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****************** ********, AB ****** Phone: (780) 469-4769 Fax: (866) 301-6297 Email This Office

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The decision to sell a business is by no means an easy one. Very often we become “attached” to the business, making it difficult to contemplate letting it go, except of course, when things begin to go wrong! We then wished we had sold out months ago when things were “on the up” or when we had an interest from a potential purchaser.

Unfortunately, none of us have the luxury of making decisions with hindsight, but the decision could at least form part of an overall plan or “grand strategy”. If the only real purpose of running a business is to eventually sell it, then it makes sense for us to plan it.

"Every privately held business will either sell, change owners, or close at some point in its life cycle." Jey Arul, MBA, President/Deal Maker 

So when is the right time to sell? 

There are of course many factors, but assuming the business is operating well, the best price can be obtained if profits are maximized at least two years prior to a sale, and that you can demonstrate current year and future profit growth.

It is also important to ensure that you have all your information systems up to date (including financial and management accounts), outstanding debts and queries on accounts resolved, legal and environmental issues finalized, etc. As soon as you have a potential buyer, you can be assured that they will want to have all the information about your business – more than you ever imagined! It is useful to remember that a business sale can take 4 - 6 months leading up to due diligence, not to mention the 3 - 4 months to find a suitable qualified buyer.

To achieve a successful sale, it is also good to identify the various exit strategies available to you. A sole proprietor owned business should think about becoming an Incorporated Company, as it leads to a “cleaner” transaction and you have the option of selling the assets or shares of the Corporation. It also provides flexibility if the owner wishes to sell just part of the company leading to the possibility of a merger, acquisition or joint venture.

Other exit strategies include management buy-outs (MBO), management buy-ins (MBI), employee share ownership plans (ESOP), and institutional buy-outs with private equity funds. Each type has its own advantages or disadvantages. Management buy-outs, for instance, may sound fine, but be wary of demotivating your management team if the deal is not completed or takes too long to complete, and be wary of the management team becoming distracted from the day-to-day running of your business.

To help sell a business, it is always worthwhile to consider using a Business Broker or Intermediary where searching for potential purchasers, dealing with inquiries, approaching potential purchasers, initial meetings and negotiations can all be dealt with at “arms length” with confidentiality secured. Use the knowledge of experienced Business Intermediaries to help identify potential buyers and record all unsolicited approaches from companies and individuals (whether you wish to sell immediately or not). Finally aim to have a short list of 6 serious buyers at the outset – and offers could be double that of others!  

At VR Business Brokers we receive around 200 buyer inquires on a business opportunity. On average we meet between 8 - 10 serious qualified buyers, of which 2 - 3 indicate a strong enough interest for us to progress further into the Offer stage. For more information about our 5 Step Business Sales Process click here.  
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