With Vancouver’s businesses on a steady rise since COVID-19 and new businesses gradually coming on the scene, now may be the time to act if you’ve been thinking of retiring or switching industries. However, once you’ve decided to sell your business, you may feel a bit lost and overwhelmed by what you need to accomplish before listing. Our 5-step checklist for selling a business in Vancouver, BC, will help you get started preparing for a successful sale and smooth transition out of your business!
Checklist for Selling a Business: 5 Steps to Preparedness
As you begin preparing your business for sale, you will find lots of information on what you should and shouldn’t do. It can be overwhelming, so our experts compiled what you need to know about selling businesses into one easy-to-follow checklist to get you started!
1. Assemble a Team of Professional Advisors
While selling a business on your own is a viable option, we recommend assembling a team of experts to ease you through the process. Crucial professional advisors to have are:
- A business broker
- A trusted accountant or financial advisor
- An lawyer
Hiring a trusted team, like Pacific M&A and Business Brokers, to facilitate the sale of your Canadian business gives you an advantage. Business brokers work with a network of pre-qualified buyers and know where to list and market your business for the best results. A broker also acts as a business valuation expert and will take a deep dive into your business to provide you with a fair asking price. It is always better to have a third party conduct the business valuation because a broker will look at your business objectively. Many small business owners view their business through an emotional lens, factoring in the work and effort they have put in over the years, which often inflates the value placed on the company. An objective opinion of value will ensure you go to market at the right price and at the right time.
Your trusted accountant can help you organize documents pertinent to the sale of your business and collect and present your financial statements in the most efficient way possible. After the sale is complete, your accountant or financial advisor can assist you with tax compliance and help you determine how to use the money in your best interest.
A lawyer can provide you with legal advice about your business. A lawyer specializing in business sales will help you understand which documents you must present to streamline the process. Additionally, they know what kinds of issues can throw a wrench in your plans and will help you avoid them at all costs.
2. Organize Your Business Documents
You’ll want to gather your business documents or any paperwork that details how your business operates. Pacific M&A and Business Brokers can walk you through this process, but some questions to keep in mind when sorting through these documents are:
- How is your business registered? Is it a sole proprietorship? Incorporation? This information will assist your lawyer in determining which legal actions may be needed.
- What is the current marketing strategy for your business? This data will help an interested buyer understand your business’ market and customer base.
- Do you lease equipment? If so, you’ll want to bring forward any equipment leases or agreements you have.
- Do you have any outstanding contracts with clients or suppliers? It’s essential for the buyer and your broker to be up-to-date on this information.
What products or services do you offer? Are they compiled into a master list with product pricing?
3. Compile All Financial and Legal Documents
Financial and legal documents provide evidence of your business’s financial health, legal framework, and operating rhythm. You can start by gathering tax returns, estimated cash flow, seller’s discretionary earnings, and average annual revenue. If you owe money to the CRA or have any outstanding debt under the business’ name, be sure to include that here as well.
Other legal documents that may be important to present to the new owner are employee benefit plans and handbooks, certifications, and insurance information.
4. Define Any Business Assets
A business asset is anything of value owned by your company. It can be tangible like a company vehicle or intangible like intellectual property. Take time to define your assets before the valuation so your professional advisors have time to review and identify any you may have missed.
Assets may include but are not limited to:
- Logos and marketing materials
- Business name and branding
- Business licenses
- Average daily customers
- Strength of the business’ reputation
- Existing inventory
- Web host and domain name
- Software and program subscriptions
5. Plan for the Sale and Transition of Ownership
Outline a succession plan, including what will happen to current employees and your role during the ownership transition. Additionally, it would be best if you prepared an exit strategy before and after your business’s sale. Determine the best time to list your business, review tax implications, and discuss the use of the proceeds with your financial planner.
After reviewing all of the documentation essential to selling your small business, work with your business broker to assemble it into a packet to provide to pre-approved buyers who have signed a confidentiality agreement. Having this informative packet ahead of time will help you stay organized, prove that your asking price is reasonable, and speed up the sales process.
This selling a business checklist is a great place to start for any business owner in British Columbia looking to retire or change industries! Even if you feel confident that you completed your due diligence, a professional will always catch things you might have missed. Pacific M&A and Business Brokers in Vancouver can help you fully prepare for the sale of your business and guide you to a purchase price that pleases all parties involved. Contact us today and get one step closer to selling your business!