How to Sell a Business in BC

Read on to Learn How to Sell a Business in BC

Selling your business in BC may be one of your most important business and life changing decisions.

Here’s how to get the most for your business.

Selling your business is one of the most important decisions you will make as a business owner.

Whether you want to retire or move on to other opportunities, the sale of your business could be your largest financial transaction of your life.

Taking the right steps early on can help you maximize the sale price, minimize tax liabilities and other expenses, and achieve your other goals for the sale of your business in BC.

“Selling a business is not an easy decision for a business owner,” says Chris Hall, Senior Business Broker with Stonebridge Business Brokers of BC.

“As a result, many business owners wait too long to sell their business and fail to take the necessary steps to prepare their business for sale” says Hall.

Planning for the sale of your business well in advance of actually listing the business for sale makes a big difference.

Why Would a Business Owner Choose to Sell Their Business?

There are many good reasons why a business owner will choose to sell their business. Here are the most common reasons to sell a business in BC:

Retirement

A business owner may be nearing the end of their career and want to enjoy retirement. As baby boomers retire, Canada is experiencing a major wave of business ownership transitions.

Pursuing Other Challenges

An owner may want to move on to another opportunity, such as a new business venture or a different lifestyle or career.

Partnership Issues

Businesses aren't immune to problems at an ownership level. Much like many marriages, conflict can arise when owners are locked into a business relationship but have conflicting goals or personalities.

In these cases, selling the business may be the best option to allow owners to resolve a difficult business partnership.

Health Issues

Some business owners must sell sell their business because medical issues are preventing them from adequately running the company.

Financial Difficulties

Businesses can experience financials challenges that affect the businesses viability and or the financial security of the business owner.

A business may need to be sold to to pay off personal or business debts.

Market Conditions

A business owner may choose to sell their business after being advised by their business broker that market conditions are favorable to sell their business.

Or a business owners may see coming market or technological changes that require significant investment of time and resources, and decide that the time is right to sell.

The Most Common Goals When Selling a Business

Business owners will have different reasons for selling, and therefore different goals that they want to achieve with the sale of their business.

Here are the most common goals when selling a business:

Money

A business owner may want to maximize their company’s sale price so that post-transaction activities, such as retirement, having money for family or charity, or pursuing other ventures can be adequately funded.

Continuity

An owner may want to ensure a smooth transition for the legacy of their business.

This may mean selling to a family member, a long-time employee, or a group of managers.

A Quick Sale

Sometimes business owners are burnt out, ill, or want to move on to other opportunities.

In cases like this, a business owner may choose a fast sale of their business over getting the maximum price for their business.

What Professional Expertise Do You Need When Selling Your Business?

It’s important for a business owner to assemble the right group of professional advisors to help then through the sale process.

This group of professional advisors usually includes the following professionals:

Accountant

An accountant is important for helping a business owner prepare accurate year-end and interim financial statements, projections and other documents that buyers will require to evaluate the business and that a business broker will need to complete a business valuation.

An accountant can also ensure the transaction is structured in a way to minimize tax liability from the sale.

Lawyer

A business owner will need a lawyer familiar with business transitions and purchase agreements that address questions of liability, corporate structure and closing details.

Banker or Lender

A banker can provide the needed funds for vendor financing or investments in the business to make it more attractive to buyers.

A banker can also give strategic advice and help find buyers.

Business Broker

A professional business broker like Stonebridge Business Brokers of BC will complete a detailed business valuation, create effective marketing material, and present the business in the marketplace to qualified business buyers.

A business broker in BC will also help you prepare your business for sale by suggesting financial and operational strategies that will steam line your business and make it more attractive to buyers.

How To Get a Business Ready to Sell

Once a business owners decides to sell their business, some time is normally needed to get your business ready for sale.

“Many business owners wait too long before starting to plan for the sale of their business,” says Chris Hall of Stonebridge Business Brokers of BC.

“I see many business owners who are nearing retirement age who haven’t put a plan together to sell their business. As a result, these business owners must sell at a time that’s not ideal to get the highest price for their business, or in a time-frame that works for the seller.

Hall suggests that business owners evaluate themselves and their business honestly so that any issues can be addressed well ahead of actually listing the business for sale.

Important questions to ask include:

Are The Business Financials in Order?

Buyers want to understand the financial performance of a business to ensure it has a solid track record that will continue in the future.

A Buyer will evaluate the business historic and interim financial statements, projections, tax returns and other records as a normal part of the due diligence process.

Review your records and financials with your bookkeeper, accountant and business broker of BC to make sure they’re up to date, and that interim statements are accurate and projections are realistic.

Is There a Plan for the Business?

Buyers want to see that a business has a track record of past profits and solid growth prospects.

They will also want to get an understanding of your short and long term goals for the business and what actions have been taken to achieve these goals.

How is the Business Performing?

Business performance issues and risks are important to address and identify.

Take the time to investigate:

• Financial Ratios to gauge and benchmark business performance.

• Review and improve operational efficiency.

• Ensure Standard Operating Procedures (SOP's) are in place.

• Address any supplier or customer concentration issues.

• Fill in any potential human resources gaps, especially in your management team.

How to Value a Business to Sell

An accurate business valuation is a key step that needs to be taken before a business is taken to the market.

The emphasis here is on 'accurate valuation.'

“Owners sometimes have a mistaken perception of their company’s value,” says Hall.

“Business owners often have an emotional connection to their business, and that may cloud their perception of business value.”

Establishing the market value of a company can be fairly complex, so it's important to use the business valuation expertise of a business broker like Stonebridge Business Brokers of BC.

Hall says that "nothing prevents a business from being sold like a business that is valued with no connection to what the market value of the business actually is."

Levels of Business Valuation

Stonebridge Business Brokers of BC can prepare three types of business valuations, ranging from basic to highly detailed.

In ascending order, from basic to thorough, the three report types are:

• Business Value Calculation - an opinion of business value providing basic details following a minimal review and little or no corroboration of information.

• Business Value Estimate - a moderately detailed report based on limited review and analysis of the business and it's financials.

• Business Valuation - a highly detailed report based on a comprehensive, corroborated review and analysis of the businesses financials, operations and industry.

Business Valuation Models

The three primary business valuation models are:

• Earnings-based Model

• Market-based Model

• Asset-based Model

It’s important to recognize that a company’s fair market value isn’t necessarily the price it will sell for.

The final selling price can be affected by numerous factors, such as market conditions, the buyer’s strategic interests, due diligence, availability of financing, your eagerness to sell and a business owners post-transaction involvement in the business.

What Expenses and Taxes Does a Owner have to Pay to Sell a business?

When you sell a business, you may have to pay:

• fees for professionals, such as accountants, lawyers, realtors, valuators, business brokers and investment bankers

• closing costs, such as title search and legal fees and any penalty for early repayment of financing

• taxes, on capital gains and income

Depending on the terms and conditions of the purchase agreement, you may also need to repay outstanding financing and assume part of the due diligence costs.

Create a Plan to Sell Your Business for Maximum Value

Contact Stonebridge Business Brokers of BC to help you prepare your business for its sale and get the maximum value for your business.