Business owners in Alberta may wonder when they should start planning for the sale of a business. Advisors suggest a proposed sale should form a part of the agreement between shareholders when they establish the business. If the shareholders’ contract includes the ground rules that will apply in the event of a sale between them, it might avoid costly and lengthy disputes.
Maximize business value
As with last-minute cosmetic improvements to the business, buyers will see through efforts to manipulate performance figures. The most important part of the sale is the company’s profitability and the seller’s ability to prove it. Therefore, maximizing business value should be part of long-term planning.
If the profits and performance over recent years are solid, gains will reflect it. Productivity and profitability can be boosted by analysis of processes and implementing improvements. With proper planning, the sale can be positioned for a maximum financial return.
Potential buyers will want to study records
Serious buyers will require time and documents to perform due diligence. Having documents and answers to questions ready will show a serious seller. The following should be available:
- Financial statements
- Employment contracts
- Supplier contracts
- Customer contracts
- Minute books
- Detailed list of assets and their descriptions
- Outstanding liabilities
- Contingent liabilities
Beware of emotions taking over
Whether family-owned or corporate, most business owners will naturally experience some levels of emotion when selling a business that took a lot of hard work to get it where it is. However, it is crucial to prevent feelings, sentiment and emotions from taking over business sense.
Delays can be expected with any business sale in Alberta and attempting to rush it is never a good idea. Patience is essential when dealing with the structure of the deal, validating values of intellectual property, goodwill and other intangible assets. Similarly, expect to extend the timeline to allow the purchaser to obtain the financing to finalize the sale.