The Factors That Impact Your Business Sale

As a business owner, we often handle everything from start to finish, building the business from the ground up. Whether you are keen to make your first dollar or are on the pathway to a seven-figure year, you’re not in it alone. External factors and market forces shape the businesses’ success at every stage. These contributing factors may at times be outside of our control, however it is important to understand how they impact your business.

Making Informed Decisions When Selling Your Business: Creating a Strategic Plan

When listing a business, setting the stage for a successful sale means evaluating everything from recurring revenue bases, productivity and intellectual property, as well as market fluctuations, international trade agreements and global economics. You do not have to be able to predict the future, however it is important to understand and track global and national economic trends that may impact your market.

Wealth Transfers: How the Next Decade Will Impact North American M&A

More than half of North America’s business owners are over the age of 54. When considering that the average retirement age is 63, this means a considerable number of mid-level businesses will be changing hands within the next decade. While some business owners plan to leave management of their business to one or more family members, less than 20% have a formal succession plan in place.

For sellers, an influx of businesses going up for sale at the same time means you are dealing with a buyer’s market. Higher rates of competition demand a more attractive profile, as well as the possibility of a lower realized sale price and unfavourable terms.

“I’m often asked when the best time to sell a business is. The right time to sell a business is when you’re ready. Racing to market before you or your business is ready can mean overlooking important details that result in long-term consequences” says Jason Brice.

International Trade Policies: Understanding Your Risk Profile

In a time where North American trade policies are headline news, it is hard to miss the impact that trade agreements have on mid-sized businesses. Buyers are looking for businesses with strong foundations for success and low-risk profiles. Any uncertainty is enough to derail a sale, and private equity firms are upgrading their due diligence in response.

It is common for private companies to look for additional funding or investors as they attempt to grow and scale. With so much uncertainty in the future of trading, Canadian equity firms are more inclined to invest in businesses with lower trade exposure. Manufacturing, for example, has been facing an uphill battle for years, and the dependency on aluminum or steel can make acquisition or investment seem riskier.

“Equity firms like to keep their investments close to home whenever possible. Businesses with a high rate of domestic revenue, diversified customer bases and recurring revenue are seen as a low-risk, sound investment” Jason states.

Interest Rates: How More Stability Can Help Sell Your Business

For the past several years, entrepreneurs have tuned into financial reporting from the edge of their seats. Now, as this volatility begins to settle, there is increasing hope on the horizon for buyers and sellers. More stability means banks and private lenders are able to offer better terms for borrowing, making acquisition accessible.

The more expensive debt is, the less inclined investors are to take a financial risk. When interest rates stabilize, deal structures become more predictable, and it becomes easier to secure financing to purchase a business. More prospective buyers means a wider network for sellers to tap into.

Industries & Market Conditions: Where Do You Fit In

The current state of the market will determine which businesses are the most appealing. Your financial statements might show a consistent upward trajectory, but that will not be enough if your business is in a stalling sector. Technology continues to be a thriving industry, as well as medical devices and care. An experienced broker can help to determine where your brand falls on the desirability scale, as well as best practices for creating a desirable profile.

Economic Growth: Adjusting Expectations to Match the Economy

With stabilized interest rates in place, Canada is beginning to rebound, but it is still expected to be a slow climb. During this time, organic growth can feel difficult, making acquisitions a more appealing way to inject new life and visibility into a brand.

Good businesses manage, however exceptional ones dominate; standing out requires more than competence, it demands true distinction. For sellers, this means showcasing a robust profile of above-market performance, clear financial statements, and defensive characteristics. Buyers will be on the lookout for recurring revenue and thoughtful projections. Working with a business broker will help sellers create a realistic valuation for the present economic conditions.

Creating Guidelines For a Strategic Sale: Working With a Business Broker

Successful sales are built on strategy. Creating a strategy means knowing all of the factors at play and being able to navigate them. Whether you are a novice to the world of business or are a veteran entrepreneur, there is always more to learn. An experienced business broker will guide you through the external factors that are impacting your valuations and affecting your sale.

“Every small detail matters when selling a business. One little inefficiency can have a major impact on your profile. Small changes now can lead to big returns later, so make sure to check your books early and often for those early warning signs” states Jason Brice.