So, your existing business is going well and you’re thinking about setting up another one. Your new idea is related to your current business and operates in the same field, so you’d like to set it up as a subsidiary. As with all new businesses, the best course of action is to start by writing a business plan. But what special factors should you take into consideration when writing a business plan for a subsidiary?
What Is A Subsidiary?
A subsidiary is a business that is fully owned and controlled by its parent company. It is a legally separate business and it may be used to launch a new product line or enter a new market, for example. Sister companies are subsidiaries owned by the same parent company.
Subsidiary or Separate Company?
Before you write your business plan, you need to decide whether you want to set up your new venture as a subsidiary of your existing business or if you should create a completely separate new business for it. Setting up a subsidiary can be more cost-effective than setting up a separate new company, and it can also provide a place for you to test your idea with minimal risk in case it doesn’t turn out the way you hoped. Creating a new company can help you to keep the businesses separate, but this comes with cost, tax and legal implications when it comes to issues such as cash flow and intellectual property. This article on starting a subsidiary company may help you to weigh up the pros and cons of creating a subsidiary versus starting a brand new company.
Use Your Original Business Plan As Guidance
How similar is your subsidiary to the parent company? When you are writing a business plan for your new venture, it may be helpful to refer back to the plan for your original business if you have one, and see if this will help you. For example, do the two companies have similar goals, or are they targeting the same market? Will they face similar threats? There may be some things in your first business plan that you can carry over to help you begin writing your new plan.
Similarly, there may be things outside of your business plan that you can use, such as lessons you have learnt from running your first business. For example, did you set your sights too high the first time around and discover you needed to adjust your goals? Or did you identify new strengths and weaknesses along the way that could impact your new subsidiary? Take these learnings and use them to strengthen plans for your new company.
Outline the Differences
How will your subsidiary be different from your parent company? Consider what will stay the same and how the companies will operate in different ways. Will they be managed by different people? Look at the rules and plans you set up for your original business, see how they fit into your new business’s plan, and add them in, throw them away or edit them as necessary.
Allocate Assets
Think about the assets your new company will need and how you will allocate these, as this should be outlined in your business plan. For example, what inventory or machinery will it need, how much money will you put into the company, and what do you expect the financial implications to be?
If you would like help with writing a business plan for your subsidiary company, we would love to hear from you. Contact us online using the form on the right or call 01604 420 420.