Buying Tutorial

Your local business broker serving Edmonton and Calgary

Purchase of a business can be a complex endeavor, from searching for the ideal opportunity to handling ownership transition procedures with precision. While perfection may never be reached, business brokers recognize the value in finding businesses tailored specifically to your unique needs, skillset, and lifestyle – using their vast portfolio of businesses and industry experience they will guide and assist you through every stage of this journey. Discover some useful information below that may help determine if buying one might be your ideal path forward.

Advice for Business Buyers and What do they Try to Achieve?

Stepping onto the journey of self-employment can be both exciting and frightening, yet surprising statistics reveal that approximately 90 percent of small business buyers lack prior ownership experience. Many buyers end up purchasing businesses that differ from what was initially on their search list as they explore the market and uncover more suitable opportunities. Most often, sellers facilitate these sales through financing arrangements. 

When potential buyers contemplate acquiring a business, their primary objectives typically revolve around attaining the following:

Starting your own business requires more than simply finding work; it represents a fundamental change to one’s lifestyle – often an immense one. As an entrepreneur, taking on more responsibilities means working longer hours and taking on many roles – as is often said: you will become “chief cook and bottle washer”. From managing the business itself to performing physical tasks like sweeping floors or replacing light bulbs.

What are the initial steps when purchasing a business?

  • How many years has the business been operating?

    An established, reliable business with a long track record typically stands the test of time and often boasts loyal customer followings and quality products/services. While exceptions do exist, typically such businesses represent trustworthy and reputable partners in business.

  • What is the duration of the current owner's ownership of the business?

    Longer is better when it comes to success in business; continued operations indicate sustained profitability.

  • Why the owner is selling?

    Be cautious of owners aged between 35-39 who have only recently started the business for six months and who wish to retire soon; their motivation may impede your offer from being taken seriously; however, individuals can seek new challenges due to restlessness or burnout after several years; understanding this motive for selling is critical and should be discussed directly with them.

  • What is the significance of books and records?

    Financial records offer invaluable insight into a business's past performance. However, it's essential to remember that tax records may not accurately depict its performance; business owners, like everyone else, tend to strive to minimize taxes as much as possible; hence tax returns often depict an unfavorable scenario of operations. When reviewing expenses it is critical to identify non-cash items such as depreciation and business use of assets and discretionary expenditures like business trips - an experienced business broker can assist in this area. Financial records only represent the past; their repeat or repetition cannot be guaranteed. Success relies upon future performance; thus financial records show what success the business has had to date while their potential depends upon you as its new owner.

  • What methods can be used to ascertain if the seller is reporting all income?

    Simply stated, it is impossible to ascertain if a seller is failing to report all income. Failure to do so constitutes illegality. Consider only income that the seller can prove; in cash-based businesses this may include not reporting all income for tax purposes, leading to an underground economy worth billions of dollars. Sellers may mention unreported or "skimming" income but these claims cannot be independently verified. When assessing a business, base your decision on the figures and details provided directly by its seller.

  • Conclusion

    Beginning an entrepreneurial endeavor can be intimidating, with no guarantees to protect you along the way. After extensive research and investigation, however, there comes a point when one must take a leap of faith and move ahead with purchasing the business. Success in owning a business takes hard work, financial adjustments, and the ability to play various roles. But if the freedom of being Your Own Boss and making independent decisions are important to you, owning a business may be your ideal path forward. Once they take that leap of faith, most business owners agree they would never return to being employees.

What key factors should you consider When evaluating a business for acquisition?

An essential step when exploring any business should be identifying its required down payment. Anytime someone asks you for more money than what you are willing to invest, no matter how promising the financials might look.

As important as it is to recognize the bottom-line profitability of any business, its true worth goes far beyond this metric alone. A prudent approach involves gathering more information about it before dismissing or overly fixating on numbers alone – an integral component of knowledge acquisition.

One of the primary concerns among people looking to purchase a business (around 90%) is understanding its purchase process. Unfortunately, there is no one-size-fits-all answer; each approach to buying can have pros and cons.

However, it’s essential that all your inquiries be answered and all necessary data compiled for informed decision-making.

Below are outlined the steps which have proven most efficient and practical for purchasing a business:

Frequently Asked Questions

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