As a business owner, you are being presented with many tough decisions during this time, balancing the needs of your employees, customers, and yourself. For most business owners, your business comprises a significant portion of your accumulated wealth, begging the question, “What can I do NOW to protect my company’s value for a future sale?”

There is no one size fits all solution as every business is unique with company specific variables and operating within industries that have all been affected slightly differently by the pandemic. Read on for a toolkit of considerations regarding Tips for Protecting your Company’s Value during these uncertain times.

The International Business Brokers Association (IBBA) and M&A Source released their Market Pulse Survey for the second quarter in 2020. This second quarter survey offers insight into the market conditions for businesses being sold in the $0-$50MM range and specifically Covid-19’s impact on the transaction market.

2020 is the perfect time to take a closer look at your business’ value amidst the changing Saskatchewan business climate. A federal election, trade wars between China and Canada, uncertainty in the energy and commodity markets all of may have affected your business, your customers, and possibly the value of your business.

A signed letter of intent (LOI) is only the first step to having an agreement between a business buyer and seller. This agreement is non-binding and its purpose is to serve as an outline of business terms and key agreement points prior to the signing of a Definitive Purchase Agreement. Although an LOI is a significant step, it’s important to remember that the deal isn’t guaranteed at this point until many other details have been addressed.

If you’re looking to sell your business, you might not consider that the buyer’s identity is important to you. Business buyers come in many forms, and there may be a category of buyer that is a better fit for your business and will yield you the highest price.

It’s not uncommon to get more than one offer for your business – if you’ve hired the right broker to help you through the steps.  In a perfect world, these offers all come in at the same time.  But that’s usually not the case.  Your broker should continue to follow through on your marketing plan once an initial offer is received and encourage other good potential buyers to place an offer before it’s too late.  This helps to maximize the price. 

It’s not uncommon to get more than one offer for your business – if you’ve hired the right broker to help you through the steps.  In a perfect world, these offers all come in at the same time.  But that’s usually not the case.  Your broker should continue to follow through on your marketing plan once an initial offer is received and encourage other good potential buyers to place an offer before it’s too late.  This helps to maximize the price. 

In Part 1, you met Steve and his family.  Steve is ready to sell his manufacturing business and just got the ball rolling with an informal meeting with a broker and his first outside perspective on the value of his business.  What’s next for Steve?  Read on. 

When was the last time you sold a business?  If you’re like most people, probably never.  It is not a common transaction like buying a home or a vehicle.  So, you can’t poll your friends for their insight because they probably haven’t done it.  You might not want to discuss it with your business peers either because of your concerns about confidentiality. 

Letting go of a business that has been built on your hard work is never easy.  It’s natural to want to protect the legacy of a life’s work – the brand and the relationships with employees, suppliers, and customers.  It’s also not a cake walk for the new owner to be handed the keys and a wave goodbye.  There are many things a new owner needs to know in order to be successful at taking over the business.  Not all of these details can be addressed before closing the deal and that is why there is typically some form of a transition period with every business sale.

Considering buying a business? Are you asking yourself, from where will I get the money?

There are two cash requirements to think about when you are considering buying a business.

1. How much cash do you need for a down payment?

2. How much cash is required to close the sale and start out on a sound financial footing?

These are two different uses for your cash, and you would be well advised to look at both carefully as you plan for the purchase of a business.

Every business is unique, but buyers tend to focus on the same aspects of a business when they are interested in acquiring it. The major factors that influence a buyer's view of your company include:

When you’re preparing to sell your business, you need to take a step back and have an objective look at the company from an outsider’s perspective.  It’s important to start the “house cleaning” well in advance of the actual sale of your business.  Some of the things that should be done can take a long time to correct so if you want to get the most from the sale of your business, it’s best to start early. 

Here are the top things to tend to if you plan to start the process of selling your business in the next 2 to 5 years. 

Selling a company means being prepared to answer tough questions from potential buyers. It's important to be confident, be prepared, and have all of your company's relevant information available to disclose. Assume that the truth would be uncovered during due diligence, and offer it freely. This will build trust and contribute to a speedier transaction.

If you’ve ever worked for a company that underwent an acquisition (or merger), you know it’s usually a powder keg of rumours and uncertainty.  Employees worry about job stability and what the new company culture will look like.  As a result, one of the major challenges during any business acquisition process is retaining employees. 

When structuring a business sale, a common problem that arises is a difference in opinion on the value of the business. It's important to recognize that the two parties are motivated by different information. Buyers are focused on past earnings and the operational risk in the business that will affect future earnings. Sellers typically focus on the company's recent historical performance, hoping to maximize their profit from the sale.

It's important to have well-crafted, documented systems and procedures in place for your business well before the time comes to sell. Systems lessen the reliance on the owner for the business to operate successfully, which gives a potential buyer confidence that they can take over the role. This increases the marketability of your company, and can help achieve a higher price.

As you have probably heard, the federal government is proposing important changes to how business sale proceeds are being taxed.

Salespeople are in short supply in Saskatchewan so most business owners would love to know the secret recipe for increasing sales.  Deep down, though, you know that there are not 4 silver bullets just waiting for you to read them so your sales will go through the roof.  You know there’s a lot to making a sale – especially when buyers are tightening their belts.

Welcome 2017

A lot happened in 2016 that affected your business and your customers. A weak mining sector, low oil prices, decreased construction activity, rising unemployment rates, declining housing market, a turbulent US election, and general market uncertainty surrounding the pending carbon tax.  This all made a difference to your local economy and the conditions that impact your customers.