Sharing experiences on buying an operating business.
I'd like to share some experiences and information that I hope will be useful for those of you who want to start a business in Canada. In Canada, there are many ways to start a business, and buying an existing one is one of them. This article will focus on that; I'll share other methods later if I have more time.
ADVANTAGES AND DISADVANTAGES OF BUYING AN EXISTING BUSINESS:
Beneficial:
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With an existing customer base, experienced staff, and business direction, there's no need to start from scratch.
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Suppliers are available.
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Sales are stable; all that's needed is further growth.
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Thanks to the guidance and sharing of market knowledge by the previous owner, I couldn't have learned it anywhere else.
Adverse:
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It's difficult to find a business that matches our expertise and budget.
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What the previous owner did in terms of market share, customers, marketing, etc., is no longer suitable, and if you change, you face the risk of losing customers.
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Existing staff are accustomed to old ways of doing things, which can make leadership difficult, and they may be reluctant to accept change.
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Unforeseen problems arose regarding finances, time, and resources.
RESEARCH AND CHOOSE THE RIGHT BUSINESS
Search on the internet:
Contact brokers regarding business acquisition.
PERFORM THE ASSESSMENT (DUE DILIGENCE)
For a professional approach, especially for businesses with substantial capital, I strongly recommend hiring a professional appraisal firm. They will conduct a thorough appraisal process, identifying potential issues the company may face, such as bankruptcy filings, lawsuits, debts, planning issues, or other disputes. They will assess the risks and determine how these factors will impact the acquisition.
If you're a small business and have a lot of experience in this industry, you can do it yourself with the help of a lawyer or accountant, but this is generally not professional due diligence. Therefore, if you choose this approach, you must have knowledge of planning, business, marketing, and accounting to control and understand all the information you need to find.
The following documents must be provided by the seller:
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Financial statements for the last 5 years
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Tax return for the most recent year
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List of expenses
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The salary and bonus structure for managers is important, as this is a crucial position. What are some of the additional benefits (bonuses or bonuses) that the employer has to provide annually, in addition to the basic salary?
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Research the business location, area, ownership status, lease status, commercial management fees, etc.
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Number of employees
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Patents (if any), regulations, and shareholder agreements.
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Describe the quantity and time frame for collecting the customer database, and the software used to manage it.
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Profit margin per product/service
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And other documents that the review team needs.
Regarding franchises, there are other resources available, and I will write a separate article about franchises when I have the opportunity.
Lawyers and Accountants are essential, even if you don't already have a Due Diligence team, you still need these two characters.
One note: truly promising businesses cannot sell cheaply. They might have to sell due to COVID, but if they have potential, they need to research the business's operating history before COVID.
If you have a business you want to sell, I also recommend preparing a strong portfolio like this and working with brokers to get the best possible selling price, avoiding selling it too cheaply or at a very low price.
For those with PR and Citizenship, you can contact banks, as major banks offer business loan programs based on the value of the business you purchase, without needing collateral.
IMMIGRATION
Above, I mentioned the requirements for locals, specifically having PR or Citizenship. If you intend to buy a business to help relatives immigrate to Canada, there are a number of additional requirements to meet. These will include:-
It must be a business that "fits the preferences" of the immigration department.
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Invest at least $250,000 in a business in Canada;
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Create/maintain jobs for at least two Canadians; and
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A viable business is one that generates enough revenue to pay the salaries of all its employees.
- People in Vietnam who want to become owners or co-owners with you must have management experience; they don't need to take an English test.
I currently advise businesses that are buying for immigration purposes or to help relatives become business owners. I don't have enough staff to handle local businesses. I hope this small contribution will help people save time and quickly become successful business owners.
Thank you everyone for reading.