Anne Brown asked:


Many times, business owners make the decision to sell a business and too quickly dive into a listing arrangement without considering all of the consequences. 

As a business owner looking to sell a business, here are a couple of issues to keep in mind if you want to sell your company quickly and at a good price.





Deal with a professional

As a business seller it is in your best interest to deal with a business broker, intermediary or specialist that focuses on the selling of businesses.  Oftentimes, owners list their companies for sale with an individual who normally focuses on residential real estate and are disappointed when their business doesn’t sell.  If you want to sell a business, it’s better to deal with a specialist.

Selling a business requires a unique skill set and the process is much different than selling a piece of real estate.  For instance, business sales are usually kept confidential so dealing with a business sales specialist will benefit you by working with a professional that has an existing network of potential buyers interested specifically in businesses for sale.  There is also more technical expertise required (example – business valuation for the purpose to sell a business is much different than determining the value for a piece of real estate, the negotiation is usually much more involved, there are typically more deal terms to be negotiated, due diligence must be managed and the overall transition facilitated).  If you are looking to sell a business please choose to deal with a professional that specializes in business sales.





Declare your income

Too often, business owners don’t ‘declare’ a portion of their business income in order to have a lower tax bill.  This is highly unadvisable.  For starters, CCRA would not be too happy if they discovered such activity.  Secondly, from a purely economic point of view, it costs you, as a business owner, in the long run when you go to sell a business.  For instance, suppose you decide not to declare $10,000 in earnings and keep this instead as cash ‘off the books’.  If your overall small business tax rate was 23% you would be saving about $2,300 in taxes.  Alternatively, supposing you did declare the full amount you would pay $2,300 in taxes and be left with $7,700 in ‘declared’ income.  However, supposing your business was valued at 2x earnings you would be gaining $15,400 in supportable business valuation when the day came to sell the business.

The point is that it may seem appealing in the short-run to cheat and not declare income but it really does pay to be honest.  Businesses with undeclared earnings are much more difficult to sell and much more difficult to justify a valuation on.  Business buyers always like to see properly documented and supportable earnings. 



Do some analysis on your business

When you decide to sell a business, it is important to be able to tell a narrative to potential buyers about your business.  Do some analysis and try to anticipate what an interested buyer might ask you.  For instance, if profit margins have been decreasing, find out why.  If sales have been decreasing, get to the root of it.  Perhaps you had a period where you lost a staff member and have since resolved the situation. 

Find out the story behind the numbers to paint an accurate picture to a buyer.  Remember that no business is perfect and most reasonable buyers don’t expect it to be.  Don’t try to gloss over any blemishes your business may have.  Be forthright. Buyers expect you to be honest and if you’re not then that would raise a red flag that could potentially de-rail a deal.



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Anne Brown asked:

Some Reasons to Consider

The process of selling your business is usually similar for many people – get your business ready to be sold, talk to a business broker and have them help you find a buyer and complete a transaction.  There are, however, many different reasons why someone might consider selling a business.  This article explores some of the major reasons behind the decision to sell.  All too often people end up selling their companies because they have to and not for any other reason.  With some planning and foresight though you can sell your business when you want to – not when you have to.

Get your Equity Out

This is a very popular reason for selling your business.  If you have worked hard and built up a successful venture then deciding to pull your money out is good reason to sell your business.

Retirement

The next 10 years will see a major increase in the number of companies for sale.  As baby boomers retire many will need the equity in their businesses, as this is their nest egg.  Unlike an employee, a small business owner does not have a company pension plan and must rely on the equity in their business to fund their retirement.  This is an increasingly popular reason for selling your business.

Family

Being an entrepreneur is a tough business.  Selling your business for family issues is quite commonly done.  Perhaps the hours are too long or the strain on family relationships is difficult.  Putting your family first is a noble decision and is a good reason to sell.

New Business Opportunity

Small business owners are usually quite entrepreneurial by nature.  Perhaps you have discovered a new business venture that interests you more and decided that it’s time to make the switch.  Selling your business for a new business is done quite often.

Bored

Owning a business can be exciting for many people.  The thought of being in direct control of your destiny is a thrilling experience for a lot of people.  However, there are long hours and much work associated with achieving this dream.  Oftentimes, business owners get bored or frustrated in their businesses and decide it’s time to move on.  Unlike employees at companies who can simply resign and move on, small business owners must find a business buyer to take over their business.  If you are thinking of selling your business due to boredom, rest assured that it happens very frequently.

Business is Getting Complex

Suppose you started a brand new business from the ground floor.  You work very hard to bring it to the next level and nurture it to make it a resounding success.  When this happens though, the company can change from a dynamic smaller business operation to a much larger organization with bigger challenges.  For example – suppose you start a dry cleaning business and work very hard to grow it to 5 then 10 outlets.  Managing a 10 outlet business is much different than running a growing a single shop store.  There are more human resources issues, management control must be delegated (which is difficult for some people) and more administration overall.  Selling your business to get back to your roots of starting a smaller, upstart company is done and is a good reason to consider selling.

With whatever reason it is, when you decide to sell you will want to make sure you are ready to sell and get the best value you can in the transaction.  Although it’s sometimes unavoidable, selling your business because your have to can put you in a time crunch and increased stress and affect your judgment and patience during the business sale process.

Please contact our business brokerage to discuss how we can help you sell your business.

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