Succession Planning or Exit Strategy

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OConnor Business Insights

Succession Planning or Exit Strategy

Brad OConnor

Nov 30, 2021

Whenever you launch or buy a business in Canada, it's advantageous to have an exit strategy in mind. Businesses typically don't last forever, as even large corporations can eventually get broken up or absorbed by another entity. Here are insightful steps to take for planning your business exit strategy.

1. Consult with Business Transition Experts

Before you market your business or franchise for sale, it's helpful to consult with business experts who have handled plenty of other company transactions. You'll need to consult with an accountant and attorney about tax implications. In order to determine the fair market value of your firm, you should turn to an independent third-party auditor. For the highest return on your investment, you'll need a reputable commercial business broker.

2. Review Canada's Tax Laws

Discuss Canada's tax laws with your attorney and accountant regarding business for sale by owner transactions. Tax laws are complex and often require comprehensive review by business experts. If you have a franchise for sale, you may be following a different tax structure than a small business for sale.

There are different types of taxes as well when you just want to sell business assets for capital gains or reorganization. You may be eligible for a capital gains reduction when selling certain corporate shares. Find out if you qualify for the Lifetime Capital Gains Exemption (LCGE).

If your business includes commercial real estate property, it's imperative that you understand the government regulations and requirements that will be applicable in your market. When you eventually sell your business you'll need to notify your tax services office of the ownership change.

3. Evaluate Your Company's Assets

One of the most critical steps in how to sell a business is estimating its fair market value. You'll need the help of an external accountant to present an objective and transparent financial analysis for potential buyers who expect to review your records.

There are different approaches to determining FMV, such as Asset based Valuation or the Discounted Cash Flow method. Business-savvy professionals will immediately want to know about earnings, cash flow and liabilities.

The main components of company value are tangible assets including inventory, and intangible assets such as intellectual property and business goodwill. Both operational efficiency and the quality of your workforce factor into FMV as well.

4. Consider Increasing Company Value

Once you get an objective professional estimate on your company’s value, either from an experienced business broker or a CPA, you should put yourself in the mindset of entrepreneurs looking for business opportunities. In other words, a successful seller must understand what serious buyers are looking for. Business investors will want maximum returns for minimal risk.

So reduce their risks by upgrading and improving your operation before placing your business for sale on the market. Make the enterprise more competitive with new technology for the highest return. Another option if you're trying to liquidate quickly is to sell the firm as is for a lower return.

5. Devise a Strategic Plan for Selling

A critical step when placing your business for sale is to hire an experienced business broker who specializes in bringing entrepreneurs together. Business sales go much more smoothly when you work with a capable team that regularly engages with a community of business investors looking for profitable investments.

Remember to maintain active communication with your business advisors to maximize the return on the sale of your business. If you care about the future of your company, you should also care about who buys it to build from your legacy.

Ready to get started? Contact us today, and one of our experienced business brokers will be in touch with you as soon as possible.

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EVALUATION/CONSULTATION

If you are a business owner considering selling a business, and would like to learn more about OConnor Business Brokers and Consultants and the services we offer, please contact us to arrange a confidential business evaluation.

You will meet one of the Directors of OConnor Business Brokers, and your requirements will be discussed. During the meeting you will have the opportunity to find out more about selling a business, and how our business brokers and M&A Advisors can assist you with the business sale process.

Unlike many other approaches, OConnor Business Brokers start without any preconceived ideas about what is right for you and for your business. By understanding the business and your motivation we can help steer you in the right direction. This often challenges conventional thinking and comes as a refreshing change to the norm.

The Directors of OConnor Business Brokers have experience as business brokers, business consultants, M&A advisors, and business owners. We understand the challenges and pressures that face a business at any one point. We therefore use our time together not to try and sell you our services but to help you understand your options and how we can help.

An initial meeting lasts approximately one hour, and can take place virtually or in person at our office.

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