Modeling your business plan
Modeling
Your business plan
A reliable business plan is based on a thorough understanding of past financial data, company’s means, market, competitive environment and potential synergies.
Which questions to ask first?
- Which role will the business plan have in the negotiation with each party involved in your transaction?
- How to use it to increase your transaction’s chance of success?
- How to review it with a critical eye? For example:
- How predictable are sales?
- How much do you depend upon certain clients and/or suppliers?
- What are your fixed costs? What is your break-even point?
- What is your capitalistic intensity?
- What is your bearable level of debts?
How to answer these questions?
- Through a collegial and in-depth effort involving each of the company’s key departments.
- By using business plan assumptions consistent with the historical financial review …
- … The historical review consisting in analyzing the main financial indicators, their relation and variation, and in restating them so as to establish a reliable economic presentation of the company.
- By reviewing key performance indicators, income and expense items, capital expenditure, fixed assets, working capital, net financial debt and cash flows.
- By knowing that the current trading is intermediary between the budget forecast and the business plan, and may become crucial in the negotiation, …
- … that the quality of the business plan prepared by the seller determines the buyer’s ability to analyze synergies,
- … that business plans are usually subject to in depth investigations during the due diligence investigations, …
- … that they are frequently adjusted by financial investors and banks, …
- … and that before evaluating a transaction, buyers need to have prepared their own stand-alone business plan.
- By using the take-over business plan to monitor the post-merger integration.
