(416) 648-8499 Mihkel Holmberg (647) 500-0844 Kate Watson
Starting a business from scratch can be slow, and depending on your overhead, it could take months or even years until you are cash positive. Existing businesses looking to expand their market or their market share can find new customer acquisition very expensive and time-consuming. Sometimes, buying a business in Canada can be a better option. And while buying a business is generally more expensive up front, you can expect to see cash flow starting on day one. Although a new startup might be cheaper in the beginning, it might be a long time before you've generated enough revenue to meet your monthly obligations.
If you have already made the decision or you are leaning toward buying a business in Canada, don't be like the large majority of people who, twelve months from the date of purchase, realize they overpaid. Holmberg & Watson would like to provide you with a few brief tips to help you get the best terms when buying a business in Canada.
Tip #1: Contact us. We can save you money and negotiate terms that reflect your best interests. This ties directly into our next tip.
Tip #2: It's almost never a good idea to buy a business in Canada on your own, even if you are a Canadian! Yet, each year, many business acquisitions take place just like this. Although buying a small business is not rocket science, you still need an experienced professional to guide you. You almost always will need an accountant and an attorney. A business broker and a banker are good ideas too!
Tip #3: Very few business acquirers take the time to find a business that matches up with their goals, needs, preferences, and values. Because it is not easy to find the ideal business, most people will end up taking the first thing they can get their hands on. This is a big mistake! Holmberg & Watson can help you evaluate the business you are interested in and even help you find the business concepts that match your needs. For example, if you are looking for a passive or mostly passive income acquisition, you don't want to end up buying a job. Be sure you are not including the wages of the owner in the net profit. If the owner is working in the business, you need to take into consideration their compensation.
Again, you are buying a business in Canada, not a job! So what would it cost you to hire someone to do the job of the owner, and then back that amount out of the net profit? What is left after that is the real profit, and that is what you are buying.
Tip #4: Don't overpay for assets just because they are there. Ask the seller for an itemized list of each and every asset. Far too often, owners have an emotional attachment to their properties, and in feeling so, they ask for more money for their stuff. Inspect every piece of equipment for the condition and make notes of everything that needs repair. Is the equipment near its expected lifespan? With items of great value, it may be prudent to have an expert examine and value the company's assets.