Steps to take today for a successful sale tomorrow
Did you know that one-third of small businesses in Canada will change hands in the next three to five years? Getting your business ready for a new owner is crucial, even if you are not planning on selling soon. Life is unpredictable, and being prepared for an unexpected sale can help you attract the right buyer and achieve a higher sale price.
Here are three things every business owner can do today that will help their business sell in the future:
1. Update your business growth plan
A business growth plan is a document that evolves alongside your business. It maps out the next one to two years with a focus on strategic operations and revenue generation.
An effective growth plan consists of a financial plan, an analysis of your business’s strengths, weaknesses, and opportunities, and a detailed plan for revenue-generating goals. It can be referenced regularly to identify areas that require a new approach.
Since 2020, we have learned what factors make a business more resilient and successful. According to the Business Development Bank of Canada, small business owners that adopted digital technology and were innovative during the initial phases of the COVID-19 pandemic were more likely to recover and emerge with a stronger business. Many businesses are again achieving and surpassing 2019 sales volumes.
A growth plan will help you see beyond the day-to-day activities of your business so you can focus on the strategic details that need attention for your business to grow under various circumstances. It can be used to show buyers potential avenues for growth.
2. Document your exit strategy
An exit strategy is an important document for any business owner, yet most never draft one. Planning your exit can make your business more profitable, earn a higher sale price, and give you time to find the most tax-advantageous sale strategy.
- Selling is difficult when a business is deeply intertwined with the owner’s skills and expertise.
- An exit strategy can show potential buyers how you will transition out and what they need to do to take over.
- An exit strategy maximizes the value of a small business.
- Planning allows you to take the required steps to implement changes or processes that will increase profits, minimize expenses, and improve operations.
- In consultation with a qualified accountant, you can structure the exit strategy to reduce your tax burden or take advantage of tax incentives available to small business owners.
- An exit strategy makes it easier to sell your business even when you hadn’t planned to.
- Over the past few years, many Canadian small business owners spent a lot of time dealing with unforeseen circumstances, highlighting the need to be more prepared and have a plan to navigate challenging times. If your health or other personal circumstances suddenly change, you will be better equipped to list your business for sale.
3. Assemble a team of qualified experts
Assembling a team of qualified experts is crucial for any small business owner who wants to sell their business successfully.
One of the most important members of your team is a lawyer who specializes in buying and selling businesses. This person can advise you on important legal considerations that may arise during the sales process. They can draft legal agreements and contracts to protect your interests throughout the sales process.
Another key member of your team is an experienced accountant. This person can prepare your financial statements, tax returns, and other documents potential buyers will review. They can advise you on important tax implications of the sale, and structure the deal in a tax-efficient manner.
In addition to a lawyer and an accountant, you should work with a qualified business broker. A broker can develop a comprehensive growth plan to make your business more attractive to potential buyers. They will market your business to a wide range of potential buyers and negotiate on your behalf to ensure that you get the best possible price.
Preparing in advance is one of the best ways to set your business up for success. It allows you to take advantage of unsolicited offers that come your way or sell sooner than expected. Even if you aren’t planning on selling for a few years, contact Acuity Business Group to find out how we can help. Your future self will thank you!