Getting Advice on Buying or Selling a Business

When you are about to embark on buying or selling a business, it is important (and highly recommended) that you consult with your professionals – a lawyer and accountant, amongst others.  You certainly need their input and advice before you sign any agreements.  That being said, it is important to realize that different advisors have different areas of experience.  This article examines the importance of getting advice when you are about to buy or sell a company and also raises the point that advisors are qualified in different areas.

Lawyers
A lawyer is a key resource for both parties of the transaction.  Sometimes, lawyers take on the role of the “small business advisor”.  When they do this, it is important to be able to distinguish when the lawyer is providing you with ‘legal’ advice versus ‘business’ advice.  Example – suppose a business buyer brings an offer to a lawyer and the lawyer exclaims, “you’re paying too much for this business”.  This may seem far fetched but it does happen quite often.  As a business buyer, it is important to ask questions such as:  Is the lawyer qualified to make business valuation opinions?  How much time did the lawyer spend on the valuation?  Has there been any analysis done?  Is he or she trained professionally in business valuations – are they a chartered business valuator, for instance.  Have they even visited the business?

As a buyer, it is important to heed the advice of your lawyer but please do not be intimidated to push back on opinions or judgments that an attorney may make that are certainly out of the realm of their expertise.

Friends
The advice of friends should not always be discounted but please, use caution when your friends give you their opinions about your business sale transaction.  Be cautious of blanket statements like, “you’re selling for how much?  That’s far too low”.  Sometimes ‘friends and neighbours’ have the best of intentions but are not qualified and should not be making such sweeping generalizations about your business for sale transaction.

It’s important to realize that you need to rely upon the advice of people who are genuinely qualified.  Another example may be the advice of a neighbour that works as a teller in a bank.  The neighbour may have good intentions when they tell you that your business for sale consisting of 100% goodwill may qualify for a substantial loan from the bank but the truth is it probably would not and the teller is likely not qualified to make such a statement.  People generally are quite forward when it comes to offering opinions and usually have good intentions but take everything with a grain of salt.

Another example of advice with good intentions that may not be completely relevant for today is the advice of ‘elders’ who give guidance based on how business was conducted over 20 years ago.  Times have certainly changed, as have the buyers and the financing packages available for businesses for sale.  Again, take everything with a grain of salt.

Please work with your business broker, chartered accountant, lawyer and other professionals to assist you with selling or buying a business but understand the difference between professional advice and personal opinion.   There are many intricacies to purchasing or selling your business in southern Ontario so it’s best to be properly informed from the outset.