If you are a business owner thinking about selling a business in Ontario, the issue of ‘timing’ may interest you. Company owners often put off a decision to sell a business due to ‘bad timing’ of one sort or the other (example – the economy has slowed, new staff need to be trained, just acquired a new complex account, etc.) The decision to sell a company is an important one and clearly prudence with respect to timing must be taken. However, there is a grey area between thinking that the timing to sell a small business is off compared to finding reasons not to sell. The purpose of this article is to de-bunk a main reason that business owners cite as to why they think it’s not a good time to sell and also to explain why now is a good time to sell if you have a strong, profitable business.
Selling a business does certainly require preparation and foresight.
The successful business seller will have taken several steps to ensure that they are able to find a buyer interested in their venture and that their business presents well. Doing things like claiming all of your earnings, maintaining proper records, increasing sales and improving business operations contribute significantly to selling a business successfully. The trouble, however, is that some business owners neglect to take the necessary steps to sell their businesses and then cite the “slow economy”, “new staff”, etc. as the reason that they won’t or can’t sell their business. The reality is that it is never a 100% ‘ideal’ time to sell – there is always something that is not quite perfect prior to listing a business for sale (example - revenue might be off for the latest quarter, the economy may have softened, a key staff member may have resigned, and so on.) The point is that selling a business is a long term decision that requires forethought. Decisions must not be knee-jerk otherwise you, as a business owner, may never sell your business at all.
Sell a business - keep perspective
The other issue to consider is that of perspective when you are selling a business. For instance, some people look at a situation and only see how the negative might affect them while others see opportunities. For instance, consider the economy of southern Ontario. The economy has traditionally been a manufacturing-centred area stretching from Toronto (GTA) to Mississauga, Oakville, Burlington, Hamilton, St. Catharines through to Niagara Falls. This QEW corridor is the home to countless factories, machine shops, steel companies and many other types of manufacturing companies. When the economy softens this sector is usually impacted much harder. Jobs are lost, exports decline, and so on. Clearly this is not an optimal situation. However, as a business seller you must remember that Ontario’s economy is now a modern, integrated service-based economy that has evolved greatly from the manufacturing roots. Economic downturns usually mean an increased level of unemployment as well. Consider that many workers look to buy a business when they lose their jobs. Buying a business is a clear option for many downsized workers so the potential pool of business buyers can increase in this scenario.
Good businesses are always in demand
The final point to consider is that not all businesses for sale are the same. Keep that in mind when you see a long list of online business for sale listings that don’t seem to be selling. Business buyers look for strong, stable and profitable businesses. They look for a business for sale that has ‘clean’ books, a history of good operations and one that is truly cared for and priced fairly. These types of businesses are in constant demand. All too often, the business for sale market is flooded with businesses that have failed (or are failing) and the owners list them at a price that is far too high and then expect to attract buyers. The trouble is that not many buyers are in the market for these types of companies (some are, but not many). The point is that even when the economy is soft or if something is not quite 100% with your business (and it never is with any venture), a fundamentally strong company that is profitable and well run should have a very good prospect of selling in any economy.
Talk to a business broker
Putting a business for sale is a big decision to make. Talk to a business broker to sell a business in Ontario, to discuss some of the many different options that will work best for you.
Keystone Business Brokers (a division of Keystone Realty Inc., Brokerage)
Steve Skrlac, MBA, CFA - Broker of Record
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