There may be several reasons you are considering selling your business—whether it’s increased competition, personal life changes, nearing retirement, or new business opportunities.
Selling your company can be a tough decision, particularly when it has been your main focus for several years. Your livelihood revolves around your business, and it's important to familiarize yourself with various steps and considerations prior to embarking on your sales journey.
BDO’s ExitRight team will help you along each step of your journey to meet your objectives. Consider the following steps before selling your business.
1. Understand your sales objectives and timeline
You need to clearly identify your objectives to achieve your desired sales outcomes. Consider the following:
- Do you want to remain part of the future operations?
- Does your business have any loans or other financing arrangements that need to be settled prior to the sale?
- When would you like to sell?
- What are your financial expectations?
- Who is your preferred buyer?
- How do you envision structuring your sale?
2. Connect with family and other stakeholders
You will need to connect with your stakeholders—family and other stakeholders—to align on the process and principles of a business exit. It’s important to have conversations with family members on how to cope with the change in life and sudden liquidity. If you have multiple owners, it’s essential to align owners on the desired outcome.
3. Know your company’s value
Figuring out how much your business is worth can seem overwhelming and complex, but understanding the value is essential. There are several factors that will impact your company’s value including industry, current economic conditions and the competitive landscape. It is important to obtain professional guidance around the value of your business and key considerations impacting value to thrive in today’s shifting market.
4. Identify value enhancement strategies and salability factors
Once you know what your company is worth, there may be opportunities to enhance its value to reach your desired sales objectives. With the help of our Strategy, Value Creation & Analytics team, we can provide tactics and strategies that will enhance your performance, position the business to make it attractive to buyers, and get you exit ready.
5. Get your financials in order
Presenting clear, well-organized financials to buyers makes a good impression of your business. Vendors may request audited financial statements to gain a fuller understanding of reported performance—our Audit & Assurance team can assist in this process. You should be able to present an accurate P&L and balance sheet for each accounting period looking back from three to five years. With an Accounting Advisory professional, you should also assess the most appropriate accounting basis: Accounting Standards for Private Enterprises (ASPE) and International Financial Reporting Standards (IFRS).
6. Consider enhancing your IT systems
Buyers are interested in businesses with IT systems that can integrate into their own and that do not require major upgrades or a complete overhaul. Technology platforms can either increase or decrease your value.
7. Engage your management team in a strategic business plan and develop a financial forecasting model
The BDO ExitRight team will facilitate strategic planning meetings with your management team to maximize value drivers and salability factors as well as develop a SWOT analysis, define critical success factors, goals, strategies, and develop an action plan. Lastly, a forecasting model will be developed to monitor progress against targets and final valuation.
8. Develop the right organizational structure and leadership succession plan
To ensure a smooth and seamless transition, conversations and a thorough plan need to be developed to outline the new management structure, define roles and reporting lines, and develop a plan to de-emphasize the owner. Another important area is identifying HR related selling risks such as termination obligations, employment standards, and health and safety.
9. Build a tax and corporate structure
There are two primary methods to sell an incorporated business in Canada. It can happen through the sale of shares or the sale of assets. The way in which a business is sold has several short- and long-term tax implications. Early and proper planning is required to minimize tax and ensure the company qualifies for the capital gains exemption. Ensure you speak with a tax professional to plan for a potential sale.
10. Market the business
An M&A advisor will work closely with you to market the business based on your sales objectives, find a buyer, and negotiate the terms of the transaction through continuous communication at every stage of the process. Running a competitive process is key to maximizing the selling price.
11. Determine your post-sale lifestyle
You’ve spent your entire career building your business, now it’s time to start thinking about your lifestyle goals post-sale. With the sale proceeds of your business you will need to consider estate planning, gifting, trusts, and asset protection, which our Wealth Advisory team can help coordinate. You will also need to determine whether you want to fully retire, start a new venture, or reach other life goals. Proper planning is essential.