You receive an unexpected offer to buy your business

What do you do next?

Published: February 27, 2020

Updated: September 20, 2023

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Receiving an unsolicited offer to buy your business can be both flattering and validating. However, after years of dedication and hard work to build your business, how do you decide whether this is the time to exit?

Here are some of the first questions you should consider:

Are you even ready to sell?

Negotiating and completing a sale requires a significant emotional and time investment. Are you ready to commit what it takes?

Could the buyer be a partner?

If you and the buyer bring different but complementary skills to the table, is there potential to scale up the business together so it’s worth more down the road?

If you were to sell and retire, do you know what's next?

Are you financially ready to retire? What selling price do you require in order to get there? Do you know what retirement looks like for you?

Are you prepared to walk away completely?

If not, would you be interested in retaining an ownership stake and a role at the company?

Are you prepared to work for your buyer post-sale?

If the business needs your expertise, could you see yourself working as an employee for the company you started? Do you have any employees who could step in and take on all or part of your role?

If you decide to sell, these are
the typical next steps:

Due diligence

This is where the buyer takes a deep dive into your business to make sure they understand what they are buying from a financial, operational, and reputational perspective. At the same time, you’ll take the opportunity to do some diligence on the buyer. The process typically takes anywhere from three four months, or longer depending on the parties involved, quality of information, and the findings.

Negotiation

This can be an emotional process if you and the buyer place different value on each business components (e.g. your employees or the client relationships you’ve fostered). Remember: it’s not personal. They’re trying to pay as little as possible and you’re trying to earn as much as possible. Beyond the price, there can be an incredible number of pieces to negotiate. It’s important to focus on the bigger picture, and not get hung up on smaller issues.

Legal documentation

Many business owners are surprised by the amount of legal documentation that underlies a typical business purchase and sale. Retaining a lawyer with transaction experience is key to help navigate the process.

How to stay prepared for an unsolicited offer

Unsolicited offers are unpredictable, so always being prepared is the best strategy.
And the advice is pretty straightforward:

Maintain good standing with CRA
Build a team that could potentially replace you
Stay on top of any environmental issues in your facility
Understand valuation metrics for your industry
Know your numbers in case someone asks

A BDO advisor can help you with all of this. And when the offer comes in, they can help you with all that too.

Check back for content updates, so you can be even more prepared to entertain (or make) unsolicited offers.

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