Anticipating changes that will affect our business

Where is your business going?

Much of our success as business owners and buyers depends upon our ability to anticipate changes that will affect our business. Failing to do so can cost us dearly.  When we correctly forecast the shifts and trends, we are able to see and act on great opportunities.

I have done both.

In the 80s, I anticipated that the companies running large IBM mainframes had such a large investment in the systems supporting their business that they would be reluctant to change this technology for many years to come, even though new technologies had come to the fore.

The technology that these companies already had—and were comfortable with— was effective.

So I invested in the building of products that substantially improved throughput as well as the management of large complex systems using their existing technology. My assumptions and predictions turned out to be accurate and we prospered. Thirty years later these clients are still using the technology.

However, in 1990, I built a sophisticated class A office building with the intention of filling it with local technology firms.  I failed to anticipate the economic collapse in Ottawa’s technology industry that occurred in 1992, the year my office building was complete. By then, there were empty buildings all across the city. I lost my shirt.

I have never forgotten the lesson learned and I want to share it with you today. The long term trend was for growth in the technology industry but the short term economic adjustment killed me before the long term trend could manifest itself.

Top 10 tips to sell your business and not leave money on the table

What would you like to do after you sell your business?

Canada has a good market for quality businesses. But a CIBC World Markets report says that some 310,000 of us plan to transfer control of our companies within the next five years, a staggering number that represents half of small-and medium-sized businesses in Canada.

Business owners will be selling into a very competitive marketplace, which means it’s likely that only the most attractive and well-prepared businesses will sell for what they’re worth.

You’ll want your business to be one of them. Here are our top 10 tips to sell your business AND protect its value, increase your personal wealth and reduce the taxes you will need to pay on the proceeds.

And here’s an extra one to start you off—for the best results, start planning three and a half to five years ahead, allowing at least six months to analyze the business, two years to build value and take advantage of tax strategies to maximize the proceeds of the sale, and another year to sell.

Managing risk and reward—why use a business broker vs a realtor when selling your business

Business brokers are trained to sell businesses

Few realtors are business brokers, but a large number of business brokers are realtors. It’s an important distinction—especially if you want to successfully sell your business.

Question: What is one of the first things a real estate agent will do?

Answer: List your business on the Multiple Listing Service (MLS).

A listing in the MLS can immediately destroy the value of a business. Telling the world that your business is for sale can cause it to lose employees, customers and suppliers.

Business brokers have very different protocols for advertising, disclosing information and handling buyers:

Business buyers’ market ahead–will you be ready?

Start thinking about the life you want once you leave your business

Some things shouldn’t be rushed. Time with your children while they are still young… a good meal with friends… a good book.

And for those who are business owners, add “selling your business” to the list.

With all that we try to fit into every day, setting aside the time for the truly important and meaningful activities can be/is difficult. Planning and good intentions go by the wayside. Yet not preparing for the sale of our business could cost us the very lifestyle we have worked so hard to build.

A CIBC World Markets’ report says that some 310,000 of us plan to transfer control of our companies within the next five years, a staggering number that represents half of all small- and medium-sized businesses in Canada.

Finding your way out

Walk down the main streets of most any town or city and you’ll find at least one vacant store. Turnover in new businesses is common and statistically predictable, but sometimes it’s a long-standing business that has closed its doors.

What happened to the owners?

Times have been tough for some—especially where neighbourhoods and buying habits have changed— who found their inventory getting stale, their cash flow drying up and their children gone their own way, wanting nothing to do with the family business.

Tired and defeated, they wanted out. So they just closed their doors.

Sometimes, that’s all they can do.

Yet as a business broker who’s been around many blocks, I can’t help but wonder… were there other options? Options the owners didn’t know about. Doors they could open instead of close.

Expect an exciting year for small business ownership in Canada

Exciting ride ahead

This is the first Friday of 2012 and as I work through my e-mails, I’m weighing this brand new year and what it will bring. I expect it to be much better for most business owners than 2011.

The American economy is showing signs of improvement, there is increasing demand for Canadian oil and gas, the potash industry in Saskatchewan is doing well and it would appear that the U.S. housing market has finally bottomed out.

Canadian banks have become more aggressive in the provision of Canada Small Business Loans, employment here is forecast to improve and small business owners are anticipating a better year in Canada.

At the same time, the economy in Europe is shaky and is probably in for a very tumultuous year.

Our current government in Canada has not provided any indication of support or programs that would have a positive effect on small business, but they have maintained low interest rates and a sound banking system. At the same time, we have many business owners past 65 and looking to retire, with many leading edge baby boomers in the same frame of mind.

No pain just gain —negotiating tips for buying or selling a business

Find options that meet both parties’ needs

My wife, Gayle, and I recently celebrated our 35^th wedding anniversary. We’re both strong-minded but we’re careful not to let our differences turn into a contest of wills, where one “wins” and the other “loses”. Yet that’s often what happens to people with opposing interests—in business as well as in life. The steamroller may “win” in the short term, but at the cost of longer-term damage to a relationship they’ll be counting on down the road.

It’s far better to find options that meet both parties’ needs. And that’s where an experienced third party can help.

In the buying/selling of a business, that experienced third party is a business broker trained in guiding buyers and sellers to common ground.  In Canada, individual business brokers often represent the interests of both the buyer and the seller of a business. This is known as dual agency.

I believe the fact that we operate as dual agents with an intimate understanding of both parties’ needs has a lot to do with our success in closing deals. Our goal is to achieve the objectives of both and to protect both, advising what is and isn’t reasonable.

Let’s say you’re the seller. You want to maximize the value of your business while minimizing risk and taxes. When the sale is closed you and the buyer need to be on good terms. You are probably going to train them. You will probably be lending them part of the purchase price. You may even be staying on with them for a period of time.

The purchaser is buying without audited statements, and even though they have done some diligence, they are buying largely on trust—trust that you have developed with them during the investigation stage.

You and the purchaser have opposing objectives during negotiation, however, and emotions can run high—it is important that you let your business broker do the negotiating. They have training and experience in negotiating that you probably don’t. They will help you reach a deal that achieves your goals and the buyer’s goals—they understand both.  If the deal does not work for either of you it will not work at all.

That does not mean you shouldn’t provide input into the development of a counter offer – you should, however, keep in mind that it has to work for both of you.

No double dipping at our table: how dual agency works in Canada

No double dipping at our table

Business brokers bring buyers and sellers together.  The rules around “who acts for whom” change with the Canada/U.S. border.

In Canada, individual business brokers often represent the interests of both the buyer and the seller of a business. This is known as dual agency.

Dual agency is not the standard in the U.S., although some states do allow a broker and one agent to represent both sides of the transaction as dual agents.

Normally, buyers pay no fees to us.  The broker is paid on a commission basis by the seller when a business transaction is successfully completed.

It seems that some don’t understand this.  Like this individual from an American financial services firm that wrote:  “I hate double-dipping business brokers”.

And he wasn’t referring to our practices with chips or vegetables.

His statements are misleading.

Let me explain.

Selling a business: top organizational factors to build value

Find ways of retaining your key personnel

Can a potential buyer see himself in your business or are you blocking the way?

When preparing to sell or build value in a business, you need to step back. Strive to become dispensable, says Grant Mellow, ActionCoach.

Grant was one of several professionals who sat down with me last fall  to discuss ways owners could add value to their business.  He told us that ActionCoach’s definition of a business is a commercial, profitable, enterprise that works without you!

“Many businesses are dependent on the contribution of the owner for success,” Grant adds. “If you want to add value, then make sure systems run the business and have a great team running those systems. If your business lacks systems and relies on you then it has less value.”

Working ON the business, not IN the business can be hard, especially for those whose business has been their means of self-employment such as a mechanic who started a garage or a baker who opened a bakery.

The greater value comes when the business is making money without its owner’s involvement in the day-to-day activities. This gives the owner the option of “retiring on the job” with income and flexibility in their life.

Confidentiality: why it counts in selling your business

Broadcasting that your business is for sale adds risk

Some people tell too much online.  They announce to the world that they’re going on vacation, letting potential burglars know that they’ll be away from home for two full weeks.  Or they reveal personal details that result in their identity being stolen.

If you’re selling a business, broadcasting the word on a public forum like Craigslist or Kijiji or listing the details under business opportunities in your local newspaper can be just as harmful.  Yet it’s fairly common to see such listings, complete with photos.

Not that anyone is likely to show up to do you or your business personal harm. The potential damage can be just as devastating, though, affecting your chances of selling and in particular, the price you get.

In a real estate listing, you want to get the word out so that everyone knows that a particular house or building is for sale. In most small business listings, you do not want anyone to know that your business is for sale.