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

Buying a Business 101

If you are thinking of buying a business and you have never bought a business (in Canada) before, the following guide will be of great use and is especially created for helping potential buyers of Canadian businesses. This comprehensive guide, written by Michelle Collins and Julie King, can be found on Canada One online and gives practical advise to those who are interested in buying a business in Canada. 

Just click on the following link and it will bring you to the correct page:

A comprehensive guide to buying a business in Canada

Cowichan Valley Toasts A Passionate Wine Lover

After 25 years in retail, the new owner of Wine Kitz in Duncan is no stranger to the winemaking industry.  His love for winemaking began in 2002 sparking an entrepreneurial passion for high quality wines. “I knew I fit in well in this industry,” says Mr. Ron Tanguay, who previously owned and operated two restaurants in Cambridge, Ontario. Since the inception of Wine Kitz in 1959, the franchise has been the leader in the consumer winemaking industry and today is one the world’s largest and most respected winemaking retailers. And that’s what motivated Mr. Tanguay to seriously explore a career opportunity in something he loved: wine.

BC's Self Employment Boom

The Globe and Mail featured an article about how entrepreneurship is flourishing in British Columbia. The article states that more and more people find self employment the way to go. 

After a decade repairing helicopters in places from the Arctic to Mexico, Marc Bonin grew weary of the turbulence in B.C.'s economically sensitive aviation industry. He wanted stability, and a chance to spend more time with his young son.

 

So last June he threw open his doors as the Car Butler – a service geared toward busy Vancouver-area doctors, lawyers and executives, which picks up and oversees repairs of their cars. It was a decision forged by choice, one that he said gives him more flexible work hours, potential for higher earnings, less need to travel and a chance to start something from scratch. Mr. Bonin, 38, plans to franchise his business in the next three years.

“I see it as my own creation. Many people relate it to babies, how they grow, and I can totally see it that way,” he said.

Many others across the country can relate. More than 115,000 Canadians became self-employed in a recent one-year period, a study released Monday showed.

What is Sunbelt?

Company Overview

Sunbelt is the largest business brokerage firm in the world, making it the dominant force in the industry. Since 1978, the Company has evolved into a business brokerage network including 300 offices throughout the United States and 30 foreign countries. We currently broker the sale of approximately 4,000 businesses each year.

Our 1,400 business brokerage professionals are dedicated to providing our buyers and sellers with superior service throughout the entire buying or selling process. Sunbelt's experienced methods make the transition smooth and uncomplicated.

Sunbelt business brokerage offices can help those buying or selling a business in any of the four areas of the private business market:


Main Street Businesses

General businesses that usually have gross sales of $1,000,000 or less per year and have 20 or fewer employees (95% of US businesses fall into this category).
Franchise Sales Sunbelt is pleased to be the business brokerage firm that represents a select group of franchisors with a proven track record of success in their field. When you buy a franchise, you are in business for yourself, but not by yourself. These franchisors have proven business systems and known names in their respective markets.


Franchise Resales
Thousands of existing franchise businesses resell every year, often for "human driven" reasons: the owner retires, dies, is in poor health, is getting a divorce, is relocating or experiences other life-changing circumstances। We, as a business brokerage, always want to know why someone is selling a business, and so do you. Depending on the circumstances, the sale of an existing franchise may present a good business opportunity for the buyer. An existing franchise has the advantage of being an existing business plus the ongoing support provided by the franchisor. Those looking to buy a franchise can benefit from the professional assistance provided at Sunbelt.

Middle Market

Sunbelt is a market leader in managing middle market transactions in the range of $3,000,000 - $30,000,000.