating prices, contracts, or how to pay for things
• Keeping track of spending

In the purchase process, many people are involved, such as procurement and finance teams, requesters, approvers, vendors/suppliers, and the purchasing and accounts payable departments.

Importance of a purchasing process

The formal purchasing process is really important for you for many reasons. Let’s break down some key points to understand its importance:

Cost savings

The purchasing process is like your money-saving superhero. It allows you to compare prices, seek out discounts, and negotiate deals. This means you can get the best bang for your buck. With a well-structured process, you can avoid impulsive buying and ensure you spend your money wisely.

Quality assurance

You want to be sure that what you buy is worth your money. A proper purchasing process lets you research and assess the quality of products or services. It empowers you to make informed decisions, preventing you from ending up with subpar items or shoddy services that might disappoint you.

Legal protection

The modern purchasing process acts as your legal shield. It spells out the terms and conditions of your purchase, which can be crucial if any issues arise. It ensures that both you and the seller are on the same page, reducing the chances of misunderstandings or disputes. If something goes wrong, a clear process can be your ticket to a fair resolution.

Efficiency and time management

Time is precious, and a structured purchasing process helps you make the most of it. It streamlines your shopping or procurement activities, making the entire process faster and more efficient. You won’t waste time running from store to store or endlessly searching for products online. Instead, you follow a well-organized plan that saves you time and effort.

Transparency and accountability

The purchasing process is like a transparent window into your spending. It keeps everything open and visible, essential for personal finances and business operations. This transparency reduces the chances of fraud or errors in your purchases.

You know where your money is going, why you’re spending it, and who is accountable for each step of the process.

What is the difference between the purchasing and procurement process?

Let’s talk about the difference between the purchasing and procurement processes:

Purchasing process

When you’re in the purchasing process, you’re focusing on buying things. It’s like going to the store and picking out the products you need. This part is all about finding the best price, negotiating deals, and making the actual purchase.

In a way, purchasing is like a one-time deal. You’re buying what you need, and once it’s done, you move on. It’s more like a transaction.

Procurement process

Now, think of procurement as a bigger picture. It’s not just about buying stuff but also about the whole process of getting what your organization needs. It includes finding the right suppliers, negotiating contracts, managing relationships, and even thinking about the long-term impact of your buying decisions by the procurement department.

Procurement is like a whole journey. It’s not just about buying things once but managing your purchases over time. It’s a bit more strategic, like planning for the future.

So, the main difference is that purchasing is like the short-term action of buying, while procurement is the bigger, long-term strategy of how your organization gets what it needs. Both are important, but they focus on different aspects of the buying process. 

In a larger organization, a dedicated procurement team plays a key role in developing and executing the long-term procurement strategy, ensuring that the organization gets the best value from its purchases over time.

Key steps of the purchasing process

Usually, the purchasing process is a cycle, with each phase requiring information and permissions. Every business will add its special touches. But in general, the buying process follows a well-known pattern of steps. They are given below:

Understand business needs

Even though this isn’t exactly a step, it’s an excellent place to start if you want to manage how a business spends money, find ways to save money, cut spending that isn’t necessary, and deal with supply chain problems.

For example, if a company requires a large number of goods, such as mobiles, there may be an opportunity to negotiate discounts.

Create a purchase requisition

The purchasing process begins when someone makes a purchase request and sends it in. You can speed up this process and improve the request process by creating a standard request form. This way, purchase requests will be the same and meet the data management needs of your team.

Screen the requests

Screening purchase requests ensure that all of the company’s purchases are correct, don’t go over budget, and, most importantly, are actually needed.

Search for suppliers

Once the request has been screened and approved for sourcing, the purchasing team will look for suppliers or vendors to meet the request. For this, you need to learn more about strategic sourcing and its importance for finding the best suppliers.

Request for proposals

Once the best products have been sourced, it’s common for the purchasing team to ask for proposals to make sure the products or services are within budget, can be delivered on time, and meet your business’s policies or requirements.

Negotiate costs and contract terms

Sometimes, all the boxes may be checked except pricing or payment terms. For example, the quality might need improvement, but the supplier might be the only one who can meet the demand by a certain date. In this case, the purchasing manager will try to negotiate a more reasonable purchase total.

The purchase request is prepared for final approval if every step of the process, including cost, delivery, and payment process, complies with the specifications. If it’s turned down, the purchasing team will either inform the requester or try to find another source or vendor.

A department manager’s lack of approval, duplication of the purchase, high cost, and failure to provide enough value for the company are a few reasons why it could be rejected.

Issue a purchase order

Once all the approvals are in, the purchasing team will make a purchase order based on the details of the approved purchase request and send it to the chosen supplier or vendor to be filled out for supplier evaluation .

Best practices for the purchasing process

Use the following best practices to make the purchasing process go smoothly.

Automate the efficient purchasing process

Whenever you can, try to automate the purchasing process, with purchase automation software, a business can shorten the time it takes to buy something, make it easier for people to do their jobs, reduce mistakes, and reduce paperwork.

Purchase automation software is helpful if your business repeatedly buys a lot from the same suppliers.

Keep accurate records

Keep accurate records of the whole buying process. It includes records of possible suppliers, negotiations, sales, returns, and any other transactions. You might want to switch to a different supplier or have a problem with the one you already have.

Keeping accurate records of every purchase process step helps reduce problems and extra work in the future.

Review your needs often

A company’s needs change all the time. Sometimes, a business needs something completely new, and sometimes, it needs a different version of something it already has. Make it a regular part of your business to look at what you need now and whether the things you buy meet those needs.

By keeping an eye on your operations regularly, you can find problems and fix them faster. It lets your business grow while you make wise spending decisions.

The purchasing process is primarily transactional and systematic. But you should still use expert strategies to help your company even more. Using the steps and best practices we’ve shared, your Purchasing team will achieve savings and efficiency for years to come.

Now, it’s time to create your purchasing process. You will have to analyze your market, business, and customers. If you need any help with the analysis process, QuestionPro is there for you.

QuestionPro CX is a survey software that helps you analyze your business and manage your customer feedback. Contact us right away to talk about how to do it.

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Frequently Asked Questions (FAQ)

The purchasing process is an organization’s steps to buy products and services efficiently.

Purchasing is the short-term buying action, while procurement is the long-term strategy for acquiring what an organization needs.

Ongoing supplier relationship management and post-purchase evaluations are conducted to ensure long-term value and quality.

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8 Steps of a Business Organization's Purchasing Process

• Small Business
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What Are the Three Most Important Components of an RFP?

The difference between a requisition & a purchase order, roles of a purchasing department.

• Business Activities That Are Preformed in the Expenditure Cycle
• How to Join Facebook as an Organization

Unlike consumer buying habits, businesses usually have a more formal approach toward purchasing. Rather than make impulse purchases, businesses will compare prices, compare suppliers and compare the quality of goods and services before completing a sale. Although some companies may spend more time on specific steps in the process or they may eliminate certain steps altogether, most business-to-business purchases can be divided into eight distinct steps.

1. A Problem Is Identified

The purchasing process does not begin until someone identifies a problem within the organization, which can be solved by purchasing a good or service. Anyone within the organization can initiate this – from a customer service rep out of printer paper – to the CEO who decides that it's time to expand to a larger facility. In some instances, a sales person may help someone in the organization to identify a need that no one had previously recognized.

2. General Need Description

After a problem is identified, the organization determines which product or service is required. When an office is out of printer paper, the office manager may decide that more paper is needed. However, a software engineer in the same company might suggest that the organization become paperless by providing all employees in the office with tablet computers.

3. Product or Service Specification

Once the general need is agreed upon by those who have purchasing authority in that organization, they will then narrow down the options by specifying what the product or service must offer. If they have decided on tablets, they would then specify the size they want, how much memory the tablets offer, and so on. If they decide on paper, then they would determine the quantity and quality of paper required.

4. Potential Supplier Search

The third step of the buying process involves looking for potential suppliers. If the company doesn't already have an established relationship with a vendor that offers the product, then often the company must look online, attend trade shows or contact suppliers by telephone. Purchasers determine if the suppliers are reputable, financially stable and if they'll be around for future requirements.

5. Request for Proposals

For large purchases, organizations usually write out a formal RFP, a Request for Proposal, and then send it to their preferred suppliers. Alternatively, they may make the process public so that anyone can send in a proposal. For smaller purchases, this could be as simple as looking at the price on a website.

6. Supplier Evaluation and Selection

In this part of the process, supplier proposals and prices are evaluated to determine who is offering the best price and the best quality. Often, price alone is enough to win an organization's business, as many businesses will weigh the price against financing options, supplier reputation and whether or not a supplier can provide the organization with future goods and services.

7. Establishing Credit and Order Specification

Once the winning supplier has been selected, the organization places the order. This may involve establishing credit with the supplier, agreeing on terms, as well as reviewing shipment times and any other deliverables that may come with the sale, such as installation or product training.

8. Supplier Performance Review

After the product has been delivered or the service has been performed, the organization will review the purchase to see if it meets acceptable standards. For larger purchases, this could be a formal review involving key decision makers in the organization and the supplier's sales staff. For smaller purchases, it is often informal. For example, if the company ordered a box of paper that arrived late or was damaged, the company may decide not to buy from that supplier again, without ever informing the supplier of a problem.

• University of Delaware: What is Consumer Buying Behavior?

A published author and professional speaker, David Weedmark has advised businesses on technology, media and marketing for more than 20 years. He has taught computer science at Algonquin College, has started three successful businesses, and has written hundreds of articles for newspapers and magazines and online publications including About.com, Re/Max and American Express.

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• 1 Five Stages of the Business Buying Decision Process
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How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated May 7, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

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One-page plan template

Download a free one-page plan template to write a useful business plan in as little as 30-minutes.

Sample business plan library

Explore over 500 real-world business plan examples from a wide variety of industries.

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean 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’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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The 8 stages of the B2B buying process

To succeed in B2B marketing, it’s essential to understand the different stages of the buying process that your prospects go through. B2B buyers tend to take a much more structured and formal approach to purchasing goods and services. As a result, the sales process is often longer and more complex than in B2C sales. Understanding this is key for B2B marketers and business owners.

We’re in a B2B industry ourselves. And the majority of the clients we work with are B2B organisations, so we understand the unique challenges that come with marketing and selling to other businesses.

There are typically 8 stages in the B2B buying process that buyers go through

These steps can be thought of as individual tasks, a to-do list that buyers need to complete before making a purchase. They might repeat a task multiple times if necessary.

1. The Problem Becomes Clear: “We have a problem!” The buyer realises they have a problem or need that must be addressed.

2. The Hunt for Solutions: “What solutions exist?” The buyer begins researching possible solutions to their problem or need.

3. The Action Plan: “Are we going to act? If yes, what do we need from this solution?” The buyer creates a list of specific requirements for the ideal solution.

4. The Supplier Shortlist: “Who might supply a suitable product or service?” The buyer identifies different suppliers who might provide the ideal solution.

5. The Request for Proposal (RFP): “Please submit proposals for (—)” The buyer creates a formal document outlining their specific requirements and sends it to suppliers they are considering doing business with.

6. The Appraisal and Decision: “Which supplier is the best choice?” The buyer compares proposals from different suppliers and selects the one they feel can best meet their needs.

7. The Purchase Transaction: “Let’s do business.” The buyer and the chosen supplier negotiate terms, sign contracts, and implement the agreed purchase.

8. The Review: “Did we make the right decision?” The buyer evaluates whether the solution they purchased has helped them resolve their problem or meet their need. If not, they may seek out a different solution.

Though it may seem complicated and time-consuming from a sales and marketing perspective, these distinct stages of the B2B buying process exist for good reason. A typical consumer will go through much the same process of evaluation, only faster and more impulsively. The more formal process described above helps decision-makers to take their emotions out of the buying process. This is beneficial for both the buyer and the supplier, as it leads to better-informed decisions and reduces the risk involved. In theory, this analytical decision-making process is more likely to result in satisfaction on both sides.

If you’re marketing to other businesses, understanding and catering to their needs at each stage in the B2B buying process is critical. Keep these steps in mind when planning your sales and marketing strategy and you’ll be well on your way to closing more deals.

1. The Problem Becomes Clear: “We have a problem!”

To begin with, your potential customer isn’t even in the market for what your company offers. They are blissfully unaware of their need.

The first stage in the B2B buying process is underway when the buyer realises they have a problem or need that must be addressed.

At this point, the buyer is beginning to understand the nature of their problem. The buying journey has begun. They are building a detailed picture of the deficiency in their business and starting to define it.

Your job at this stage is to make your potential customer aware of their need for your product or service. You can do this through marketing campaigns, targeted content, educational webinars, or even just a conversation that helps them to see the issue you resolve.

2. The Hunt for Solutions: “What solutions exist?”

Once they become aware of their problem, they start to look at all available solutions.

This is broad, top-down research that most often takes place on the internet via search engines. They want to understand all of their options and evaluate the pros and cons of each one.

As a marketer, you need to generate awareness around the pain points your product or service can solve. Digital channels like your website and social media accounts are great for sharing thought leadership pieces that show off your company’s expertise.

3. The Action Plan: “Are we going to act? If so, what do we need from this solution?”

The business needs to decide what type of solution it wants and then consider the benefits and drawbacks of each option.

After evaluating their options, the buyer will decide what action to take – if any. They might accept the status quo and the buying journey ends here. Or they commit to a particular solution and define the service or final product specification they intend to purchase. This includes setting an appropriate budget.

If you’re familiar with Jobs Theory, decision makers at the company are deciding what job needs to be done at this stage of the buying process. The outcome might be pretty standard, or a unique set of company-specific requirements.

This takes place internally, behind closed doors. As a marketer, you need to make sure you’re providing the right information to help with this decision. That means comparing your solution with every possible alternative under consideration, not your direct competitors. Point out the cost of inaction too. You need the company to continue the buyer’s journey if they are to become a viable customer.

4. The Supplier Shortlist: “Who can provide us with XYZ?”

Now that the buyer knows what they need, it’s time to identify who can provide it.

The buyer will put together a list of potential vendors, usually starting with online research. They’ll use their own experiences and recommendations from others in their network to narrow down the field.

The goal here is to be included on the supplier shortlist. You can achieve this by ensuring that you have a strong online presence and positive reviews from past customers.

Make sure your website gives business buyers a good first impression and encourages them to request more information. Other digital channels such as LinkedIn and other social accounts need to be active and have an equally polished appearance.

Make it easy for B2B buying teams to contact you with enquiries. This will give you the chance to follow-up with far more detail. The B2B buying process is slow, it’s considered, and it’s well researched. And print marketing collateral can be far better absorbed by decision-makers. A quality corporate profile can help get your sales reps to get through the door and onto the supplier shortlist.

5. The Request for Proposal (RFP): “Can you provide us with this solution?”

The request for proposal (RFP) is the first sign of commitment you may see as a supplier. RFP’s are standard practice for any large business that wants to find the best possible partner for its specific needs. By clearly outlining your requirements and objectives, an RFP allows the buyer to compare potential suppliers on a level playing field. It also helps to ensure that everyone is on the same page from the start of the project, which can save a lot of time and frustration down the road.

The purchasing manager (or senior management) will normally score vendors for their performance against specific criteria. This scoring system takes the emotion out of the decision-making process and ensures that only the most qualified vendors are considered for contracts.

6. The Appraisal and Decision: “Which supplier can provide us with the best solution?”

Finally, you’re nearing a purchasing decision. In the later stages of the B2B buying process, businesses are evaluating proposals from the shortlisted vendors and scoring them against specific criteria.

During the appraisal process, it’s not unusual for decision-makers to go back to vendors with questions or clarifications. They might also ask for additional information, such as customer references or demonstrations of the product or service in action.

At the end of this stage, the buyer will have a good understanding of each vendor’s capabilities. They’ll be able to compare apples with apples and make an informed decision about which supplier is best suited to their needs.

7. The Purchase Transaction: “Let’s do business.”

Once the evaluation process ends a purchasing decision can be made. It’s time to sign on the dotted line and make the purchase. For most businesses, this is a relatively straightforward process. The buyer simply needs to choose the preferred vendor and agree on terms, including payment terms and delivery schedules.

Payment is usually made upfront or shortly after delivery of the product or service. In some cases, however, the purchase transaction can be more complex. If a business is purchasing a large or expensive item, it might need to finance the purchase or sign a lease agreement.

8. The Review: “Did we make the right decision?”

The B2B buying process doesn’t end when the contract is signed. After the purchase has been made, business buyers will review their purchasing decisions and make sure that the chosen vendor is living up to their promises.

This review should take place shortly after the product or service has been delivered. It’s an opportunity for the buyer to assess whether they’re happy with the purchase and identify any areas where the vendor could improve.

If the buyer is satisfied with the purchase, they may choose to do business with the same vendor again in the future. If not, they may start the B2B buying process all over again, looking for a new supplier that can better meet their needs.

It’s important to nurture your relationship with the customer and ensure they’re happy with the purchase decision they’ve made. Focusing on customer satisfaction will help to build loyalty and encourage repeat business down the road.

Aligning your marketing to the B2B buying process

Remember that these stages are actually tasks within the purchase process. Business buyers need to complete each step on their way to a purchasing decision.

By understanding the stages of the B2B buying process you can ensure that appropriate marketing collateral is always in place. It helps you provide the right information, produce the right marketing collateral, and have the right conversations to swing sales decisions your way.

Aid their research efforts

The buying process began with problem identification. Your marketing can speak to that need. Help the prospect start the buyer’s journey by identifying the problem they face and how it could potentially affect their business. Remember that first, you need the senior decision maker to commit to resolving their problem and begin their buying journey. You want to make the cost of inaction clear.

Next, the B2B buying team will look into all available solutions.

Buyers are looking for information that will help them understand their options. They might search online for articles or white papers that compare different products or services. Or they might attend a trade show or webinar to learn more about what’s available. You’ll need to be there with the right information, knowledgeable and capable.

Excel in the evaluation phase

As a marketer, you can ensure that your website is optimised for relevant keywords and that your sales team is prepared to answer questions about your products or services. You might also consider creating helpful resources, such as ebooks or guides, that buyers can use during their research.

During the evaluation stage, buyers are looking for more detailed information about specific vendors. They might request a product demonstration or a pricing proposal. As a marketer, you can ensure that your corporate profile and marketing brochures are top-notch. Have testimonials or case studies that highlight the benefits of your products or services.

Reassure when the purchase process ends

It’s important to stay in touch with buyers after the purchase has been made. It’s human nature to second-guess ourselves and you can expect some degree of buyer’s remorse.

 As a vendor, it’s your job to reassure the key decision maker that they’ve made the right decision.

The post-purchase follow-up is an important part of the B2B buying process and it’s an opportunity to continue building your relationship with the customer. You might send a thank-you note or give them a call to check in and see how they’re enjoying the product or service. 

The B2B buying process is much like any other customer journey. Yes, it’s a more formal decision making process, but that’s an opportunity in disguise. With good marketing collateral and a solid understanding of the steps involved, you can guide prospects smoothly through to a purchase decision – and beyond.

We are a design agency that can help you with your B2B marketing needs and increase your chances of winning formal purchasing decisions. Contact us today, and we’ll get started on working together.

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How to Buy An Existing Business: A Step-By-Step Guide

Many people dream of owning and operating a business, citing that it’s essential to achieving the American Dream. It’s not uncommon to hear stories of people saving every last cent they earn to start their own company and watch it flourish. But, as business and economic landscapes change, more and more prospective business owners are opting to buy existing businesses instead of starting from scratch.

There are many benefits to buying an existing business, but above all else, business owners have a higher chance of mitigating risk and closure than launching a new venture. After all, it’s estimated that “30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first ten.” 1

But, buying a business isn’t an easy task to undertake. You need to have a solid plan under your belt to even have a chance of success. That’s why we’ve developed this guide to help you. With it, you will learn how to buy an existing business by gaining insight into what to look for in a prospective business, understanding why business owners sell their small businesses, evaluating a business’ financial and legal standing, and more.

• Why do owners sell their business?

Choosing which business to buy.

• Evaluate initial information about a few businesses.
• Evaluate the business you’re considering.
• Make a written offer.
• Secure the required funding.
• Finish the sale.

1. Why do owners sell their business?

When buying a business, it’s important to think about the reasons why the current business owner is trying to sell it. There are many reasons, good and bad, why small business owners make the decision to sever ties with the businesses they started. As someone who is considering buying an existing business, it’s vital that you understand those reasons so you go into the buying process with the understanding of the seller’s motivations.

Many business owners opt to sell their business due to:

• Being an entrepreneur is often a job that easily exceeds the standard 40 hour work week. It’s natural to want to retire after getting a business off the ground and running it for many years, whether that means passing it to a trusted associate or selling the business altogether.
• Many business owners want to start a business, set it up nicely in terms of revenue, and then sell it to turn a profit and go on to a new venture. This kind of reason can be a great opportunity for a prospective business owner. While this is generally a noble reason, we do recommend extra research if a business owner cites this reason.
• After years of hard work, many business owners simply opt to sell in order to pull out their capital after years of building the business.

While these reasons seem to be mostly positive and constructive towards someone looking to purchase, not all business owners have the same motivations. In fact, many small business owners have not-so-great reasons why they want to dispose of their companies and you need to be able to spot the red flags.

Some red flags to keep in mind include:

• Even if a business is profitable, the business owner can still have made bad financial decisions that land them in hot water. When this happens, they see liquidating the business as a way to relieve them of debt or other financial burdens. It’s important to uncover and assess the business’ financial information to make sure you aren’t buying something that has financial challenges.
• Internal issues that result in a split are, of course, never good. We advise that you be wary of the issues themselves so you can understand the reasons behind the sale, so you know for a fact that they don’t have to do with any potential downfalls in the business. Examples of these include management problems, other disputes among staff and ownership, or even issues with equipment or resources that make running the business difficult.
• Owning a business can be demanding, which often leads to burnout. Burnout can lead to declining revenues and discouragement of employees. If this is the case, you’ll have to pick up the pieces the old owner left behind, which can be challenging.

When you’re going into the process of buying a business, it’s vital that you ask the right questions, to dig deeper into why an owner is trying to sell a business. Doing so will help you find out if you’re making a sound investment.

Before you begin the process of looking for a business, you need to figure out the kind of business you want to buy. Not every person can run any business, so it’s important to evaluate your needs and wants from top to bottom.

You need to really evaluate what kind of business you want to buy in order to have the best chance of success. Some of the criteria you should keep in mind are the business’ physical location, its industry, the size of the business, and the lifestyle you have versus the lifestyle the company currently operates under. These are great baseline figures to think about because, even though you’re buying this business, you’re integrating into something that already exists. So, if you go to a company that you’re not compatible with and try to force it into something that it’s not, it can be difficult to move forward.

We encourage you to write out a series of needs and wants that you are looking for in a business. That way, you will have something to reference once you begin your buying process. Below is a form you can fill out with some questions to consider.

• __________________________________

Once you’ve got your list of important characteristics determined, you are ready to start looking for businesses for sale that match your search criteria. Searching on BusinessBroker.net is a great way to find businesses for sale.

It may also be beneficial for you to have a helping hand to guide you along the way by way of a business broker. Business brokers work as many home brokers do – they help you find businesses that fit your buying criteria. Business brokers act as intermediaries between buyers and sellers in the brokerage process. They are trained in business transfers and have experience and knowledge in evaluating businesses from all essential angles.

A business broker can help you narrow down your options while also finding companies that fit into your above criteria without the stress of having to do it yourself.

To find a business broker near you, check out our business broker directory .

3. Evaluate initial information about a few businesses that interest you.

Consider each of the main characteristics you’re looking for in a prospective business as determined in step 2. Now, in conjunction with your business broker, find several small businesses you’re tentatively interested in and compare them to your wants and needs. Feel free to take notes directly on this page as you evaluate the businesses.

Note: As you’re going through this process, it may be beneficial for you to reach out to other business owners to learn more about industry standards that may impact or restrict your options related to these business characteristics. For instance, there may be certain industries that tend to be relocating to another area, or certain laws coming into effect that may impact operations. Even if something monumental like this isn’t going to impact your chosen business, it is always helpful to get another perspective before jumping in.

• Business 1: ________________
• Business 2: ________________
• Business 3: ________________

Depending on which business meets these core needs, you can narrow down your search by choosing a handful of contenders to evaluate further.

4. Evaluate the business you’re considering.

Once you’ve found a few businesses that fit your base criteria, it’s time to start a more extensive evaluation process. In this stage, it may prove helpful to have an attorney and accountant on call who can assist as needed with specific questions or issues that may arise. Your business broker may have trusted attorneys or accountants that they use regularly so check with your them first before hiring anyone on your own.

This biggest thing to keep in mind during this step is to do your due diligence. But, luckily, your business broker will have a comprehensive list of items to check during your due diligence period.This checklist and corresponding analysis and collection of data will enable you to see if it is as much of a fit for you as you initially thought and will also point to any improvements you think are needed if you choose to move forward with the purchase.

Even though you’re not making price negotiations right now, that doesn’t mean you shouldn’t go through the business’ financials with a fine-tooth comb. Accurate financials are critical for making an informed decision, and the financial statements and income tax returns must mirror each other. You will want to review the past three years with your business broker or trusted advisors, as well as your accountant and attorney so they can spot specific things you might not know to consider. And if you want to move forward with a business you’ve evaluated, it’s a good idea to create a business plan with the information you find. This will help you in the next step when you’re making a written offer.

5. Make a written offer through your business broker.

Now that you’ve evaluated your prospective businesses and found the one you want to move ahead with, it’s now time to write up an offer with your business broker. To start, list out all the tangible and intangible assets of the business that will transfer to you. Other items to include in your offer are:

• The offer price
• Terms of payment
• If you will need owner financing
• How long the owner has to accept or counter
• A negotiation clause

It is also vital to include a non-compete provision in your written offer to prevent the current business owner from opening a new business near you with the money from the sale. Along with that, it’s a good idea to require the owner to sign a statement that they have disclosed all of the assets and liabilities of the business, including liens, judgments, and lawsuits.

Have your business broker and attorney review the written offer you’ve drafted before you submit it to the business owner to ensure that everything is accurate. At this point, the owner will either accept, reject, or counter the offer you’ve given. We recommend really leaning on the expertise of your broker to navigate you through the offer process.

5. Secure the required funding.

Whether the buyer and seller ultimately agree to the sale, you need to find the appropriate funding. Most small businesses buyers finance a considerable portion of the purchase price themselves, but it’s important for the buyer to have enough money to make a down payment and cover the business's capital requirements, which sometimes means getting loans. There are several ways to get funding. It’s important to learn about all your options before you proceed to the next step.

Seller Financing

Also known as a seller carryback, seller financing is a loan the owner of a business gives to a new buyer to cover some or all of the cost of the purchase. The seller will be the de facto lender and hold the note on the business. This is beneficial because you can get cheaper financing and a faster close. In light of that, you need to also be aware that seller financing may bring higher interest rates and large balloon payments down the road.

Business Loan

You can, of course, go through a bank to get the loan you need to cover your business costs. This is generally a safe option because you can get a relatively low and stable interest rate and have access to refinancing options. Business loans can have downsides, however, like needing to see existing healthy cash flow and needing to have excellent credit.

Personal Savings

As we mentioned above, you can rely on personal savings to finance the purchase of your new business. This is a great option because, of course, you won’t have to rely on another person or entity when buying your business. But, this can also open you up to potential rejection and straining your personal finances if the seller wants more than you originally anticipated.

Retirement Savings

Tapping your retirement savings, such as a 401(k) account, is also an option. Similar to the personal savings option, this provides the benefit of not having to rely on another person or company for funding. However, be aware of penalties and fees you may face based on how old you are when you withdraw funds from a retirement account -- make sure the benefit of doing so outweighs the cost.

Again, we recommend weighing your financing options with your business broker because they will know what your situation is and guide you towards the right path for you.

7. Finish the sale

• Finalize the terms of the sale
• Draft a sales agreement that is explicit in its terms, and have an acquisitions attorney involved

During this final step, you need to finalize the terms of the sale, gather the last bit of paperwork to transfer everything over to your name. Several documents are required to complete the transaction. The purchase and sale agreement is the most important of these, but other documents often used in closings include:

• Escrow Agreement
• Bill of Sale
• Promissory Note
• Security Agreement
• Settlement Sheet
• Financing Statement
• Employment Agreement

Closings are generally done either through an escrow settlement or through an acquisitions attorney. In an escrow settlement, the escrow agent will gather the money to be deposited, the bill of sale, and other relevant documents and hold them until all conditions of sale have been met. After that occurs, the escrow agent acts on the documents and funds in accordance with the terms of the contract.

If you go through an acquisitions attorney, they will draw up a contract and act as an escrow agent. Whereas escrow settlements do not require the buyer and the seller to get together to sign the final documents, attorney-performed settlements do.

Once all of the T’s are crossed and the I’s dotted, it’s time to celebrate – you’ve just bought your new business! Congratulations!

About Business Broker Network

BusinessBroker.net (BBN) was started in 1999 and is a marketplace for businesses- and franchises-for-sale on the internet. Essentially, BBN connects thousands of business buyers and sellers each month. Learn more about how you can find a business broker today.

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The 7 Steps of the Business Planning Process: A Complete Guide

In this article, we'll provide a comprehensive guide to the seven steps of the business planning process, and discuss the role of Strikingly website builder in creating a professional business plan.

Step 1: Conducting a SWOT Analysis

The first step in the business planning process is to conduct a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This analysis will help you understand your business's internal and external environment, and it can help you identify areas of improvement and growth.

Strengths and weaknesses refer to internal factors such as the company's resources, capabilities, and culture. Opportunities and threats are external factors such as market trends, competition, and regulations.

You can conduct a SWOT analysis by gathering information from various sources such as market research, financial statements, and feedback from customers and employees. You can also use tools such as a SWOT matrix to visualize your analysis.

What is a SWOT Analysis?

A SWOT analysis is a framework for analyzing a business's internal and external environment. The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths and weaknesses include internal factors such as the company's resources, capabilities, and culture. Opportunities and threats are external factors such as market trends, competition, and regulations.

A SWOT analysis can help businesses identify areas of improvement and growth, assess their competitive position, and make informed decisions. It can be used for various purposes, such as business planning, product development, marketing strategy, and risk management.

Importance of Conducting a SWOT Analysis

Conducting a SWOT analysis is crucial for businesses to develop a clear understanding of their internal and external environment. It can help businesses identify their strengths and weaknesses and uncover new opportunities and potential threats. By doing so, businesses can make informed decisions about their strategies, resource allocation, and risk management.

A SWOT analysis can also help businesses identify their competitive position in the market and compare themselves to their competitors. This can help businesses differentiate themselves from their competitors and develop a unique value proposition.

Example of a SWOT Analysis

Here is an example of a SWOT analysis for a fictional business that sells handmade jewelry:

• Unique and high-quality products
• Skilled and experienced craftsmen
• Strong brand reputation and customer loyalty
• Strategic partnerships with local boutiques
• Limited production capacity
• High production costs
• Limited online presence
• Limited product variety

Opportunities

• Growing demand for handmade products
• Growing interest in sustainable and eco-friendly products
• Opportunities to expand online presence and reach new customers
• Opportunities to expand product lines
• Increasing competition from online and brick-and-mortar retailers
• Fluctuating consumer trends and preferences
• Economic downturns and uncertainty
• Increased regulations and compliance requirements

This SWOT analysis can help the business identify areas for improvement and growth. For example, the business can invest in expanding its online presence, improving its production efficiency, and diversifying its product lines. The business can also leverage its strengths, such as its skilled craftsmen and strategic partnerships, to differentiate itself from its competitors and attract more customers.

Step 2: Defining Your Business Objectives

Once you have conducted a SWOT analysis, the next step is to define your business objectives. Business objectives are specific, measurable, achievable, relevant, and time-bound (SMART) goals that align with your business's mission and vision.

Your business objectives can vary depending on your industry, target audience, and resources. Examples of business objectives include increasing sales revenue, expanding into new markets, improving customer satisfaction, and reducing costs.

You can use tools such as a goal-setting worksheet or a strategic planning framework to define your business objectives. You can also seek input from your employees and stakeholders to ensure your objectives are realistic and achievable.

What is Market Research?

Market research is an integral part of the business planning process. It gathers information about a target market or industry to make informed decisions. It involves collecting and analyzing data on consumer behavior, preferences, and buying habits, as well as competitors, industry trends, and market conditions.

Market research can help businesses identify potential customers, understand their needs and preferences, and develop effective marketing strategies. It can also help businesses identify market opportunities, assess their competitive position, and make informed product development, pricing, and distribution decisions.

Importance of Market Research in Business Planning

Market research is a crucial component of the business planning process. It can help businesses identify market trends and opportunities, assess their competitive position, and make informed decisions about their marketing strategies, product development, and business operations.

By conducting market research, businesses can gain insights into their target audience's behavior and preferences, such as their purchasing habits, brand loyalty, and decision-making process. This can help businesses develop targeted marketing campaigns and create products that meet their customers' needs.

Market research can also help businesses assess their competitive position and identify gaps in the market. Businesses can differentiate themselves by analyzing their competitors' strengths and weaknesses and developing a unique value proposition.

Different Types of Market Research Methods

Businesses can use various types of market research methods, depending on their research objectives, budget, and time frame. Here are some of the most common market research methods:

Surveys are a common market research method that involves asking questions to a sample of people about their preferences, opinions, and behaviors. Surveys can be conducted through various channels like online, phone, or in-person surveys.

• Focus Groups

Focus groups are a qualitative market research method involving a small group to discuss a specific topic or product. Focus groups can provide in-depth insights into customers' attitudes and perceptions and can help businesses understand the reasoning behind their preferences and behaviors.

Interviews are a qualitative market research method that involves one-on-one conversations between a researcher and a participant. Interviews can be conducted in person, over the phone, or through video conferencing and can provide detailed insights into a participant's experiences, perceptions, and preferences.

• Observation

Observation is a market research method that involves observing customers' behavior and interactions in a natural setting such as a store or a website. Observation can provide insights into customers' decision-making processes and behavior that may not be captured through surveys or interviews.

• Secondary Research

Secondary research involves collecting data from existing sources, like industry reports, government publications, or academic journals. Secondary research can provide a broad overview of the market and industry trends and help businesses identify potential opportunities and threats.

By combining these market research methods, businesses can comprehensively understand their target market and industry and make informed decisions about their business strategy.

Step 3: Conducting Market Research

Market research should always be a part of your strategic business planning. This step gathers information about your target audience, competitors, and industry trends. This information can help you make informed decisions about your product or service offerings, pricing strategy, and marketing campaigns.

There are various market research methods, such as surveys, focus groups, and online analytics. You can also use tools like Google Trends and social media analytics to gather data about your audience's behavior and preferences.

Market research can be time-consuming and costly, but it's crucial for making informed decisions that can impact your business's success. Strikingly website builder offers built-in analytics and SEO optimization features that can help you track your website traffic and audience engagement.

Step 4: Identifying Your Target Audience

Identifying your target audience is essential in the business planning process. Your target audience is the group of people who are most likely to buy your product or service. Understanding their needs, preferences, and behaviors can help you create effective marketing campaigns and improve customer satisfaction.

You can identify your target audience by analyzing demographic, psychographic, and behavioral data. Demographic data include age, gender, income, and education level. Psychographic data includes personality traits, values, and lifestyle. Behavioral data includes buying patterns, brand loyalty, and online engagement.

Once you have identified your target audience, you can use tools such as buyer personas and customer journey maps to create a personalized and engaging customer experience. Strikingly website builder offers customizable templates and designs to help you create a visually appealing and user-friendly website for your target audience.

What is a Target Audience?

A target audience is a group most likely to be interested in and purchase a company's products or services. A target audience can be defined based on various factors such as age, gender, location, income, education, interests, and behavior.

Identifying and understanding your target audience is crucial for developing effective marketing strategies and improving customer engagement and satisfaction. By understanding your target audience's needs, preferences, and behavior, you can create products and services that meet their needs and develop targeted marketing campaigns that resonate with them.

Importance of Identifying Your Target Audience

Identifying your target audience is essential for the success of your business. By understanding your target audience's needs and preferences, you can create products and services that meet their needs and develop targeted marketing campaigns that resonate with them.

Here are reasons why identifying your target audience is important:

• Improve customer engagement. When you understand your target audience's behavior and preferences, you can create a more personalized and engaging customer experience to improve customer loyalty and satisfaction.
• Develop effective marketing strategies. Targeting your marketing efforts to your target audience creates more effective and efficient marketing campaigns that can increase brand awareness, generate leads, and drive sales.
• Improve product development. By understanding your target audience's needs and preferences, you can develop products and services that meet their specific needs and preferences, improving customer satisfaction and retention.
• Identify market opportunities. If you identify gaps in the market or untapped market segments, you can develop products and services to meet unmet needs and gain a competitive advantage.

Examples of Target Audience Segmentation

Here are some examples of target audience segmentation based on different demographic, geographic, and psychographic factors:

• Demographic segmentation. Age, gender, income, education, occupation, and marital status.
• Geographic segmentation. Location, region, climate, and population density.
• Psychographic segmentation. Personality traits, values, interests, and lifestyle.

Step 5: Developing a Marketing Plan

A marketing plan is a strategic roadmap that outlines your marketing objectives, strategies, tactics, and budget. Your marketing plan should align with your business objectives and target audience and include a mix of online and offline marketing channels.

Marketing strategies include content marketing, social media marketing, email marketing, search engine optimization (SEO), and paid advertising. Your marketing tactics can include creating blog posts, sharing social media posts, sending newsletters, optimizing your website for search engines, and running Google Ads or Facebook Ads.

To create an effective marketing plan , research your competitors, understand your target audience's behavior, and set clear objectives and metrics. You can also seek customer and employee feedback to refine your marketing strategy.

Strikingly website builder offers a variety of marketing features such as email marketing, social media integration, and SEO optimization tools. You can also use the built-in analytics dashboard to track your website's performance and monitor your marketing campaign's effectiveness.

What is a Marketing Plan?

A marketing plan is a comprehensive document that outlines a company's marketing strategy and tactics. It typically includes an analysis of the target market, a description of the product or service, an assessment of the competition, and a detailed plan for achieving marketing objectives.

A marketing plan can help businesses identify and prioritize marketing opportunities, allocate resources effectively, and measure the success of their marketing efforts. It can also provide the marketing team with a roadmap and ensure everyone is aligned with the company's marketing goals and objectives.

Importance of a Marketing Plan in Business Planning

A marketing plan is critical to business planning. It can help businesses identify their target audience, assess their competitive position, and develop effective marketing strategies and tactics.

Here are a few reasons why a marketing plan is important in business planning:

• Provides a clear direction. A marketing plan can provide a clear direction for the marketing team and ensure everyone is aligned with the company's marketing goals and objectives.
• Helps prioritize marketing opportunities. By analyzing the target market and competition, a marketing plan can help businesses identify and prioritize marketing opportunities with the highest potential for success.
• Ensures effective resource allocation. A marketing plan can help businesses allocate resources effectively and ensure that marketing efforts are focused on the most critical and impactful activities.
• Measures success. A marketing plan can provide a framework for measuring the success of marketing efforts and making adjustments as needed.

Examples of Marketing Strategies and Tactics

Here are some examples of marketing strategies and tactics that businesses can use to achieve their marketing objectives:

• Content marketing. Creating and sharing valuable and relevant content that educates and informs the target audience about the company's products or services.
• Social media marketing. Leveraging social media platforms like Facebook, Twitter, and Instagram to engage with the target audience, build brand awareness, and drive website traffic.
• Search engine optimization (SEO). Optimizing the company's website and online content to rank higher in search engine results and drive organic traffic.
• Email marketing. Sending personalized and targeted emails to the company's email list to nurture leads, promote products or services, and drive sales.
• Influencer marketing. Partnering with influencers or industry experts to promote the company's products or services and reach a wider audience.

By using a combination of these marketing strategies and tactics, businesses can develop a comprehensive and effective marketing plan that aligns with their marketing goals and objectives.

Step 6: Creating a Financial Plan

A financial plan is a detailed document that outlines your business's financial projections, budget, and cash flow. Your financial plan should include a balance sheet, income statement, and cash flow statement, and it should be based on realistic assumptions and market trends.

To create a financial plan, you should consider your revenue streams, expenses, assets, and liabilities. You should also analyze your industry's financial benchmarks and projections and seek input from financial experts or advisors.

.jpg)Image taken from Strikingly Templates

Strikingly website builder offers a variety of payment and e-commerce features, such as online payment integration and secure checkout. You can also use the built-in analytics dashboard to monitor your revenue and expenses and track your financial performance over time.

What is a Financial Plan?

A financial plan is a comprehensive document that outlines a company's financial goals and objectives and the strategies and tactics for achieving them. It typically includes a description of the company's financial situation, an analysis of revenue and expenses, and a projection of future financial performance.

A financial plan can help businesses identify potential risks and opportunities, allocate resources effectively, and measure the success of their financial efforts. It can also provide a roadmap for the finance team and ensure everyone is aligned with the company's financial goals and objectives.

Importance of Creating a Financial Plan in Business Planning

Creating a financial plan is a critical component of the business planning process. It can help businesses identify potential financial risks and opportunities, allocate resources effectively, and measure the success of their financial efforts.

Here are some reasons why creating a financial plan is important in business planning:

• Provides a clear financial direction. A financial plan can provide a clear direction for the finance team and ensure everyone is in sync with the company's financial goals and objectives.
• Helps prioritize financial opportunities. By analyzing revenue and expenses, a financial plan can help businesses identify and prioritize financial opportunities with the highest potential for success.
• Ensures effective resource allocation. A financial plan can help businesses allocate resources effectively and ensure that financial efforts are focused on the most critical and impactful activities.
• Measures success. A financial plan can provide a framework for measuring the success of financial efforts and making adjustments as needed.

Examples of Financial Statements and Projections

Here are some examples of financial statements and projections that businesses can use in their financial plan:

• Income statement. A financial statement that shows the company's revenue and expenses over a period of time, typically monthly or annually.
• Balance sheet. A financial statement shows the company's assets, liabilities, and equity at a specific time, typically at the end of a fiscal year.
• Cash flow statement. A financial statement that shows the company's cash inflows and outflows over a period of time, typically monthly or annually.
• Financial projections. Forecasts of the company's future financial performance based on assumptions and market trends. This can include revenue, expenses, profits, and cash flow projections.

Step 7: Writing Your Business Plan

The final step in the business planning process is to write your business plan. A business plan is a comprehensive document that outlines your business's mission, vision, objectives, strategies, and financial projections.

A business plan can help you clarify your business idea, assess the feasibility of your business, and secure funding from investors or lenders. It can also provide a roadmap for your business and ensure that you stay focused on your goals and objectives.

Importance of Writing a Business Plan

Writing a business plan is an essential component of the business planning process. It can help you clarify your business idea , assess the feasibility of your business, and secure funding from investors or lenders.

Here are some reasons why writing a business plan is important:

• Clarifies your business idea. Writing a business plan can help you clarify your business idea and understand your business's goals, objectives, and strategies.
• Assesses the feasibility of your business. A business plan can help you assess the feasibility of your business and identify potential risks and opportunities.
• Secures funding. A well-written business plan can help you secure funding from investors or lenders by demonstrating the potential of your business and outlining a clear path to success.
• Provides a roadmap for your business. A business plan can provide a roadmap and ensure that you stay focused on your goals and objectives.

Tips on How to Write a Successful Business Plan

Here are some tips on how to write a business plan successfully:

• Start with an executive summary. The executive summary is a brief business plan overview and should include your business idea, target market, competitive analysis, and financial projections.
• Describe your business and industry. Provide a detailed description of your business and industry, including your products or services, target market, and competitive landscape.
• Develop a marketing strategy. Outline your marketing strategy and tactics, including your target audience, pricing strategy, promotional activities, and distribution channels.
• Provide financial projections. Provide detailed financial projections, including income statements, balance sheets, and cash flow statements, as well as assumptions and risks.
• Keep it concise and clear. Keep your business plan concise and clear, and avoid using jargon or technical terms that may confuse or intimidate readers.

Role of Strikingly Website Builder in Creating a Professional Business Plan

Strikingly website builder can play a significant role in creating a professional business plan. Strikingly provides an intuitive and user-friendly platform that allows you to create a professional-looking website and online store without coding or design skills.

Using Strikingly, you can create a visually appealing business plan and present it on your website with images, graphics, and videos to enhance the reader's experience. You can also use Strikingly's built-in templates and a drag-and-drop editor to create a customized and professional-looking business plan that reflects your brand and style.

Strikingly also provides various features and tools that can help you showcase your products or services, promote your business, and engage with your target audience. These features include e-commerce functionality, social media integration, and email marketing tools.

Let’s Sum Up!

In conclusion, the 7 steps of the business planning process are essential for starting and growing a successful business. By conducting a SWOT analysis, defining your business objectives, conducting market research, identifying your target audience, developing a marketing plan, creating a financial plan, and writing your business plan, you can set a solid foundation for your business's success.

Strikingly website builder can help you throughout the business planning process by offering a variety of features such as analytics, marketing, e-commerce , and business plan templates. With Strikingly, you can create a professional and engaging website and business plan that aligns with your business objectives and target audience.

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Business Broker: Your Guide to Buying or Selling a Business

Last Updated:  

October 10, 2023

Are you considering buying or selling a business? Whether you're an aspiring entrepreneur looking to acquire a thriving company or a seasoned business owner ready to move on to your next venture, a business broker can be your invaluable guide throughout the process. This article serves as your comprehensive guide to understanding the role of a business broker and how they can assist you in achieving your goals.

A business broker is a professional who specialises in facilitating the buying and selling of businesses. They possess the expertise and resources to help you navigate the complex world of mergers and acquisitions, ensuring a smooth and successful transaction. With their vast network and industry knowledge, a business broker can help you find the right opportunity or buyer, negotiate favourable terms, and maximise the value of your business.

Whether you're a buyer or a seller, partnering with a business broker is a strategic move that can save you time, money, and stress. So, if you're ready to embark on this exciting journey, let's delve into the world of business brokerage and discover how it can benefit you.

Key Takeaways on Buying or Selling a Business

• The Role of a Business Broker : A business broker serves as a vital guide in buying or selling a business, facilitating communication, negotiation, and ensuring a smooth transaction.
• Assessing Business Needs : Before entering the process, assess your business needs and goals, conduct thorough evaluations, and strategically plan for long-term objectives.
• Choosing the Right Broker : Select a reputable broker with a proven track record, aligning fees with your budget, and ensuring they understand your unique aspirations.
• Navigating the Buying Process : A business broker can guide buyers through the acquisition process, leveraging market knowledge and negotiation skills for a successful outcome.
• Maximising Business Value : Partnering with a broker can enhance your company's value through strategic planning, operational improvements, and attracting the right buyers.
• Closing the Deal : Expert negotiation and legal compliance are crucial in finalising the sale, with a skilled broker aiding in overcoming challenges and ensuring a smooth transaction.

Understanding the Role of a Business Broker

So you're thinking about buying or selling a business, and you're wondering just how much value a business broker can bring to the table. Well, let me tell you, communication is key when it comes to working with a business broker. They act as a liaison between buyers and sellers, ensuring that all parties are on the same page and that the transaction goes smoothly. By maintaining open lines of communication, a business broker can understand your specific needs and help you navigate the complexities of the buying or selling process.

In a competitive market, the benefits of using a business broker are immense. They have access to a wide network of potential buyers or sellers, giving you a greater chance of finding the perfect match for your needs. Additionally, a business broker can provide valuable insights and guidance based on their experience in the industry. They can help you negotiate a fair price, navigate legal and financial matters, and ensure that all necessary paperwork is completed accurately and on time. In short, a business broker can be your trusted guide, helping you achieve your goals in the world of business buying or selling.

Assessing Your Business Needs and Goals

First, think about what you really want to achieve and how buying or selling a business fits into those goals. Assessing your business needs and goals is crucial before embarking on the process of buying or selling a business. One important aspect of this assessment is conducting a thorough business evaluation. This evaluation will help you determine the current value of your business or the value of the business you are interested in buying. It will also give you an understanding of the market conditions and potential risks and opportunities associated with the business. Strategic planning is another key component of assessing your business needs and goals. This involves identifying your long-term objectives, developing a roadmap to achieve them, and aligning your resources and capabilities accordingly. By carefully assessing your business needs and goals, you will be better equipped to make informed decisions and maximise the value of buying or selling a business.

Finding the Right Business Broker for You

When searching for the ideal match, finding a business broker who truly understands your unique needs and aspirations will significantly enhance your journey towards acquiring or divesting a company. Choosing a reputable broker is crucial to ensure a smooth and successful transaction. Look for brokers with a proven track record and a solid reputation in the industry. Ask for recommendations from trusted sources or conduct thorough research online. Evaluate the broker fees and make sure they align with your budget and expectations. Keep in mind that while fees may vary, it's important to consider the value and expertise the broker brings to the table. A good broker should be able to provide a clear breakdown of their fees and explain the services included. Don't hesitate to negotiate fees to find a mutually beneficial agreement. By selecting the right broker, you can have peace of mind knowing that you have a knowledgeable and trustworthy partner by your side throughout the buying or selling process.

Navigating the Buying Process with a Business Broker

As you embark on your journey to acquire or divest a company, imagine navigating the buying process with a trusted partner who understands your unique needs and aspirations. A business broker can be that partner, guiding you through every step of the process and ensuring your buyer expectations are met. They have a deep understanding of the market and can help you find the right business that aligns with your goals. Additionally, they can assist in negotiating a fair price and structuring the deal to your advantage. When it comes to broker fees, it's important to remember that they are typically paid by the seller. This means that as a buyer, you can benefit from the expertise and support of a business broker without incurring any additional costs. So, when you're ready to buy a business, consider enlisting the services of a reputable business broker to help you navigate the buying process successfully.

Maximising the Value of Your Business with a Broker

Imagine partnering with a skilled professional who can help you unlock the full potential of your company and enhance its value. A business broker is your key to maximising profitability and strategic planning. By working closely with a broker, you can gain valuable insights into your business and identify areas for improvement. They will conduct a thorough analysis of your operations, financials, and market position to develop a strategic plan tailored to your goals. With their expertise, they can help you identify potential buyers who see the true value in your business, resulting in a higher selling price. Additionally, a broker can guide you in making necessary changes to increase profitability and attract more buyers. Their knowledge of the market and negotiation skills will ensure that you get the best possible deal. Don't miss out on the opportunity to maximise the value of your business - partner with a business broker today.

Closing the Deal: Negotiating and Finalising the Sale

Get ready to seal the deal and secure the sale of your company by expertly negotiating and finalising the transaction. Negotiation strategies play a crucial role in ensuring a successful sale. As the seller, it's important to have a clear understanding of your bottom line and desired terms. Start by setting realistic expectations and being prepared to compromise on certain aspects. A skilled business broker can guide you through the negotiation process, using their expertise to navigate any hurdles that may arise. It's also important to consider the legal considerations involved in finalising the sale. Ensuring all necessary documents are in order and that the transaction complies with relevant laws and regulations is essential. Working with a knowledgeable broker can help you navigate these complexities, ensuring a smooth and legally sound transaction. By leveraging negotiation strategies and considering legal considerations, you can confidently close the deal and achieve a successful sale of your business.

In conclusion, working with a business broker can be a game-changer when it comes to buying or selling a business. Their expertise and industry knowledge can help you navigate the complex process with ease. Whether you are a buyer looking for the right opportunity or a seller aiming to maximise the value of your business, a business broker is your trusted guide. So, don't hesitate to reach out to a reputable broker and take advantage of their skills to ensure a successful transaction.

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What to Know Before Buying a Business

I f you are considering buying a business, there are several important factors to consider before making such a significant investment. Buying a business can be a complex process that requires careful planning and consideration. This quick guide will discuss what you need to know before buying a business to ensure a successful and profitable acquisition.

Understanding the Basics of Buying a Business

Embarking on the journey to purchase a business requires a foundational understanding of several key aspects. First and foremost, setting a realistic budget is crucial; it determines the scale and type of business opportunities within your reach. A precise evaluation should inform this step of your financial resources and the investment you’re willing to commit. Equally important is the decision regarding the nature of the business you wish to acquire. Reflecting on your areas of expertise, interests, and the lifestyle you envisage can guide this choice, ensuring alignment with your personal and professional aspirations.

Exploring the market is another vital step, demanding diligent research into current industry trends, consumer behavior, and future forecasts. Such insights can highlight lucrative opportunities or potential red flags within specific sectors, guiding your decision-making process toward a sound investment. Deciding whether to build a new venture from the ground up or to invest in an established entity is a pivotal choice. An existing business typically offers immediate operational capabilities, including a customer base, a tested business model, and an established operational infrastructure, which can be incredibly advantageous.

However, the allure of an existing business should be consistent with the necessity for a meticulous assessment of its operational health and prospects. It is imperative to ensure that the investment aligns with your long-term business objectives by scrutinizing its financial stability, market reputation, and scalability. This phase sets the stage for a deeper dive into due diligence, where a comprehensive examination of the business’s inner workings will further inform your decision-making process.

How to Conduct Thorough Due Diligence

Conducting thorough due diligence is a pivotal step in the process of acquiring a business, ensuring that you are making an informed decision. This meticulous examination requires a deep dive into the business’s comprehensive financial health, including analyzing its balance sheets, income statements, and cash flow statements for the past few years. Investigating these documents reveals the business’s profitability, revenue streams, and financial stability, which are critical for assessing its value and growth potential.

Engaging with experienced professionals, such as hiring a business broker , is advisable to navigate the complexities of financial records and legal documents. Their expertise will aid in identifying any discrepancies or concerns that could impact the business’s future performance. This team should also review contracts with customers and suppliers, employment agreements, and any intellectual property rights, ensuring a full understanding of the business’s operational dynamics and obligations.

Assessing any potential risks or liabilities is another crucial aspect of due diligence. This involves examining pending legal matters, debt obligations, and any compliance issues with industry regulations. Uncovering these factors is essential for evaluating the potential challenges that could arise post-acquisition, enabling you to gauge the actual value of the business and any investments needed to mitigate these risks.

Thorough due diligence lays the groundwork for a successful acquisition by clearly showing the business’s past performance, current status, and future potential. It is a comprehensive process that demands attention to detail and a proactive approach to uncovering all facets of the business you intend to purchase.

Negotiating the Purchase Price and Terms

Negotiating the purchase price and terms is a delicate yet pivotal part of acquiring a business. It is where the financial health, assessed liabilities, and projected growth of the entity are weighed to agree upon a valuation that reflects its true worth. At this juncture, the leverage of expert financial and legal advisors becomes invaluable. They possess the understanding to navigate complex negotiations, ensuring that the agreed-upon terms safeguard your interests.

Critical to this process is examining not just the outright purchase price but the payment structure itself. Options may include upfront payments, earn-outs based on future performance, or seller financing, each with its implications for the buyer’s cash flow and tax obligations. Additionally, delineating the specifics of what is included in the sale – such as assets, inventory, and intellectual property – is paramount to avoid ambiguity.

Negotiating also extends to crafting contingencies within the purchase agreement that allow for due diligence findings, such as addressing any compliance issues or transferring specific licenses and permits necessary for operation. These terms serve as a buffer, ensuring the buyer is insulated against unforeseen liabilities post-acquisition.

Engaging in these negotiations with a clear, informed strategy and the proper professional support will lead to mutually beneficial terms, laying the groundwork for a smooth transition and the business’s future success.

Purchasing a business represents a significant venture that can yield considerable rewards when approached with diligence and strategic insight. The journey from initial consideration to final acquisition encompasses a series of critical steps: setting a realistic budget based on your financial capacity, selecting a business that aligns with your expertise and aspirations, and engaging in comprehensive market research to understand industry trends and potential opportunities. Central to this process is the execution of meticulous due diligence, a phase that unveils your potential investment’s financial health, operational dynamics, and legal standings. Employing seasoned professionals to aid in scrutinizing financial records and negotiating terms ensures that you make informed decisions, safeguarding your interests. The art of negotiation plays a crucial role in determining the purchase price and the structuring of the deal, emphasizing the need for a well-informed, strategic approach to finalizing the acquisition. With the proper preparation, guidance, and a clear understanding of the intricacies involved in buying a business, you are well-positioned to make a decision that not only meets but surpasses your business objectives, steering you toward sustained success and profitability.

Module 7: Consumer Behavior

Reading: the organizational buying process, making b2b buying decisions.

The organizational buying process contains eight stages, which are listed in the figure below. Although these stages parallel those of the consumer buying process, there are important differences that have a direct bearing on the marketing strategy. The complete process occurs only in the case of a new task. In virtually all situations, the organizational buying process is more formal than the consumer buying process.

It is also worth noting that B2B buying decisions tend to be more information-intensive than consumer buying decisions. As the marketing opportunity progresses, buyers seek detailed information to guide their choices. It is unlikely that a B2B buyer—in contrast to a consumer—would ever make a final buying decision based solely on the information they see in a standard advertisement.

The organization buying process stages are described below.

Problem Recognition

The process begins when someone in the organization recognizes a problem or need that can be met by acquiring a good or service. Problem recognition can occur as a result of internal or external stimuli. Internal stimuli can be a business problem or need that surfaces through internal operations or the actions of managers or employees. External stimuli can be a presentation by a salesperson, an ad, information picked up at a trade show, or a new competitive development.

General N eed D escription

Once they recognize that a need exists, the buyers must describe it thoroughly to make sure that everyone understands both the need and the nature of solution the organization should seek. Working with engineers, users, purchasing agents, and others, the buyer identifies and prioritizes important product characteristics. Armed with knowledge, this buyer understands virtually all the product-related concerns of a typical customer.

From a marketing strategy perspective, there is opportunity to influence purchasing decisions at this stage by providing information about the nature of the solution you can provide to address the the organization’s problems. Trade advertising can help potential customers become aware of what you offer. Web sites, content marketing, and direct marketing techniques like toll-free numbers and online sales support are all useful ways to build awareness and help potential customers understand what you offer and why it is worth exploring. Public relations may play a significant role by placing stories about your successful customers and innovative achievements in various trade journals. (Note that the AirCanada video you just watched is an example of this. The video was created by IBM and is offered as one of many “IBM client stories.”)

Product Specification

Technical specifications come next in the process. This is usually the responsibility of the engineering department. Engineers design several alternatives, with detailed specifications about what the organization requires. These specifications align with the priority list established earlier.

Supplier Search

Six of the mirror segments for NASA’s James Webb Space Telescope. The mirrors were built by Ball Aerospace & Technologies Corp., Boulder, Colorado

The buyer now tries to identify the most appropriate supplier (also called the vendor). The buyer conducts a standard search to identify which providers offer what they need, and which ones have a reputation for good quality, good partnership, and good value for the money. This step virtually always involves using the Internet to research providers and sift through product and company reviews. Buyers may consult trade directories and publications, look at published case studies (written or video), seek out guidance from opinion leaders, and contact peers or colleagues from other companies for recommendations.

Marketers can participate in this stage by maintaining well-designed Web sites with useful information and case studies, working with opinion leaders to make advantageous information available, using content marketing strategies to make credible information available in sources the buyer is likely to consult, and publishing case studies about customers using your products successfully. Consultative selling (also called personal selling ) plays a major role as marketers or sales personnel learn more about the organization’s goals, priorities, and product specifications and provide helpful information to the buyer about the offerings under consideration.

Proposal S olicitation

During the next stage of the process, qualified suppliers are invited to submit proposals. Depending on the nature of the purchase, some suppliers send only a catalog or a sales representative. More complex purchases typically require submission of a detailed proposal outlining what the provider can offer to address the buyer’s needs, along with product specifications, timing, and pricing. Proposal development requires extensive research, skilled writing, and presentation. For very large, complex purchasing decisions, such as the solution sale described above, the delivery of a proposal could be comparable to a complete marketing strategy targeting an individual customer. Organizations that respond to many proposals typically have a dedicated proposal-writing team working closely with sales and marketing personnel to deliver compelling, well-crafted proposals.

Supplier Selection

At this stage, the buyer screens the proposals and makes a choice. A significant part of this selection involves evaluating the vendors under consideration. The selection process involves thorough review of the proposals submitted, as well as consideration of vendor capabilities, reputation, customer references, warranties, and so on. Proposals may be scored by different decision makers using a common set of criteria. Often the selection process narrows down vendors to a short list of highest-scoring proposals. Then the short-listed vendors are invited to meet with the buyer(s) virtually or in person to discuss the proposal and address any questions, concerns, or gaps. At this stage, the buy may attempt to negotiate final, advantageous terms with each of the short-listed vendors. Negotiation points may cover product quantity, specifications, pricing, timing, delivery, and other terms of sale. Ultimately the decision makers finalize their selection and communicate it internally and to the vendors who submitted proposals.

Consultative selling and related marketing support are important during this stage. While there may be procurement rules limiting contact with buyers during the selection process, it can be helpful to check in periodically with key contacts and offer any additional information that may be helpful during the selection process. This phase is an opportunity for companies to demonstrate their responsiveness to buyers and their needs. Being attentive during this stage can set a positive tone for how you will conduct future business.

Order-Routine Specification

The buyer now writes the final order with the chosen supplier, listing the technical specifications, the quantity needed, the warranty, and so on. At this stage, the supplier typically works closely with the buyer to manage inventories and deliver on agreement terms.

Performance Review

In this final stage, the buyer reviews the supplier’s performance and provides feedback. This may be a very simple or a very complex process, and it may be initiated by either party, or both. The performance review may lead to changes in how the organizations work together to improve efficiency, quality, customer satisfaction, or other aspects of the relationship.

From a marketing perspective this stage provides essential information about how well the product is meeting customer needs and how to improve delivery in order to strengthen customer satisfaction and brand loyalty. Happy, successful customers may be great candidates for published case studies, testimonials, and references for future customers. Dissatisfied customers provide an excellent opportunity to learn what isn’t working, demonstrate your responsiveness, and improve.

Procurement Processes for Routine Purchases

As noted above, the complete eight-stage buying process describe here applies to new tasks, which typically require more complex, involved purchasing decisions. For rebuys and routine purchases, organizations use abridged versions of the process. Some stages may be bypassed completely when a supplier has already been selected.

Organizations may also use e-procurement processes, in which an approved supplier has been selected to provide a variety of standard goods at pre-negotiated prices. For example, an organization may negotiate an e-procurement agreement with Staples that allows employees to order office supplies directly from the company using an approval workflow in the ordering system. These systems help simplify the buying process for routine purchases, while still allowing appropriate levels of approvals and cost controls for the buyer.

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered in this outcome. This short quiz does  not  count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.

• Revision and Adaptation . Authored by : Lumen Learning. License : CC BY: Attribution
• Chapter 4: Understanding Buyer Behavior, from Introducing Marketing. Authored by : John Burnett. Provided by : Global Text. Located at : http://solr.bccampus.ca:8001/bcc/file/ddbe3343-9796-4801-a0cb-7af7b02e3191/1/Core%20Concepts%20of%20Marketing.pdf . License : CC BY: Attribution
• Primary Mirror Segment Cryogenic Testing. Authored by : NASA's James Webb Space Telescope. Located at : https://www.flickr.com/photos/nasawebbtelescope/5637974497/ . License : CC BY-NC-ND: Attribution-NonCommercial-NoDerivatives

Four Big Mistakes to Avoid if You’re Buying a Business

No. 1 is don’t listen to self-professed experts on social media and do-it-yourself coaches who might want only to make a buck. Also, to be successful, you need to go all in.

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If you’re thinking about becoming an entrepreneur, you may be wondering whether you’d be more successful starting a business or buying an established business.

“‘Start your own business, open your own shop’ has always been part of the American dream,” observes Josh Tolley, nationally syndicated talk show host and author of the recently published Acquisitional Wealth .

“Sadly, few people pay enough attention to statistics that show approximately 50% of start-ups fail within five years . However, if a business remains open for a decade, the odds are that it will survive and has the potential to be marketable . So, if you have the option of investing in a new business or buying a well-established, going concern, just think of the hassle, worry and grief that can be avoided. But you’ve got to go about it the right way, realize the importance of having your own support team, and don’t even dream of doing it alone!”

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Don’t fall for social media instant experts

In recent years, a number of our clients have run their business ideas by my staff — ideas and schemes, as Tolley correctly points out, “that often (stem) from a growing social media presence of insta-experts and coaches who sell do-it-yourself, expensive ‘how to buy a business’ courses, along with a list of several self-named resources that are available to buy now from their websites.

“Very much like the stock market mania of the COVID years, otherwise sober, mature adults act more like high school kids infatuated with their first love. This is where the failure to have competent, professional help and guidance can prove costly,” he says.

I asked Tolley to set out some of the most glaring mistakes anyone wanting to buy a business can make.

1. Follow the wrong advice and think you can do it on your own.

So many people are trying to go it alone, following the advice of an online business coach who says, “I can guide you in buying an ongoing business, so why pay for a lawyer or an accountant?”

The result is an epidemic of financial and legal problems. If you are buying a business, definitely use the experience of a broker, a transactional attorney and, if applicable, an accountant familiar with the dynamics of the enterprise. “It's going to save you years of headaches, stress and possible legal ramifications to the business,” Tolley notes.

2. Buy retail or income-producing property.

The second most frequent mistake is getting into either retail or income-producing real estate . Tolley underscores, “Retail is not where you want to start, and you must accept the fact that there is a lot of unstable ground when it comes to retail. Restaurants are retail. Anything can upset the apple cart, from a pandemic to even construction on the road in front of the business/restaurant you just purchased.”

He makes a strong case in his book: “Make sure that you are purchasing a business that is not dependent on retail conditions, but instead depends on market or B2B (business-to-business) conditions.”

3. Think you’re going to be successful without going all in.

Contrary to other endeavors in life, if you're going to acquire a business, jump in entirely or don't jump in. “Once you have acquired a business,” Tolley points out, “you have to commit and really go for it. So often, I’ve seen the results of ‘entrepreneurs’ who tried to continue working their regular job. A variant of that mental process thinks, ‘Well, we saved $200,000 for a down payment, so let's try $50,000 down to just give it a taste.’ That never works out.”

4. Change your team of advisers during the process.

“Don't listen to your friends who might have owned one business once or who have no experience at all,” Tolley cautions. “This isn't a time to get a consensus from friends and family. Unless they've done this successfully, their opinions don't really carry a whole lot of weight. As many first-time buyers don't come from a business background, their friends and family tend to have a similar lack of experience, and so their advice may lead down incorrect paths.”

How to prepare to buy a business

Before buying a business, you have to prepare financially by: 

• Keeping your credit score high
• Not incurring any unnecessary new debt, such as a new car
• Postponing any sort of credit hit until after the purchase
• Ensuring your tax records are clean and up-to-date

Concluding our interview, Tolley shared a prescription for a successful business purchase by someone who has never before owned or operated a business: Start learning as many business skills and acquiring as much practical business knowledge as you can, rather than focusing on specific industry capabilities.

“Your overall business skill set is going to serve you much better in acquiring the company and running it successfully,” he says. “For example, with a restaurant, how to manage employees is going to serve you better than mastering a risotto recipe. Related and important skills will come with the business; knowing how to drive the business — like learning how to not just drive a car but race it and win — is now your goal.”

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to [email protected] . And be sure to visit dennisbeaver.com .

Related Content

• What Not to Do if You Join Your Family Business
• Thinking of Starting a Business? Tips for Avoiding Failure
• Selling Your Business? Beware of Potential Blind Spots
• Is Someone Sabotaging Your Company? Is It You?
• How to Lose Your Shirt Investing in a Restaurant

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA .

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, " You and the Law ." Through his column he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift." 

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Introducing the ultimate Copilot+ PCs – The all-new Surface Pro and Surface Laptop

• Pete Kyriacou – CVP, Microsoft Devices

Today, Microsoft and Surface introduced the fastest, most intelligent Windows PCs ever: Copilot+ PCs. The all-new Surface Pro and Surface Laptop are the ultimate Copilot+ PCs, delivering incredible performance, all-day battery life and brand-new AI experiences. They showcase the beauty and innovation that happens at the intersection of software and hardware.

Surface was created to lead the PC industry with innovation and technology that showcases the best of Microsoft and empowers our customers to achieve more. We’ve been at the forefront of new PC categories, with thoughtful designs and new features that inspire our customers. And as we dive into the new wave of AI, Surface continues to put our customers first.

Copilot+ PCs

Copilot+ PCs provide a quantum leap in computing, with power, performance and breakthrough AI experiences. Debuting with Snapdragon ® X Elite and Snapdragon X Plus processors, Copilot+ PCs are tuned to deliver optimal processing and response times – and are faster than the latest Macbook Air. i

Performance like this means the apps customers love work great. Microsoft has partnered closely with developers across the globe to optimize their applications for this processor. In addition, the powerful new Prism emulation engine delivers a 2x performance boost compared to Surface Pro 9 with 5G. On the new Surface Pro and Surface Laptop, powered by Snapdragon X Elite and Snapdragon X Plus processors, experiences like Adobe Creative Cloud, Microsoft 365 and Chrome will feel snappy, quick and responsive.

In addition, Copilot+ PCs have the most powerful Neural Processing Units (NPUs) in the PC category today. With over 45 trillion of operations per second (TOPS), these NPUs power new AI experiences – here are three that we love:

In addition to Microsoft experiences, the power of the NPU extends in our work with developers who are leveraging the NPU for their own AI workloads. Some examples of these new AI experiences include:

• Davinci Resolve: Effortlessly apply visual effects to objects and people using NPU-accelerated Magic Mask in DaVinci Resolve Studio.
• Cephable: Stay in your flow with faster, more responsive adaptive input controls, like head movement or facial expressions via the new NPU-powered camera pipeline in Cephable .
• CapCut: Remove the background from any video clip in a snap using Auto Cutout running on the NPU in CapCut.

We are seeing many developers around the world and across various industries working on exciting new ways to accelerate their applications using the power of the NPU, including: WhatsApp, Luminar Neo, LiquidText, Camo, djay Pro and more.

All-new Surface Pro

Over 10 years ago, Surface pioneered the 2-in-1 category. Since then, the tablet that can replace your laptop has advanced the expectations of a productivity device, delivering more power, more battery life and innovation people love. The all-new Surface Pro unlocks a new way to think about a laptop: Combining accelerated performance, all-day battery life and industry-leading AI capabilities in an ultra-flexible design that can replace your tablet, your laptop and can even power your multi-monitor set-up.

The all-new Surface Pro , powered by Snapdragon® X Elite and Snapdragon X Plus processors, delivers incredibly fast speeds, 90% faster than Surface Pro 9. It’s built for the ultimate multitasker, supporting up to three external 4K displays, with two USB 4 ports, and a stunning 13” display with new optional OLED with HDR technology, delivering new levels of peak brightness and immersive colors. Wi-Fi 7 offers the fastest wireless connection iv available and optional 5G v keeps you connected to the fastest cellular network, while you’re on the move.

The ultra-wide, quad-HD front-facing camera is our best Surface camera ever. AI-powered Windows Studio Effects like Automatic Framing, keep you in focus, even as you move around your space. The 10MP Ultra HD rear-facing autofocus camera supports 4K video so you can capture and edit all on one device.

Surface Pro is made with more recycled materials than Surface Pro 9, including 72% recycled content in the enclosure. vi Surface Pro is serviceable by design with more replaceable components than ever, including the motherboard, battery, cameras and more.

The all-new Surface Pro Flex Keyboard unlocks new levels of flexibility. It’s ready to be used attached to your Pro for the ultimate laptop set-up or detached for more flexibility and to support your creative workflows.

It is built with enhanced extra carbon fiber layers for stability and has a larger, customizable haptic touchpad. With integrated pen storage, your Slim Pen is secure, charged and ready to go.

Surface Slim Pen gets even better with the new Surface Pro, with all new AI experiences. The ink now flows naturally with Zero Force inking, ultra-precise shading, 4,096 points of pressure sensitivity and a built-in haptic engine for a more natural writing experience.

The all-new Surface Pro is the most flexible laptop, reimagined.

All-new Surface Laptop

When we first launched Surface Laptop, it redefined the classic PC category, pushing boundaries and elevating the user experience to new heights. We introduced premium materials, a vibrant array of colors, ultra-productive 3:2 aspect ratio touchscreens, and a fit and finish like nothing else. We delivered power and performance, and the best typing experience on the market to this day, in a light, sleek design. Beyond elegant design, the Surface Laptop showcased an incredible balance of premium features that delivered the best of Microsoft on a Surface device. This holistic approach revolutionized the industry, setting new standards for excellence and heralding a new era of innovation in laptop design.

The all-new Surface Laptop maintains these principles – purpose built to unlock a new AI era with Copilot experiences that transform the PC experience.

Redesigned from the inside out, this new Laptop has modern lines and a stunning PixelSense touchscreen display with razor-thin bezels.  With 120Hz refresh rate, HDR technology, Dolby Vision IQ™ vii and Adaptive color technology, this display delivers crisper whites, darker blacks and an extended color spectrum. There are two screen sizes, as our new 13.8” display provides larger viewing area than a traditional 14” laptop, in a more compact design and a 15” with an even larger working canvas. This ultra-light and stylish Laptop comes in four stunning colors viii : Platinum, Black, Dune and Sapphire.

Surface Laptop unleashes lightning-fast speed and AI accelerated power for the ultimate multitasking. It is 86% faster than Laptop 5, delivering incredible performance.  It can power up to three external 4K monitors. The 45 TOPS NPU unlocks new AI experiences and delivers industry-leading performance for seamless productivity with the longest battery life on any Surface – up to 22 hours on the Surface Laptop 15” ix and up to 20 on the Surface Laptop 13.8” x . With a large variety of ports and lightning-fast Wi-Fi 7, you will always be connected.

The new Surface Laptop has a Full HD Surface Studio Camera that supports AI-powered Windows Studio Effects like Automatic Framing, Portrait Blur, Creative Filters and Voice Focus – so you come across clearly and confidently. AI-enhanced sound with premium Omnisonic® Speakers and Dolby® Atmos® xi , and Studio Mics amplify your voice and presence.

Surface Laptop is known for its comfortable and quiet typing experience and now, every keystroke is perfected. With optimal key travel for accurate and swift typing and a large precision haptic touchpad that is smooth, responsive and customizable for your personal preference.

This is the fastest, most intelligent Surface Laptop ever.

Surface product principles

Accessibility, security and sustainability are core components in every product in the Surface lineup. The all-new Surface Pro and Surface Laptop make major strides across all three categories.

Surface products are built to empower everyone on the planet to achieve more. When we develop inclusive products, we create a more comfortable and empowering product experience for everyone, without excluding people in the process. Our journey involves continuous learning from the disability community, placing them at the heart of our design process to develop solutions that unlock their full potential.

Our accessible offerings are comprehensive, ranging from an ecosystem of adaptive accessories to adaptive features built into the fabric of our hardware and software. With the new Copilot+ PCs from Surface, we continued to prioritize adaptability, resulting in products that are inclusive by design.

That’s why we designed the new Surface Pro Flex Keyboard with a bold keyset option, xii to reduce eye strain and assist people with low vision. We added a customizable, haptic touchpad, the most inclusive touchpad on the market today, to both our Surface Pro keyboard and our Surface Laptop, empowering customers with a wide range of hand movement and dexterity capabilities to easily adjust the touchpad to their preferences, resulting in a more delightful experience for all.

These hardware capabilities, alongside new experiences that utilize the power of the NPU, increase your productivity and creativity, allowing you to work, learn and play in the way that is most natural to you.

Security and privacy are always top of mind for us, implementing chip-to-cloud security that begins with inherently secure Surface devices. These new Surface PCs are meticulously built to protect your data from day one. Starting with tracing the origin of even the smallest components on the motherboard through building the lines of code ensuring a secure boot. Every Copilot+ PC will be a Secured-Core PC with Microsoft Pluton Security enabled by default and Windows Hello Enhanced Sign-in enabled by default. We take our responsibility to keep your data safe seriously.

In 2020, Microsoft set a goal to become carbon negative by 2030 – and at Surface, we know we have a responsibility to the planet. With the new Surface Pro and Surface Laptop we are introducing our most significant sustainability advancements yet. We have reduced our carbon emissions by an average of 78% per enclosure through several sustainability interventions, including using 100% recycled aluminum alloy, 100% recycled rare-earth metal magnets and 100% carbon free electricity at manufacturing facilities. xiii

We are also committed to reducing plastic waste – with all-new paper-based packaging with more recyclable components – and extending the lifetime of your device with innovative repairability features.

This is just the beginning. We will continue delivering sustainability advancements across the device lifecycle as we work towards Microsoft’s 2030 commitments.

Pre-order today

The brand-new Surface Pro and Surface Laptop deliver incredible speeds, all-day battery life and all-new AI experiences, all starting at $999. You can pre-order today and learn more about our new products at Microsoft.com. They’ll be available at key retailers worldwide starting June 18. To learn more about Surface for your organization, visit the Surface for Business blog.

i   Based on Cinebench 2024 Multi-threaded conducted by Microsoft in April 2024 comparing pre-release build of Surface Laptop with Snapdragon X Elite running pre-release Windows 11 26100 and Apple MacBook Air 13″ with M3 running macOS 14 Sonoma.  

ii   Recall is optimized for select languages (English, Chinese (simplified), French, German, Japanese and Spanish.) Content-based and storage limitations apply. See https://aka.ms/copilotpluspcs .  

iii   Currently supports translation for video and audio subtitles into English from 40+ languages. See https://aka.ms/copilotpluspcs .  

iv   6GHz band not available in all regions.  

v   5G availability options with 5G coming later in 2024. 5G not available in all areas; compatibility and performance depends on carrier network, plan and other factors. See carrier for details and pricing.  

vi   Enclosure includes Bucket and Kickstand. 100% recycled aluminum alloy in Bucket and Kickstand. 100% recycled rare earth metals in magnets. Based on validation performed by Underwriter Laboratories, Inc. using Environmental Claim Validation Procedure, UL 2809-2, Second Edition, November 7, 2023.   

vii   Requires Dolby Vision® encoded content and video.  

viii   Colors available on selected models only. Available colors, sizes, finishes and processors may vary by store, market and configuration.  

ix   Local video playback: Testing conducted by Microsoft in April 2024 using preproduction software and preproduction Surface Laptop Snapdragon® X Elite C12 512GB, 16GB RAM devices. Testing consisted of full battery discharge during video playback of a .mov file through the Windows Media Player application in 1080p at 24 FPS. All settings were default except screen brightness set to 150 nits with Auto-brightness disabled. Wi-Fi was connected to a network. Tested with Windows 11. Battery life varies significantly with settings, usage and other factors.  

x   Local video playback: Testing conducted by Microsoft in April 2024 using preproduction software and preproduction Surface Laptop Snapdragon® X Plus C10 256GB, 16GB RAM devices. Testing consisted of full battery discharge during video playback of a .mov file through the Windows Media Player application in 1080p at 24 FPS. All settings were default except screen brightness set to 150 nits with Auto-brightness disabled. Wi-Fi was connected to a network. Tested with Windows 11. Battery life varies significantly with settings, usage and other factors.  

xi  Requires Dolby® Atmos® encoded content/audio.  

xii  Surface Pro Flex Keyboard with bold keyset available only in U.S. English.  

xiii  As compared to a baseline no-interventions scenario modeling the same products without any sustainability interventions in the production phase of the devices.