How to evaluate a business plan for buying an existing business?

Evaluating a business plan for buying an existing business requires some knowledge of the market and some inherent knowledge of the business. Some of the business plans start with grand plans but asking the right questions for all the claims made by the business is a good first step.

Some of the commonly found assumptions/claims are as follows:

Growth - The business plan may have projected a growth of 100% year on year for the next 5 years. While it is achievable, the question you should be asking is, what has the company achieved in the past 3 - 4 years. Will I be able to pull off such a growth in the coming years, post the acquisition? And if the future prospects are looking so bright, why is the business owner exiting at this moment.

Market - While market sizes can be huge on paper, a good question to ask is, will this business be able to capture a good chunk of the market size in the coming years.

Competition - Who are the competitors of the business and how do they differentiate from this company? Why would this company stand out and perform better than the competition?

Understanding these aspects may give better insights into how one can evaluate a business plan for buying an existing business. If you are interested in understanding what are the typical sections of a business plan please visit this link.