Business News and Business Products, Services, Reports and Advertising. Business News RSS Feed. » Blog Archive » Planning to Sell a Business

Business News and Business Products, Services, Reports and Advertising. Business News RSS Feed. » Blog Archive » Planning to Sell a Business

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.