I just finished answering a balance sheet question on the bplans.com blog and it occurs to me that the problem might be a very common misunderstanding. Separate your personal finances from your new business’ finances when you buy a business. Mixing the two can get very confusing.
For example, if you buy a business for $100,000, you pay that money to the previous owner and it doesn’t appear in your plan. Even if you borrowed the money to buy the business, it doesn’t matter. Think of this as something like buying shares of stock. When you buy stock in Microsoft from somebody else, Microsoft’s financials aren’t affected.
Sometimes, however, the purchased business takes the loan. This is sometimes called leveraged buyout. For example, the business borrows $100,000 and pays it to the previous owner, you end up owning the business, but the business you own has this much debt. In that case the debt does go into the business plan.
This point seems to cause a lot of confusion. Just think of the analogy of one person buying shares from another person, and that will help. Also, watch for who owes the money at the end of the day. If the company owes it, then it should be included in the financials. If the new owner owes it personally, it doesn’t belong in the business plan.