10 Questions To Ask When Buying a Business—Do Your Homework!

Published in Nanaimo Magazine - December 2010 Issue

Buying a business is an arduous, yet rewarding process, and can take weeks or months. Because buying a business will involve investing a fair amount of money and time, it is critical to do your homework when gathering information about the business. This process is commonly referred to as due diligence.  It helps the buyer discover information such as whether the purchase price of the business is too high; the type and condition of the business being bought; bad financial situations if they exist, and contingent liabilities. There are so many questions to ask when considering the purchase of an existing business. In fact, there is not enough room on this page to list them. But let us give you a few examples that relate to financial, marketing, ownership and operations: 

1. Ask why is the seller selling—and verify the answer.

2. Ask to review the certified financial statements of income, cash flow and balance sheets for the last three years. If you borrow from a bank to pur- chase the venture, the bank will want to see them.  Recent audits and projections should also be reviewed.

3. Ask  to see the company’s Tax Returns (not the owner’s personal) for the last three years.

4. Ask for a copy of all documents of all outstanding indebtedness like notes payable, accounts payable, real estate and equipment leases.

5. Ask if the seller is willing to stay around for awhile after the sale to help with transition.  If so, have you discussed some compensation for his/her services during that transition period?

6. Ask if there has been any significant turnover of employees. If so, why? Ask to see employment agreements and organizational charts.

7. Ask about the quality of customer relations at the company. Review customer lists if possible.

8. Ask about the relationship between the company and its vendors. Do vendors display preferred, regular or irregular relations with the company?

9. Ask to review key contracts.  Also ask to see any litigation-related documents.

10. Ask for information about patents, copyrights and other intellectual property-related documents.

If you are contemplating small business ownership, feel free to give the Sunbelt Nanaimo office a call at 1-877-289-0969 or visit the website at www.bcbusinessbroker.ca or www.sunbeltnetwork.com/vancouverisland - we can help you find a reliable business that suits your background.  We are Certified Business Intermediaries with special training to help our clients analyze business opportunities and assess future probability of success.  President of Sunbelt Business Brokers, Michael Naprawa, is the Director of Education for the Canadian Chapter of IBBA (International Business Brokers Association), an organization that creates business standards and a code of ethics; and creates training and professional designations for Canadian Business Intermediaries.  Feel free to contact our Nanaimo office with your questions or comments.

View the article and check out Nanaimo Magazine here

2010 Highlights of Small Business in British Columbia

Published October 2010

BC - The government has released SMALL BUSINESS PROFILE 2010, a 36 page report that profiles small business growth and development in the province. Here are the key highlights.
Small businesses account for 98 per cent of all business in the province, with approximately 395,900 small businesses operating in British Columbia in 2009. Of those more than half (56 per cent) were self-employed and the rest (42 per cent) had fewer than 50 employees.
Only Saskatchewan, which has 89.5 small businesses per 1000 people, has a greater number of small businesses per capita. This puts BC, which has 88.9 small businesses per capita, well ahead of most other provinces (the national average of 72.0).
How does this translate into economic value? Small businesses provide enormous support for employment and also contribute to the province's gross domestic product (GDP).
Small businesses in the province account for 57 per cent of private sector jobs, the highest rate nationwide, and employed 1,045,400 people in 2009. On top of this are 443,800 self-employed worker, who tend to be older, are more likely to work longer hours than employees working for others and are also more likely to be male.
In terms of production, small businesses in the province accounted for roughly 32 per cent of BC's gross domestic product in 2009 and 41 per cent of the total value of goods exported from the province in 2008.
Read the report SMALL BUSINESS PROFILE 2010 to learn more about the state of small business in British Columbia.

Article: http://www.canadaone.com/ezine/briefs.html?StoryID=10Oct18_2

HST - Preparing for July 1, 2010

Preparation is key to reaping rewards and avoiding pitfalls as the implementation of the harmonized sales tax (HST) in Ontario and British Columbia looms, according to a veteran tax expert.

"Worries are not non-extistent, but they are small compared to the relative benefits," said Peter Budreski, chartered accountant and consultant to small and mid-sized firms.

He said preparing for the transition will greatly reduce the pain of the change and position small and mid-sized firms to reap the rewards of HST.

For instance, businesses must make sure their tax software tools have been patched or updated to accommodate the HST, said Budreski. In Ontario for instance, the government has earmarked $400 million for accounting software replacement assistance to SMBs, he noted.

On July 1, 2010, the goods and services tax (GST) and the provincial sales tax (PST) will be merged into the HST in Ontario and BC.

The Ontario government claims the move will save businesses $500 million annually in compliance costs. When fully implemented, the HST will save $4.5 billion annually.

Budreski, who also helps owners of small and mid-sized companies set up their QuickBooks accounting software, said the transition will generally mean less cost and complication for many of these firms, although many consumers might cry foul.

"There will probably be a backlash from consumers who will feel they are going to be charged more taxes over a wider range of products," he said

Source: Article from http://www.itbusiness.ca/it/client/en/home/News.asp?id=56777

BC's Economy is Looking Up

On April the 12th the government of British Columbia released a report revealing a number of interesting economic indicators. Overall the economic climate seems to be improving, below a list with some positive economic indicators can be found:

- Major construction project in B.C. hold strong

- Building permits on the rise

- 2010 first quarter housing starts doubles 2009 figure

- B.C. forecast to lead Canada in new home starts

- Conference board forecasts B.C. to lead Canada in growth in 2010

- B.C. to lead nation in job creation

- Vancouver's economic growth expected to lead Canadian cities

- Consumer confidence in B.C. up yet again

- Business confidence remains strong

- Vancouver a top city for international competitiveness

- B.C. continues to record strong population growth

- B.C.'s housing sales continue positive rebound

- B.C. remains a box office leader in film and TV production

- China grants Canada approved destination status

Source: BC Government Website, 2010