PRIVACY FIRST – CLIENT FOCUSED – DEALS DONE RIGHT


Seller FAQ

HOW LONG WILL IT TAKE TO SELL MY BUSINESS?

On average it will take 9 to 12 months to sell most businesses to find the right match of the right buyer for the right business. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period. There are many buyers looking right now, but your business must be the exact one that appeals to the buyer at this exact time. Not only must your business be just right, the price and terms must fit into our buyer’s ability as well.

WHAT IS THE VALUE OF MY BUSINESS?

Business valuation is not an exact science. Many factors are considered when valuating 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 allows you to position your business to obtain the highest purchase price when the time comes to sell and also gives 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.
DO YOU ADVERTISE MY BUSINESS FOR SALE?

We will create a series of blind, non-specific advertisements that will give your business a strong presence in 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 the real-world experience of selling businesses to back up their opinion. If they don’t, what’s the basis for their opinion?

I’M CONCERNED MY STAFF AND CUSTOMERS WILL FIND OUT ABOUT THE SALE?

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.

WHAT DO I NEED TO PREPARE TO SELL MY BUSINESS?

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.

    C opy 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.

o    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 .

HOW IS MY CONFIDENTIALITY PROTECTED?

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.

HOW DO YOU SHOW MY BUSINESS?

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 detailed verbal description and response to questions. If there is continued interest, we will setup a buyer/seller meeting that will allow you to meet each other and to 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.

WHAT HAPPENS WHEN THERE IS A BUYER FOR MY BUSINESS?

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 buyers 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.

WHAT CAN I DO TO HELP SELL MY BUSINESS?

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.

SHOULD I SELL AS AN "ASSET SALE" OR "SHARE SALE"?

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 our 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 reverts 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.

SHOULD I OFFER SELLER FINANCING?

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. 

WHEN SHOULD I TELL MY EMPLOYEES, I PLAN TO SELL MY BUSINESS?

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.

WHAT TRAINING WILL BE REQUIRED FROM ME AND FOR HOW LONG?

This will be dependant 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 a one year. 

DO I NEED TO USE A LAWYER? AN ACCOUNTANT?

We recommend it. A lawyer and an accountant might be helpful and is 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.

Buyer FAQ

WHAT TO CONSIDER BEFORE BUYING A BUSINESS?

Some ways to prioritize your criteria to narrow your search and zero in on the right business for you include:

Geography:    Where would you like to live and work from.

Cash Flow:   Cash flow is the profit a business generates, from which you will make monthly debt payments from the purchase of the business, with the remainder being your return on investment, or what you will live on. Cashflow is King and you need to understand what meets your personal requirements.

Industry:   Does this industry interest you? Can you bring any experience? Do you have resources or contacts that can help you get traction?

Price:  Just because you can afford the price of a business, doesn’t mean it’s the  right fit. Price is usually a function of cash flow, so once you determine your cash flow  requirements, you will quickly start to see the general range of prices you will pay for a  business that fits your needs. If you get to this point and realize you can’t afford a  business that meets your cash flow requirements, you may need to put your business acquisition plans of for a bit while you save more for your down payment.

WHY SHOULD I SIGN A "CONFIDENTIALITY AGREEMENT" AND COMPLETE THE "BUYER QUESTIONNAIRE"?

The purpose of confidentiality agreement is to protect business information. Non-disclosure agreements are used to review financial and company records so that you can make a realistic assessment of the strengths and weaknesses of the business in both quantitative and qualitative terms. You can also determine if the seller’s asking price for the business is reasonable.

Their clients have provided them with plenty of sensitive documents and numbers; it cannot be released to just anyone without proper care for its protection. When a first-time inquirer demands a company’s name, location, or financial details before signing any agreement, a red flag goes up in the broker’s mind.

WHY SHOULD I USE A BUSINESS BROKER?

A business broker will handle all of the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, introducing you to other professionals who may be able to assist you. Expertise to guide you through the transaction, which includes facility tours, the decision to buy, due diligence, the lending process to closing. Especially if you’ve never bought a business before, their experience and network of professional contacts is invaluable. At the closing table we often hear, "We never could have done this without you!"

WHO PAYS THE BUSINESS FINDERS CANADA FEE/COMMISSION?

Usually the seller pays the fee. The seller signs an exclusive listing agreement with Business Finders Canada in order to market the business to potential buyers. As we're usually hired by the Seller and have a fiduciary responsibility to them. However, we're also required to treat every buyer fairly and ethically. We are all licensed REALTORS® (A REALTOR® is a licensed real estate professional who is a member of CREA and, as such, subscribes to a high standard of professional service and a strict Code of Ethics) This is a responsibility we take very seriously. In addition to providing accurate information, we are also concerned with finding the right "fit" for both buyer and seller.

If you have a signed Buyer-Broker Agreement, you are obviously responsible for those fees. Beyond that, there will be costs associated with any other professional advisor you engage – accountant, Merger and Acquisition lawyer, and possibly lender fees.

WHAT IS THE DIFFERENCE BETWEEN AN "ASSET SALE" AND A "SHARE SALE"?

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 our 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 reverts 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 their personal possession is to either dividend them out or charge a management fee to the corporation they 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.

DO I NEED TO USE A LAWYER? AN ACCOUNTANT?

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

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