Owning and running a business in Ontario or anywhere else in Canada can be quite a rewarding experience. This has led to an increasing number of people looking into business acquisition in the country, with potential buyers being both Canadians and those from abroad. However, there are quite a considerable number of things to consider, such as due diligence business buy, steps to buy business, and much more. As a result, many people may quickly become overwhelmed at the prospect of buying a business in Canada.
Business immigration to Canada can make things much more complicated than people may expect, which can further overwhelm people. Because of this, many people may ask themselves ‘am I ready to buy business?
Despite how complicated that the process may be, there are a variety of things that a potential business owner can do to simplify the process. Research will be an important aspect of this, with there being a few areas that they should pay attention to.
Should I Buy A Business?
People who are considering a business acquisition in Canada will naturally wonder whether or not they should. There are a variety of things that can be involved in this, with many of these being focused on the pros and cons of buying a company.
Alongside this are a few key considerations that you’ll need to be aware of. With how much can be at stake with a purchase, there should be a considerable amount of time and effort put into this stage of the acquisition.
There are a quite a variety of things that you’ll need to consider when doing so.
Pros & Cons
The first things any potential business owner will have to consider are the pros and cons of owning one. There are quite a variety of these to consider. While some may be more obvious than others, there are some that may be surprising.
The benefits of owning a company can be quite broad, with some of the more notable being:
History: An established business should already have a proven and relatively successful history, which should negate much of the risk that’s typically involved in building a company. Alongside this is the fact that you shouldn’t have to start from scratch.
Revenue Stream: Alongside the history that a company should have is a revenue stream, which is something that can be quite beneficial. If you’re considering a business, then it should already be profitable, or close to it.
Expertise: Many potential business owners may lack knowledge in a specific market or industry. As a result, they mightn’t be able to establish a new company in the niche. However, the majority of this is overcome by purchasing a firm that already has pre-existing expertise in the industry.
While there are a variety of attractive benefits to buying a business in Canada, there can also be a few challenges. The majority of these will be seen regardless of where the company is based, which means that they’re something that every potential company owner should be aware of. Some of the most notable of these include.
Doesn’t Match with Your Current Portfolio: These are areas that can affect many potential buyers, especially if they already own a business and are looking to merge two companies. The primary reason for this is that there can often be differences in company culture and much more, which could make the purchase more challenging.
Conflict in Vision: Every owner will have a vision for their business, regardless of whether they established the firm or bought one. In the case of purchasing a new company, this vision can often conflict with the vision that many in the firm already have. This clash could be something that makes the purchase, and subsequent merger, much more difficult.
Over-Reliant on Previous Owners & Management: A somewhat rocky change in ownership can provide a host of difficulties, both in the short- and long-term. This is especially true if the company was overly dependent on an owner’s involvement, or that of specific employees.
Key Considerations
Alongside the pros and cons of buying a company, there are a variety of considerations that will come into play. While some may be obvious to some people, many others may often overlook them. This shouldn’t be the case, as certain considerations will have to be looked at to determine whether or not a company is the right fit.
Alongside this is the fact that looking at them will help you determine whether the company will be successful in the future. These should also help you figure out how valuable the company may be. Some of the more notable of these include:
Customers: There should be a certain amount of goodwill from the customer base, which will affect the company going forward, as well as its price tag.
Employees: The number of employees a business has is something that will play a considerable role in the purchase, as they’re one of the most significant assets that a firm will have.
Operations: You’ll need to look at how a company operates to figure out if you’ll need to make changes once a company has been purchased.
Financing: This may be one of the more critical aspects to consider, as you’ll need to make sure that the company has the financing necessary to continue operating. Revenue will be one of the more notable aspects of this, as you’ll need to determine if this is enough to cover the firm’s costs and generate a profit.
There are quite a significant number of things that you might want to look at, with all of this being a part of a due diligence business buy. By looking at each of them, you should be able to ensure that the company you’re considering is right for you.
Questions to Ask Yourself Before Buying
When you’re looking for a company to buy, you’ll need to ask yourself a variety of questions before doing so. While the factors that you’ll have to consider are helpful, there may be a few other things that may play a role in your decision.
Questioning whether or not you should buy a particular business is a natural part of the process. However, many potential buyers may not know what questions they should consider when looking at a company. There are a few that most people should ask, including:
1. Is It A Sensible Purchase? If you’re in a position to purchase a company, it doesn’t mean that you should. Instead, you should determine whether or not the investment makes sense for your plans, such as expansion, integration, and much more.
2. Do You Know Everything About the Company? Much of this will focus on doing your due diligence before buying, as you’ll need to have a complete picture of a firm before you do so. If you don’t know everything about a potential purchase, then you could be in for a few surprises.
3. Will There Be an Effect on Your Current Company? If you already own a business or several of them, then you’ll need to determine what kind of impact buying a new firm will have on it, if any. When doing so, you should aim to ensure that this impact is as positive as possible.
There can be a variety of other questions that you may want to consider, depending on your specific circumstances. By starting with each of the above, however, you’ll be able to start your due diligence with a firm.
By doing so, you’ll be able to determine whether a business will be worth the money that you may be paying for it. As a result, you should be able to ensure that you see as large of a return on investment (ROI) as possible.
How to Find A Business for Sale?
Many people who are considering buying a business may not know how to find one for sale. While the process may be somewhat more difficult than many people may assume, there are a few simple ways to find a company for sale. In fact, this may often be one of the more straightforward steps when buying a company.
Much of this can be driven by the fact that there are quite a variety of ways to find a business for sale. There are a few that can be surprising, as well as effective, including:
Websites: This may be one of the simplest and most obvious ways of finding a business to buy, although it can be more effective than you may believe. There are quite a significant number of websites dedicated to this, although you should exercise a certain amount of caution when doing so.
Business Brokers: Business brokers work as intermediaries between a buyer and seller and help to facilitate the transaction. Depending on where you’re buying, there may be a variety of brokers to choose from.
Commercial Real Estate Agents: Commercial real estate agents may be a surprising source of leads for buying a business, with many often-selling companies alongside the real estate that they typically deal with.
Lawyers & Accountants: Like commercial real estate agents, lawyers and accountants can often help generate leads for businesses to buy.
Bankers: Bankers deal with entrepreneurs and business owners regularly, which means that they’ll often have an idea as to who are looking to buy or sell a company. As a result, they can often work as an intermediary, as they’ll often want to be involved in financing a transaction.
There can be a variety of other ways that you may be able to find a company for sale, although the above can often be the most effective way of doing so.
Steps Involved in Buying A Business
Most first-time business buyers may not know what’s involved in doing so. As a result, they may quickly become overwhelmed and might make a variety of mistakes during the process. These can often prove to be quite costly, which is the primary reason why they’re best left avoided.
Much of this can be avoided by following a few steps to buy business, much of which can be seen in doing your due diligence beforehand. The majority of this will focus on the company’s finances, which is one of the more important parts of the acquisition.
Use Experts: You should utilize the services of in-house and external experts, which should help to give you an accurate overall picture of how financially healthy a firm is.
Look at The Impact Your Changes Will Have: You should also determine the potential effects that any changes you plan to make will have. Regardless of how important these changes may be, they can often have quite a significant impact on how the company performs, especially in the short-term.
Look at Their Assets: You’ll need to look at a firm’s assets and liabilities, which the sellers shouldn’t have any problem supplying. The assets that a business has should help you determine its value, which is vital during the process of buying the company.
Double-Check Model Numbers: When you’re assessing the equipment that a firm has, you’ll need to ensure that you have accurate information about them, with this focusing on date of purchase when the equipment was made, and much more. This information may have quite an impact on the actual value of the equipment itself.
Look at Their Inventory: You’ll also need to accurately determine how valuable the company’s inventory is, as well as whether the stock will need to be sold quickly or if it will become unusable in a certain amount of time.
Get Their FMV: The company’s fair market value (FMV) is also something that you’ll need to determine before you purchase, as you should make sure that you’re paying the right amount for the firm. There are two main ways that this can be done, with the first being based on the company’s assets while the other is based on cash flow and overall revenues. There are a variety of specialists that you’ll be able to hire that will help you do so, with this being highly recommended.
By following each of the above steps, you should be much closer to buying a company, especially purchasing one for a fair price. Throughout this time, you’ll need to work closely with the buyer and possibly a variety of other people when doing so.
While this may be quite a long and challenging process, it’s something that should reap dividends in the long-term. Alongside this, it should also help you ensure that you’re purchasing the company at a price that everybody is comfortable with.
Step-By-Step Acquisition Strategy
Buying a company can often be a painstaking process, so many people will want to try to make this as easy as possible. While the process mightn’t be simple, there are a few steps that you should follow during an acquisition strategy.
Shop Around for Your Financing: While bank loans can be a common route, there are a variety of other options that you may be able to take. Much of this can be seen in business initiatives, which is worth looking at. These can often have much better terms than a bank loan, which is why they should be considered. However, this could mean a significant amount of research and negotiations may be involved. Despite this, it can reap dividends in the long-term.
Minimize Any Negative Impact You May Have: In most cases, adverse consequences may be unavoidable, which is why they’ll need to be planned for. As such, these should play a part in your acquisition strategy as you’ll be able to minimize them, if not avoid them completely.
Get an Outside Evaluation: This is highly recommended, as this will ensure that you’re paying what the company is worth. Alongside this, you should place somebody in charge of the acquisition. When doing so, you should compensate them based on a smooth purchase and transition, which should encourage them to make the process as easy as possible.
Buying a company can be a stressful process on both sides of the transaction, with this also extending to employees and a variety of other key stakeholders. As a result, it’s recommended that you follow a variety of best practices when doing so, much of which can be done after you’ve bought the company.
What to Do After Buying A Business?
Once the business has been purchased, many people may wonder what to do next. Much of this is driven by the fact that there are quite a significant number of things that could be done. As a result, quite a considerable number of people will be curious as to which steps will be the most effective.
Establish A Post-Purchase Team: This will be quite beneficial for you as well as the company, which is especially true if you’re merging the new business with one that you already have. During this time, you should identify a core group of leaders who will be able to make the transition period as easy as possible for everyone involved. This team could prove quite useful in the months ahead.
Establish A Target Operating Model: This typically consists of any changes that will need to be made in the coming months, as well as their timeframe. This plan should then be communicated to all key stakeholders, which includes employees. What many business buyers may forget is that a purchase can be a stressful experience for everyone involved, which means that communication can be vital.
Talk to People: Introducing yourself to key contacts within the business can also be an essential component of this, which should include suppliers and possibly even customers. This is something that should be done as early as possible so that the transition period can be smooth.
Create A New Strategy: It’s also recommended that you develop a new strategy for the business that’s different from the previous owner’s one. While the old plans may have worked for a considerable amount of time, this doesn’t mean that they always will. As such, instead of sticking to what may have worked in the past, you should look to the future and develop a strategy depending on what challenges the company may face. When doing so, you should ensure that these changes in policy are communicated effectively to key stakeholders.
Be Available for People: It’s also recommended that you keep your door open for people in the future. This is primarily because many involved in the company may have questions in the months following the purchase. As such, staying open to these questions can be vital.
There are quite a significant number of things that a potential buyer will have to look into before going through a business acquisition in Canada. With the above, however, you should be able to answer many of the questions you have about the process, such as, “am I ready to buy business”, as well as a few others.
Much of the research you’ll have to go through will focus on your due diligence business buy, which should prove to be quite beneficial when deciding on which company to purchase. This is also a vital aspect of the process, as it will allow you to determine whether or not a potential purchase will be a positive investment.
During this time, it’s also vital that you follow the steps to buy business as closely as possible. While these may change slightly depending on specific circumstances, they can be quite helpful in purchasing a company quickly and with few mistakes, if any, occurring.
This is especially true when it comes to business immigration to Canada, which is often much more complicated than for Canadians. However, all of the above should prove to be useful in the journey.
Sarnail Singh, CCIM, MBA
Disclaimer: The information contained herein is intended for information purposes only. Although the information is believed to be correct, it’s accuracy, correctness or completeness cannot be guaranteed, and the writer make no representations or warrant the accuracy of the information provided. The prospective should not construe this information as legal. Legal counsel or other advisors should be consulted if desired on matters related to this blog and/or information. For more information please contact sarnail singh at info@sarnail.com.
