Selling your business is a complex subject. A layman might face difficulty in understanding and comprehending this topic. Let me simply say this to you: selling your business might be one of the hardest decisions of your life. The emotional attachment and all the blood, sweat and tears you might have put into your business to make it flourish. However, you have decided to sell your business but have no idea how to do that.
In this blog, you will learn some tips and tricks for selling your business; what possible key points you should keep in mind before selling it; and how to identify the perfect buyer for your business.
What questions should you ask before selling your business?
There are three important questions a seller should always ask before selling their business.
- What is the reputation of the business?
- Is my business making any profits?
- Why would someone be interested in buying my business?
Reputation of the business
Having proper knowledge about your business is one of the most important tools that will help you in selling your asset. The question that arises is, is your business independent enough to work on its own or does it need your supervision? The buyers usually look forward to purchasing those businesses whose sellers systematize them in a way that doesn’t depend on them.
Buyers are mostly attracted to those businesses that are proven, and a new buyer can easily replicate and learn from them. It is easier, less time-consuming, and more efficient to purchase an already working business. As you can control, grasp, and understand the industry instantaneously and effortlessly.
Furthermore, proper rules and regulations, a safe working environment, empowered employees, and employee training programs are also very attractive for buyers to purchase. In an easier language, your business will have high selling value.
Businesses making profit
Buyers are always interested in knowing whether your business is profitable or not. So it’s a plus point if your business was profitable in the past. In fact, businesses need to have a positive balance on their balance sheet. In addition, buyers may ask you to show your net income and business account. So that they will get an overview regarding your customers, sales, and transactions, the age of your receivables as an indicator of the quality of your clients and business.
Why would someone want to acquire your company?
You may gain a lot of insight into where your company might stand in the industry by asking yourself this question. Is it capable of changing and transforming values in accordance with the latest market trends? Does your company adopt the latest, evolving market trends? Does your business provide a way of life that other people might find appealing?
Before becoming blank in front of your prospective buyer and he looks at your bewildered blank face, answer these questions. Additionally, consider the situation from the viewpoint of the customer to see whether your company is offering all the customer could want.
Several ways to sell your business
These are some of the ways to sell your business in Canada.
Business number
In Canada, you need to call the tax service officer and cancel your Business number (BN). The reason why your business number is closed is that the new business owner might not have to pay your outstanding debt. Furthermore, it is easy for the buyer to set up their business number (BN).
- Close your payroll account
You can close your payroll account if you have employees working in your business.
- Close GST/HST account
GST/HST account is also closed when you are selling your business.
Ownership transformation
There are several methods for transferring ownership of your business. A change of owners will affect your firm differently depending on its structure. Your firm could be affected by the changes to the corporate structure:
- Sole proprietor
- Partnership
- Corporation
Sole proprietorship
According to the government of Canada website, if the sole proprietorship is not combined or if the owner is changed, the legal status must be altered as well.
Partnership
In a partnership, the government of Canada has stated that if the composition of your partnership changes, for instance, a partner is added or removed, the previous contract is nullified or cancelled and all partners should make a new contract.
Proper knowledge of tax implications
If you are selling your firm, you might decide with the buyer that there won’t be any GST or HST due on the transaction. The following circumstances allow you to choose this option.
- Selling the business that you founded or operated.
- At least 90% of the property may be considered necessary for the buyer to be able to operate the business under the agreed sales terms.
The Lifetime Capital Gains Exemption (LCGE)
You can only qualify for the Lifetime Capital Gains Exemption (LCGE) if you sell your incorporation shares. Limited liability companies that are in the market for buyers should think about incorporation before the sale to benefit from this dispensation.
At the time of sale, Canada's rules stated that the business's 90% of assets must be used in the active market for it to be LCGE qualified.
Asset valuation and sale
Correct asset valuation is important for sellers to choose whether to set a price for the entire company or specific assets. When calculating a value, don’t forget about intangible assets like goodwill and land. Finding the right buyer is crucial. Asset valuation is also very essential.
You can also pass the firm along to a family member, relative, or trusted employee, but there is a possibility the sale might be low. Remember, you can only sell your business to a close relative or family member if your business is private limited. However, you will get a higher price only from selling to the public.
In the end, evaluating the worth of your firm depends heavily on its profitability and the documentation supporting it.
Conclusion
We understand how to market your company in Canada. You now know the three crucial inquiries a seller has to make when selling a firm. We also have a basic understanding of several ways to sell your company.
It may be both stressful and thrilling to sell your business and move on to the next part of your life. Although you've created something successful, it might be difficult to move on and negotiate the formalities of transferring business ownership. You need a lot of patience and labour to sell your business at the best price.