Starting a business one thing, selling it is quite another

Derek Shevkenek - Oct 12, 2016

Back in the 1990’s during my University of Calgary summer break, I took a risk, gave up a guaranteed $8,000 summer job, invested $2,000 in ladders, equipment and a truck, and ran a student painting business.

Often, the only way any business succeeds is to lay everything on the line. Time, money, heart, soul, prayer and persistence – with no guarantees! The big question is, “Will I make it?”
About half of small businesses fail after 5 years (Industry Canada), some suffering significant loss. But for those that make it, businesses can grow significantly in value, anywhere from hundreds of thousands to multiple millions of dollars.
More than 60% of business owners plan on retiring within 10 years (CFIB), which often means selling the business. While high risk may have been needed to establish the business, it’s not appropriate when constructing an investment portfolio from sale proceeds, and it’s not appropriate in the final years before the sale happens.
Strangely, many business owners exhibit risky behaviour in those final years. That risky behaviour is failing to proactively prepare for business sale, resulting in lost potential value and significant business disruption. The big question is, “How do I exit the business?”
Proactive preparations include addressing questions like: How will you figure out what the business is worth? What steps can you take to maximize business sale value? Is there potential for family, management and/or employees to purchase the business, and if so, have you initiated such discussions? What professionals such as lawyers, accountants and advisory specialists, should you inform and involve now to help prepare for business sale? How will you handle business sale proceeds, and how will that affect your overall financial, tax and estate planning picture? The goal is to realize maximum value, after preparing a well thought-out plan.
Thankfully, my student painting business succeeded beyond expectations. If you’re a business owner looking to exit, I hope you succeed in safely and smoothly reaping the reward for all your hard work.
Inquiry welcome at Opinions are those of Derek Shevkenek and may not reflect those of BMO Nesbitt Burns Inc. The information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. BMO Nesbitt Burns Inc. is a Member - Canadian Investor Protection Fund. Member of the Investment Industry Regulatory Organization of Canada.