Interested in acquiring a business but unsure about how to get started? Here are the main steps and considerations.
It’s worth doing your homework before diving into a major undertaking like acquiring a business. That way you’ll know what’s feasible for you and who you can rely on for assistance.
Choose your team and partners
Before you start looking around at what businesses are up for sale, take the time to go through these steps.
1- Define your budget
How much capital do you have? That’s the first aspect to consider when determining what size of company fits your budget.
2- Contact the bank and other sources of financing
Approach your bank or other actors in the financial field — like Fonds FTQ, Investissement Québec and BDC — to introduce yourself, explain your intentions and get the ball rolling on the next steps.
3- Choose the right accounting and legal partners
From the get-go, it’s important to involve partners that you have an affinity with. Tell them about you and your process so that they’ll be prepared when an opportunity comes along and you’re able to show them the project details.
4- Prepare your team
You can’t successfully acquire a business without a competent team behind you. Start putting a group together now. That way the team will be ready to spring into action when the time comes. Otherwise, you could end up missing out on good opportunities.
Strengthen and broaden your network of contacts
There are a number of different ways to find good business opportunities, but in order to find the best one, you need to know what’s out there and how the different offers compare. Talk to the people you know and see who can help you expand your search.
1- Accountants and lawyers
The accountants and professionals in your circle may know if their other clients are looking for partners or buyers. Don’t overlook this valuable source of information.
These days, banks employ people to help certain clients sell their businesses. By connecting sellers to the right buyer, the bank hopes to maintain a business relationship with the client and their business.
3- Centre de transfert d’entreprise du Québec (CTEQ)
This group’s regional organizations help facilitate connections between business buyers and sellers. Their website includes a directory of prospects.
This website publishes ads for businesses for sale by owners who prefer to find buyers on their own.
5- Contact businesses directly
Some prospective buyers choose to contact businesses directly and inquire whether the owner is interested in selling. It’s a gutsy move that can sometimes be risky because entrepreneurs tend to shy away from disclosing their intentions for privacy reasons.
6- Business brokers
Brokers usually have a portfolio of companies for sale, including businesses of all sizes, in a variety of fields and geographic regions.
Why work with a broker?
Even though there isn’t a professional order that governs business brokers, these professionals are experts. They know how to assist entrepreneurs with the acquisition process. For buyers, there are several advantages to working with a broker.
1- Focus on serious sellers
You’ll know the seller is serious about selling and ready to let go of their business.
2- Know the company’s fair value
A good broker can help estimate the value of the business that’s for sale. In fact, they’ll complete the assessment before putting the opportunity on the market. This reassures buyers that the seller has a realistic idea of how much their business is worth.
3- Rest assured that the company wants an external leader
When sellers choose to work with brokers, it shows that the company’s stakeholders have already ruled out transferring the business to an internal party, such as a family member.
4- Save time and minimize risks
Your broker will oversee the various steps in the sale process. They’ll orchestrate everyone involved (bankers, accountants, lawyers, etc.), which helps save time and reduces the risk of the seller backing out.
5- Delegate sensitive tasks
Brokers are skilled at sending the right message at the right time. Since they already have the seller’s trust, they’re in a better position to broach more sensitive subjects with their client.
Finding a business for sale can be a long and arduous process. Being adequately prepared can go a long way in making the transaction a success. Having a solid plan and all your paperwork in order will prove that you’re serious about making an offer and it will inspire both the broker’s confidence and the seller’s.
This article is written by Dominic Chouinard.