Business valuation is not an exact science. Many factors are considered when evaluating a business including, but not limited to:

• How much are the assets of the business worth?
• How much positive cash flow does the business generate?
• How stable is the goodwill of the business?
• What is the involvement of the owner?
• What opportunities are there to expand the business?
• How stable is the workforce?
• How long has the business been around?
• What type of sale (asset or share)?

It’s critical that you understand the fundamental factors which allow you to position your business to obtain the highest purchase price when the time comes to sell and also give you peace of mind that you received a fair deal. It doesn’t make any difference what you think your business is worth, or what you want for it. It also doesn’t make any difference what your accountant, banker, lawyer, or best friend thinks your business is worth. Only the marketplace can decide what its value is.

We will create a series of blind, non-specific advertisements that will give your business a strong presence on the Internet and will be on over 100 websites across North America and beyond. We also discuss a list of prospects provided by you. We have several qualified buyers looking for businesses at any given time.

Depending on their specific background, accountants may not be the best source of information. Before you take someone else’s word, you should make sure they have real-world experience of selling businesses to back up their opinion. If they don’t, what’s the basis for their opinion?

We understand that confidentiality is a huge concern for any business owner contemplating selling their company. To protect your company’s identity throughout the sale process, we only communicate sensitive information to potential buyers once they have signed a non-disclosure agreement and have provided a buyer profile showing their current financial capabilities and intent.

The potential buyer will then have access to the business overview and basic financial information. Digitally through our online platform.

In order to prepare your business for sale and provide buyers with critical information to help their buying decisions, we will need:

• 5 years of Financial Statements (Balance Sheet & Income Statement) if available.  (or tax returns if financial statements are not prepared).
• Year to date Income Statement to the most recent complete month end with comparative balances for the same period, prior year.
• Profit and Loss statements for the same years as the Financial Statements
• Value of significant equipment at current market value.  (What you could sell it for today)
• List of the leased equipment (if applicable) and copies of the related leases.
• Copy of any Rental or Lease agreements for premises and/or Property assessments
• Value of inventory at cost (not retail)
• A list of Owners and Family members involved in the business, the work they do, the wages (T4) paid each year to each person, and market rate for the work performed by each person.
  • A list of any Unnecessary, One-Time, Non-recurring Revenues or Expenses included in your financial statements each year, such as:
    • One-time consulting expenses,
    • One-time gain/loss on the sale of an old piece of equipment,
    • Vehicle expenses when a vehicle is nice but not necessary to the business (if you wouldn’t provide a vehicle to an employee doing the same job),
    • Any other applicable items.

In our system, a buyer will fill out an electronic NDA (Non-Disclosure Agreement) along with a number of questions to pre-qualify that buyer. After a follow up call and verification questions we then control the flow of documentation they can see as we release the information slowly. We also control the length of time that they can view this information. No documentation gets emailed directly to buyers. As the buyer continues to show interest, we release more information.

At any time, we can cut off the information and delete it from their portfolio.

Printing privileges and watermarks are on all documents with the date and their name and email address. So yes, confidentiality is of the extreme with Business Finders Canada.

We will introduce your business to prospective buyers after they have signed our non-disclosure agreement. They will start the process through the written profile about your business along with a detailed verbal description and response to questions. If there is continued interest, we will set up a buyer/seller meeting that will allow you to meet each other and go into your business with greater detail. We will encourage the buyer to visit your business (when possible) to get a feel for the location, facility, and nature of your operation (with your permission). We should now have a very interested prospect.

When a buyer is sufficiently interested, we will assist in the preparation of a written offer to purchase. This Purchase Agreement will spell out the buyer’s offer in detail. The offer will contain several contingencies that the buyer feels must be met before the transaction goes to actual closing/completion. We will present all offers to you for consideration until you find one that is acceptable to you. This is a contract and you will have the right to accept, counter, or reject. It is important to know that timing is important and this contract will expire if you do not respond. If you accept the offer, or you counter it and the buyer accepts your counter, be prepared to do some fast work to remove the contingencies.

Prepare, Prepare, Prepare. Be available to answer questions. Make sure the business is in great condition to show a buyer. Clean up your inventory. Buyers are looking for relevant inventory. Clean up your financial statements. Working with a business broker can keep you on track.

SHARE SALE

A share sale involves selling the shares of the corporation to the buyer. When the shares transfer to a new owner, the corporation being sold stays intact, the outgoing owner resigns his/her position as president and director, and the new owner is appointed to these positions.

A share sale is often very desirable to the seller as this type of transaction often qualifies for the capital gains exemption of up to $883,000 that is provided to all Canadian citizens once in their lifetime. A share sale is often not desired by a buyer because of contingent liabilities that might come with the corporation, such as unpaid taxes.

It is best to discuss with your account to determine what tax implication will apply to you.

ASSET SALE

An asset sale occurs when a seller directs the corporation he or she owns to sell the assets and goodwill (almost always including the name) to another corporation. Quite often, the corporation owned by the seller is then renamed or reverted to its original numbered status.

An asset sale is very desirable to a buyer because it means the buyer will start with a clean corporation, without history, and no worries about contingent liabilities. For the seller, there can be significant tax implications, mainly because the only way to get the sale proceeds into your personal possession is to either dividend them out or charge a management fee to the corporation you still own, both of which are highly taxable.

An asset sale can often be a very complicated transaction. Detailed allocations to asset values need to be negotiated and employees must be let go from the prior corporation and re-hired, often causing tenure issues. In addition, all utilities, contracts, etc. have to be re-assigned to the new entity, credit inquiries may be performed on the new owner, and covenants from the new owner may also be requested.

It is best to discuss with your account to determine what tax implication will apply to you.

You are not required to finance any portion of the sale of your business, but you need to be aware of the many reasons to consider this option. With reasonable terms, the chances for a timely sale increase dramatically, and at a higher purchase price. The major reason is that most small businesses attempt to minimize the profits shown on financial statements to reduce tax liability. You will need to understand that your new buyer will be considered a new start-up without any track record. Seller financing may be the only way to sell your company. Businesses that are owner financed almost always sell better than those that aren’t and often sell for 10-15% higher than businesses that do not.

Although it sounds harsh, our considerable experience has proven that it is best not to tell your employees about the sale until immediately before or immediately after the sale. Of course, if there is an employee whose expertise will be needed after the sale, you should introduce the buyer to this employee shortly before closing. Your business broker can assist you in determining the timing for notifying employees of the sale.

This will be dependent on the buyer’s experience and how much there is to learn in your business. Training will be important to most buyers. They need to learn your bookkeeping system, opening and closing procedures, who your suppliers and vendors are and their agents, introduction to employees and customers, and general product knowledge. This time frame can be as little as two weeks and as long as one year.

We recommend it. A lawyer and an accountant might be helpful and are always suggested, but not required. Many transactions conclude successfully without one. If you’re more comfortable using a lawyer and or account, we can recommend a few who are experienced.