The Business Plan When Selling and Buying a Business: Why It's Not Just for Startups

A business plan is typically associated with the startup phase: it helps an entrepreneur think the business through before it even exists. But the same type of document plays a different, and at least equally important, role when an existing business is being sold — both for the seller who needs to document the business's direction, and for the buyer who needs to take over and further develop it. If you don't already have a grip on the structure of a business plan, you can start with our walkthrough of how to write a business plan step by step.

Why is an updated business plan relevant when selling a business?

When a business is being prepared for sale — often called "sale readiness" — a clear, documented strategy and business plan is something advisors in business transfers consistently highlight as one of the factors that can raise the price a seller actually achieves. Many businesses sell below their potential, precisely because the seller has never gathered the story and direction the business actually has into a document a buyer can engage with.

There's also a more practical reason: the due diligence a buyer carries out before a deal already examines many of the same matters that go into a business plan — market position, customer base, organization and finances. If you already have an updated plan in place, a large part of the groundwork a buyer would otherwise request has effectively already been done. It makes the process faster, and it signals that the business is professionally run.

Why does the buyer need their own business plan?

If the purchase of an existing business needs to be financed wholly or partly with a bank loan, a solid business plan is in practice a prerequisite. The bank needs to see that the purchase strategy is realistic, and that the buyer can repay the loan — and that credit assessment typically starts from the business's last two to three years of accounts (revenue, operating result, equity and liquidity). The buyer's business plan therefore needs to engage directly with the historical finances, not just future ambitions.

The plan is also a trust document toward more parties than the bank alone: toward the seller, who often wants to know the business is going to good hands, toward any suppliers and partners, and in some cases toward employees. If a potential financing partner like the Danish Growth Fund (Vækstfonden/EIFO) could be relevant as a co-guarantor on a bank loan, that typically requires a realistic financial model and a certain degree of private co-financing — which in turn requires a well-developed plan.

The actual content of the buyer's plan should describe how the business will be run and further developed after the handover — for example through growth in the existing market, new products, new customer segments, or operational efficiencies — and build on the knowledge the seller, the customers and the existing accounts already provide, rather than starting from scratch with pure assumptions.

How do the seller's and buyer's plans connect?

In a well-prepared deal, the two documents work together in practice: the seller's updated business plan or strategy document gives the buyer a solid foundation to build on, and the buyer's own plan for the coming years builds on exactly that knowledge. It's also part of the basis for how financing of the purchase itself can be structured — for example with seller financing, where part of the purchase price is paid over time or depends on future earnings (a so-called earn-out), which often requires both parties to agree on the forward-looking plan for the business.

Frequently asked questions

Should I, as a seller, always have a business plan ready before I sell?

It's not a requirement, but it's a recognized part of good sale readiness. An updated plan or strategy document typically strengthens a buyer's confidence and can speed up the due diligence process.

Is a business plan the same as a valuation?

No. The business plan describes how the business creates value and develops going forward. A valuation is a concrete calculation of what the business is worth in money — but a good business plan is often part of the foundation for a realistic valuation.

Does a buyer always need to make a completely new business plan?

In practice, yes — particularly if the purchase is to be financed with a bank loan. The plan should, however, build on the business's existing accounts, customers and operations, rather than being written as if the business were a brand-new startup.

Selling or buying a business and need sparring on how a business plan fits into the process? Book a no-obligation call with us.