Is it time to sell? It’s a big decision!
The decision to sell your business in is not one to be taken lightly.
Letting go of the enterprise that you’ve built, sacrificed so much for over the years involves careful planning and serious consideration of the financial, legal, tax, lifestyle and emotional matters you’ll be facing.
Understanding how to sell a business in a way that meets your needs is a great place to start. Having a conversation with one of our Business Broker’s, to get the right plan in place, one that accounts for your needs and avoids costly mistakes, will provide you with invaluable peace of mind.
Below you will find information on some of the key considerations when selling a business.
If you have any questions, please don’t hesitate to Contact us.
Planning and Preparation is Critical!
Because there are so many considerations that will affect the value or your business, your after tax proceeds, and the attractiveness of your business in the marketplace, proper planning and preparation can make a huge difference in the outcome of the sales process.
We encourage all business owners to control the circumstances that affect the value of their businesses and to constantly build for the maximum return on their investment. Every step you take to prepare your business for sale will ultimately create a more enjoyable and more productive business environment for you to work in. It will also ensure that you are prepared when the right opportunity comes along.
Before we get into some of the key steps, be aware that timing is critical. By preparing your exit strategy well in advance of selling, you can leave on your terms. Generally it is a good thing that most business owners are not risk adverse. Unfortunately, when it comes to preparing to sell their businesses, this trait is counter productive as they will often continue operating the business until they are either burned out, have major health concerns, the business is no longer viable, or the die. Far too many entrepreneurs hang on too long after their energy and enthusiasm for the business have deteriorated and have started to diminish the performance and value of the business.
If you would like to prepare to leave your business on your own terms, please Contact us today.
Below are some of the key considerations on how to help prepare for selling your business. If you want to read more, download Insider Tips on Selling a Business in Canada.
- Define and thoroughly evaluate your reason(s) for selling
- Consider what alternatives there might be to selling
- Determine if selling is indeed your best option at this point in time
- Work with an accountant, business broker, financial planner and tax lawyer to structure optimal transaction strategies and your best approach to managing the proceeds of the sale
- Determine if the proceeds of the sale will provide the funds you require to sustain your lifestyle after the business is sold
- Evaluate your optimal terms and conditions for sale
- Determine the best possible timing for you
- Are you ready for your retirement?
- What will you do once you sell your business?
- How does your family feel about selling?
- Will selling satisfy your financial needs for retirement or other pursuits?
- Are you interested in continuing to work in the business?
- Do you plan to buy another business?
Talking with a local Sunbelt Business Broker will help you understand how buyers are likely to perceive the value of your business. While a formal business valuation is required to go to market, you can contact us, enjoy a conversation and lean on our experience before making any commitments.
- Get a Business Valuation done by qualified experts with a credible track record
- There are different types of Business Valuations, ours help you understand what you can expect to sell your business for
- Understand the value drivers that will affect the sale price of your business
- Consider your potential for increasing value if you make improvements
- Determine if the time, effort, costs and resources required to increase the value of your enterprise within a reasonable time frame, will produce a realistic return on the investment
- Are there any assets that you do not want to sell with the business?
- Will any of your furniture, fixtures and/or equipment need to be repaired or replaced?
- Does the business have any debt?
- Are there any current or anticipated Legal, Tax, WSIB or other possible liabilities that could affect the value of your business?
- What kind of growth is your business experiencing?
- Is your business operating at optimal efficiency?
- Is your return on investment approaching its peak?
- Have you implemented systems and processes to make it possible for a new owner to successfully operate your business?
- Is the business dependent on you?
- Can your knowledge and skills be transferred to a new owner to increase saleable value?
Keeping the sale of your business confidential will preserve the value of your business. We highly recommend that you do not discuss the possible sale with your discussions with staff, suppliers, bankers, customers, competitors and personal contacts, unless they need to know, to assist in the process.
Working with a Sunbelt Canada Business Broker will allow you to carry on keeping your business healthy while we confidentially guide you through the process of selling your business. Our system is designed to confidentially market your business, to find qualified buyers are invaluable to you.
There is a long list of things to be done as you prepare to sell your business. We will help you identify what needs to be done to prepare for a sale. Here are a few things to consider:
- Provide detailed and accurate financial information
- Ensure your books and records are up to date with at least 3 (preferably 5) years of financial history
- Be clear about how your business operates, who the clients are, what is special about your business, and what opportunities are available to improve the business
- Provide accurate information on inventory, equipment, FF&E
- Present your business in the best way, as tidy and organized as possible
We will prepare an excellent marketing package that clearly explains your business so the right buyer can make a well informed offer.
Keep your business in peak condition so it shows well when the right buyer is ready. Buyers are most attracted by a business with steady or growing performance. Using our services will let you stay focused on strong business operations as our Business Broker’s limit the distractions of the selling process for you.
- Keep running your business as though you plan to have your best years ever
- Stay focused on running your business, don’t get distracted by the sale of the business. Let your business broker bring you the right buyers and bring you back into the process when you need to be involved
- Keep a healthy pace in all areas of your business
- Don’t stop marketing or try to trim expenses
When selling a business it is reassuring to know that you have found someone who has a similar passion for your business, the abilities to run the business and the financial resources to make a deal happen. Finding the right buyer is not always an easy task. We need to confidentially market your business, then screen our database and any inquiries for buyers who would be a great fit, then we would introduce them to the business and to you.
The last thing you want to be doing is wasting time with unqualified buyers or “tire kickers.” Being a part of Sunbelt Business Brokers Canada, we have a large pool of pre-screened buyers and a system that allows us to confidentially find and screen buyers from the market place, before they are introduced to you. By having one of our Business Brokers doing this work on your behalf, this will allow you to stay focused on operating your business, while we work on finding the right buyer for you and your business.
Once you have met with the buyer and you feel that they would be a good fit to work with you, your staff, customers and suppliers after closing, and they feel that this is the right business for them, they will make an offer. The offer will contain the following:
- The purchase price that the Buyer is prepared to offer
- Specify how and when the purchase price is to be paid and under what conditions
- Recommend a date for closing, with conditions, terms and their respective timelines to be met before closing (and perhaps some for after closing)
- Set out expectations for your responsibilities after closing – such as training and transition support for the Buyer or the terms for your continued employment
The offer may also establish a time frame for due diligence and request exclusivity in negotiations for that period of time.
After meeting with one of our Business Brokers, completing a valuation, preparing the marketing collaterals for your business, you can be confident in our efforts during the negotiations, to create a win-win deal. You are able to rely our knowledge and experience to help negotiate terms that will not only align with your goals but those of the Buyer as well, to achieve that win-win scenario.
Congratulations, you have an accepted offer! Now both parties need to conduct a reasonable investigation to make sure everything is as it was portrayed.
The Buyer will want to verify many items including: human recourses, operational, safety and training policies and procedures, as well as your accounting/bookkeeping, payroll, job descriptions and organizational structure, workflow and processes, systems and manuals, etcetera. The Buyer’s advisors will review financials, assess equipment, confirm titles, and more.
As the Seller you will want to validate that the Buyer will do a good job running your business and that they will look after the staff and your clients. You want to be sure they will repay the financing you are providing, so you need to check out the Buyer just as they are checking out your business.
Your Business Broker will work with you to prepare for due diligence. By the time you have arrived at this point in the process, so long as you have provided all of the information that was requested, we should have between 90% and 95% of the information that the Buyer and their representative(s) will ask for. This will expedite the diligence process an allow it to run as smooth as possible, minimizing the risk of finding any “skeletons in the closet” that could kill a deal. This process is all about substantiating the information that was provided; this increases trust and helps avoid issues before and after the transition.
Diligence is complete and you are ready to close the deal. You now need a transaction lawyer to draft the closing documents:
- Non-compete, training, and transition agreements
- A promissory note for the financing as well as a security agreement to protect that financing
- An agreement of purchase and sale reflecting the structuring of the deal
If it is a share sale, you may also require an agreement to hold the shares in trust until the purchase price has been paid in full. If it is an asset sale, then you will need to register a security against the assets of the business.
As closing approaches, work closely with your Business Broker to guide you through items like conducting a closing inventory count, how to handle work-in-progress, billing, and recent expenses. Your Broker’s experience is important here and can help to quickly resolve any potential sources of conflict that could damage the deal. In all likely hood there will be some post closing adjustments to make, as you will not have all of your final bills available at the time of closing.
You do not, want to alert your staff to the sale until all of the agreed to conditions have been met. At which time you will probably want to hold a staff meeting to introduce the new owner and give them an opportunity to reassure the employees of their intentions after closing and to address any concerns that the staff may have at that time.
Once the deal is closed it is time to work together with the Buyer for a positive transition.
Do you have other questions?
Be sure to visit Seller FAQs to answers to the following questions.
- How long does it take to sell my business?
- What can Business Brokers do – and, what can’t they do?
- What can I do to help sell my business?
- What happens when there is a Buyer for my business?
- Why is Seller financing so important to the sale of my business?
For more insight you can also download our e-book, Tips on Selling a Business in Canada by visiting our corporate site.