Guide to Business Plans for Buying or Franchising an Existing Business
How to build a plan that proves the price, structures the financing, satisfies the lender and gets you through the first 100 days as the new owner.
Summary
Buying an existing business or franchise gives you customers, staff and cash flow from day one, but the plan you need is different from a start-up plan. Lenders want to see normalized historical earnings, a justified price, a financing structure (often bank or BDC debt, a vendor take-back and your equity), debt service coverage under your ownership and a transition plan. Franchise buyers must also test the franchisor's numbers and fees. This guide covers each section, includes a deal calculator, and explains asset vs. share purchases and the CRA business number (BN) steps at closing.
Buying a business that already works can be less risky than starting from scratch. There are existing customers, trained staff, suppliers, systems and a track record lenders can analyze. Franchises add a proven brand and operating model. With many Canadian owners approaching retirement, there are also more businesses for sale.
But "existing" doesn't mean "safe." Buyers routinely overpay because they accept the seller's numbers at face value, underestimate working capital, or don't account for what changes when the founder leaves. Franchise buyers sometimes rely on the franchisor's sample projections without testing them against their own location, rent and staffing. A strong business plan is how you test the deal before you commit, and how you convince a lender to fund it.
This guide walks through what an acquisition or franchise business plan needs, with a calculator to test your financing. If you'd like the plan built for you, our business plan services prepare acquisition and franchise plans for buyers across Ontario and Canada.
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1. How Acquisition and Franchise Plans Differ
| Feature | Start-up plan | Acquisition plan | Franchise plan |
|---|---|---|---|
| Basis for projections | Market research and assumptions | Historical results, normalized | Franchisor data plus local assumptions |
| Key question | Will it work? | Is the price right, and can you keep it working? | Will this location work under the franchise model? |
| Biggest risk | Demand | Overpaying; losing customers or staff in the handover | Fees, rent and build-out costs exceeding plan |
| Financing | Equity, CSBFP, BDC | Bank or BDC, vendor take-back, equity | Bank franchise programs, CSBFP, equity |
| Unique sections | Market validation | Valuation, due diligence, transition | Franchise agreement terms, fees, territory |
2. Key Sections of an Acquisition Business Plan
- Executive summary: the target, purchase price, financing request, structure and a one-line DSCR.
- The business being acquired: history, products, customers, staff, location and competitive position.
- Buyer profile: your experience, management team and why you can run this business.
- Historical financial analysis: three to five years of statements, trends and normalized earnings.
- Valuation and purchase price: how the price compares with earnings and assets.
- Sources and uses of funds: price, working capital, closing costs and reserves, and where each dollar comes from.
- Projections under new ownership: monthly year-one cash flow and annual years two and three, including your salary and new debt.
- Transition plan: seller handover period, key staff and customer retention.
- Risks and mitigation: customer concentration, key-person risk, lease terms, equipment condition.
Lenders read acquisition plans with the same framework they use for any loan; see how Canadian lenders evaluate business plans.
3. Normalizing Earnings: SDE and EBITDA
Reported profit rarely shows what the business really earns. Owners run personal expenses through the company, pay themselves above or below market, and record one-time costs. Normalizing adjusts for these so you, the lender and the seller are talking about the same number.
| Item | Amount |
|---|---|
| Net income before tax | $210,000 |
| Add: owner's salary | +$120,000 |
| Add: owner's personal vehicle and phone | +$15,000 |
| Add: one-time legal costs | +$10,000 |
| Add: interest, depreciation and amortization | +$45,000 |
| Seller's discretionary earnings (SDE) | $400,000 |
| Less: market salary for a general manager | −$90,000 |
| Adjusted EBITDA | $310,000 |
Three views of the same business's earnings
Illustrative example above
- SDE is common for small owner-operated businesses, where the buyer will work in the business.
- EBITDA is used for larger businesses with management in place.
- Every add-back needs evidence. Lenders discount add-backs they can't verify.
Our financial modeling services build the normalization schedule and projections lenders rely on.
4. Structuring the Financing
Most small business acquisitions in Canada combine several sources. The mix below is illustrative; actual structures depend on the lender, the business and the buyer.
Illustrative acquisition capital stack
Share of total purchase price; varies by deal
| Source | Role | What the plan must show |
|---|---|---|
| Senior term loan (bank, credit union, BDC) | Largest share, secured on business assets | DSCR, collateral, buyer experience |
| Vendor take-back (VTB) | Seller lends part of the price, often subordinated to the bank | Repayment schedule and seller's confidence |
| Earn-out | Part of the price depends on future results | Clear, measurable targets |
| Buyer equity | Shows commitment and absorbs risk | Source of funds |
| Working capital line | Funds receivables and inventory after closing | Monthly cash flow and seasonality |
Some growth-oriented buyers also tap non-dilutive programs for post-acquisition projects; see our guide to business plans for grants and non-dilutive funding. Larger or serial acquirers should review the funding readiness framework for growth-stage companies.
5. Interactive Acquisition Financing Calculator
Test whether a deal's cash flow can carry its debt. Figures are illustrative defaults; replace them with your own.
6. Franchise-Specific Planning
A franchise plan must test the franchise system as well as the location. In Ontario, the Arthur Wishart Act (Franchise Disclosure), 2000 generally requires the franchisor to deliver a disclosure document at least 14 days before you sign any franchise agreement or pay any money. Several other provinces have similar laws. Use that time to build your own projections.
| Cost | How it's charged | Plan tip |
|---|---|---|
| Initial franchise fee | One-time, at signing | Include in sources and uses |
| Royalty | Percentage of gross sales, often mid-single digits | Calculate on sales, not profit |
| Advertising fund | Percentage of sales | Add local marketing on top |
| Build-out and equipment | Franchisor specifications | Get contractor quotes, not estimates |
| Technology and training fees | Monthly or one-time | Check the franchise agreement |
| Working capital reserve | Your own cash | Cover the ramp-up to break-even |
- Treat franchisor earnings claims carefully. Rebuild them using your rent, wages and local demand.
- Call existing and former franchisees about real sales, costs and support.
- Model the ramp-up: new locations rarely hit system averages in year one.
- Check renewal, transfer and territory terms with a franchise lawyer.
7. Due Diligence, Deal Structure and BN Registration
| Feature | Asset purchase | Share purchase |
|---|---|---|
| What you buy | Selected assets and contracts | The corporation, including all liabilities |
| CRA business number | Your corporation uses its own BN; new program accounts needed | Corporation keeps its existing BN and tax history |
| Tax history risk | Generally stays with the seller | Transfers to you; needs thorough tax due diligence |
| GST/HST | May apply; a joint election may be available in qualifying sales of substantially all assets | Generally not applicable to the share sale |
| Usually preferred by | Buyers | Sellers |
- Complete BN registration before closing if you're buying assets: your corporation needs its own business number with GST/HST (RT) and payroll (RP) accounts ready to operate from day one. Ontario corporations generally receive a BN at incorporation through the Ontario Business Registry.
- In a share purchase, review the target's CRA business number accounts: corporate tax, GST/HST and payroll filings, notices of assessment and any arrears.
- Verify the financials against tax returns, bank statements and HST filings.
- Review leases, key contracts and employee terms for change-of-control clauses.
- Get tax and legal advice on structure, the GST/HST election and purchase price allocation.
Clean books from day one protect your investment; our bookkeeping services set up the new owner's accounting and tax accounts.
8. The First 100 Days
| Period | Focus | Actions |
|---|---|---|
| Days 1–30 | Stabilize | Meet staff and key customers with the seller, confirm banking, payroll and BN accounts, no major changes |
| Days 31–60 | Learn | Review pricing, suppliers and margins; set up monthly reporting |
| Days 61–100 | Improve | Implement quick wins, compare actuals with the plan, report to the lender |
A plan that keeps working after closing is where much of its value lies; see the ROI of professional business planning for SMEs. Our fractional CFO services support new owners with reporting, covenants and integration.
9. Frequently Asked Questions
Do I need a business plan to buy an existing business?
If you are borrowing to fund the purchase, yes. Canadian lenders typically require an acquisition business plan showing the target's historical results, normalized earnings, the purchase price and financing structure, projected cash flow and debt service coverage under your ownership, and a transition plan. Even without financing, a plan helps you test whether the price is justified.
How much down payment do I need to buy a business in Canada?
It varies by lender, deal and buyer, but buyers commonly contribute around 10% to 30% of the purchase price in equity. Vendor take-back financing, where the seller lends part of the price, can reduce the cash needed and shows the seller's confidence in the business.
What is seller's discretionary earnings (SDE)?
SDE is the total financial benefit an owner-operator receives from a business: net profit before tax, plus the owner's salary and personal benefits, interest, depreciation and amortization, and one-time or non-business expenses. Small owner-operated businesses are often priced as a multiple of SDE, while larger businesses are usually priced on EBITDA.
How long do I have to review a franchise disclosure document in Ontario?
Under Ontario's Arthur Wishart Act (Franchise Disclosure), 2000, a franchisor must generally deliver the disclosure document at least 14 days before the prospective franchisee signs any agreement relating to the franchise or pays any consideration. Several other provinces have similar franchise laws. Have a franchise lawyer and accountant review it during that period.
Do I need a new CRA business number when I buy a business?
It depends on the structure. In a share purchase, the corporation keeps its existing CRA business number and tax history, so due diligence on its tax accounts is essential. In an asset purchase, the buyer's own corporation needs its own business number and program accounts, such as GST/HST and payroll, before closing.
Summary
An acquisition or franchise business plan has to prove three things: the price is justified by normalized earnings, the financing structure leaves enough cash to cover debt with a healthy DSCR, and you can keep the business performing through the transition. Verify every add-back, rebuild franchisor projections for your location, model fees and working capital, choose an asset or share structure with professional advice, and have your CRA business number and BN registration ready before closing.
Buy with confidence
Ledgerive helps buyers across Ontario and Canada analyze targets, structure financing and prepare lender-ready acquisition and franchise business plans. Book a free 30-minute call or reach us directly.