Many business owners in Canada sell their businesses to non-family members when exiting. You are not alone if you plan to sell your business to a non-family member. However, the percentage of business owners planning to transfer their business in the future is small. Usually, the lack of succession planning results from difficulty finding a suitable buyer with enough financing to close the deal.
Before selling your business to a non-family member, it is best to consider factors that make it more attractive. For example, finding a buyer for a company with potential future growth is much easier. In addition, other corporations in your business sector may want to acquire your business to improve its profitability.
Valuation is critical. You can determine your business value by researching similar businesses in your area and their selling price. It is important to note that small companies may sell significantly less than their asking price. In addition, potential buyers may evaluate your business’ projected cash flow for the next few years to assess the value of the cash flow against business risks.
You can find a purchaser and obtain a better offer by;
Having a valid reason to sell
Despite having a valid reason to sell, avoid disclosing personal information that may weaken your negotiating power
Not waiting till you are under pressure to sell for emotional or economic reasons
Waiting till you are under pressure can force you to accept a poor offer
Gathering essential information
Essential information may include:
- Three years tax returns and financial statements
- Lists of fixtures and equipment
- Lists of employees and customers
- Franchise agreement
- Copies of leases for equipment and premises
- Lists of loans and payment schedules
- Names of professional advisors, for instance, tax specialists, business brokers, and qualified legal advisors.
Having professionally prepared financial statements for the sale
Professional financial statements increase your business’ value in potential buyers’ eyes
Considering hiring a business broker to identify purchasers
A business broker can act as an agent while you are looking out for a purchaser and during negotiations.
Maintaining confidentiality
Avoid divulging information about your day-to-day business activities. Your competitors can use this information. It would be best to ask potential buyers to sign a non-disclosure agreement. Also, provide financial information only to potential buyers who have paid a deposit
Not leaving your business unattended while looking to sell
Leaving your business unattended can cause a decline. Maintain your inventory, premises, and regular business hours.
Learning to judge the seriousness of a potential buyer
It is not ideal to waste time on tire kickers
Assemble A Team of Experts to Help
It is best to have an experienced tax advisor or a certified Ottawa CFP on your expert team. The tax advisor ensures that you plan your sale in the most tax-efficient manner. You also need a business valuator and qualified legal professional to prepare legal documentation. In addition, working with a tax advisor can help you create a financial plan. This plan shows what level of after-tax sale proceeds will be adequate for your retirement goals. Furthermore, a tax advisor can help you manage the investment of the sale proceeds. Also, consider hiring a business broker to help you find a purchaser.
Conclusion
Keeping your business going strong till you sell is essential. Unfortunately, many business owners start winding things down as they approach retirement. However, actively engaging your business and keeping it growing can attract potential buyers and most likely fetch a higher selling price.
As a reputable Ottawa certified financial planner, we are happy to help you create a financial plan for selling your business in the most tax-efficient manner. Kindly contact us today.
