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From the classified ads in your local newspaper, to your neighbour who's retiring and selling his business, there are businesses for sale everywhere you look. But some businesses are better buys than others. How do you find the right business for you?
The first step is deciding what type of company you want to purchase. Make a list and prioritize the items. Use precise, specific criteria, such as size, location and the price you are willing to pay. Here are some questions to guide you:
- What type of business (service or product) are you looking for?
- How much time will you invest in running the business?
- Do you want shares or assets?
- What level of risk is acceptable to you?
- What machinery, equipment, inventory or vehicles will you require?
Once you've determined what you need, start producing a list of targets that meet your requirements. Costly mistakes can be avoided if you take the necessary steps and time to do some research.
Internet
The Internet is a natural place to begin your search. Do a key word search using "business for sale," "buy business," or "buy or sell business" with specific keyword criteria such as "manufacturing" or "tourism" or "retail."
Many websites provide forums to bring buyers and sellers together. Some also provide buyers with email alerts as soon as a business is advertised for sale. Typical business categories are:
- Retail
- Automotive and transport
- Hotels and restaurants
- Tourism
- Industrial and manufacturing
- Technology services
- Financial services
- Construction
- Franchises
- Investment opportunities
Here are some websites that provide quick search tools using specific criteria, such as location, financial range, and property type:
Aquizition.biz is a confidential forum that links buyers and sellers. It provides quick search results by sector, with a vast listing of businesses and franchises for sale across Canada. You can also consult a professional or financial firm by expertise.
Icx.ca specializes in commercial real estate sales, with a sub category in selling businesses, with or without property.
Canadian Business Exchange provides a search tool and additional services such as immigration, consulting, research and due diligence research for a fee.
Carrefour PME offers business opportunities in the province of Québec (website only in French).
BusinessesforSale.com and FranchiseSales.com provide services to buyers, sellers and brokers internationally.
Venture Exchange offers business opportunities in Calgary.
Networking
You've probably heard that networking is valuable for finding a job, but it works equally well for finding a business to buy. In fact, personal recommendations are the source of many of the goods and services we buy, so asking your "network" about businesses for sale is a good place to begin. Here are some approaches to consider:
Buying the company you work for: If you're currently working for the kind of company you would like to acquire, find out if the current owner would consider selling the company. An option to reduce the risk is to join forces with the rest of the management team and buy out the owner.
Approaching your contacts: Many businesses for sale are never advertised. Owners may not want to cause unease amongst their customers, suppliers and employees, or may not want unqualified buyers approaching them. Tell your network of friends, family, colleagues and business associates about the kind of business you are looking for and ask for suggestions. Often the best opportunities are hidden but they surface through personal contacts.
Approach business owners directly: When you find a business that appeals to you and meets your criteria, you can approach the owner directly, even if the business is not for sale. The owner may not be planning to sell at the moment, but your interest in buying may encourage him or her to consider your offer.
Attend industry events: Attend conferences and trade shows in the industry that interest you. You are likely to meet decision makers, including vendors and suppliers of complementary goods. These people tend to have the inside scoop as to what's going on in a particular business. Find out from other business owners what is going well for them, and what their challenges are. You may find someone who is looking to acquire a partner, or who wants to sell a business.
Chambers of Commerce: Take part in local Chamber of Commerce events. You'll meet people from a variety of businesses in your area, who are there for the purpose of connecting and increasing business in your community. Explain your interest in acquiring a business. You are bound to get leads and suggestions to follow up.
Publications
If you are not sure what kind of business you want, start by scanning business, entrepreneurial and financial magazines such as Inc., Entrepreneur, Profit Guide, and Small Business Opportunities. They may give you insights into options you have not considered. For example, if you work in food services, you have a number of options available, such as a catering business or restaurant equipment supplier. However, before plunging into an area where you have little or no expertise, look into the industry and see what specific businesses are advertised.
Magazines, newsletters and trade journals often have classified sections which advertise businesses for sale. And every industry has one or more trade associations and a variety of publications. For example, if you are interested in buying a business that sells health food products, magazines on natural health often have a classified section. Similarly, trade journals on marketing have publishing, editing or printing companies for sale.
Classified ads in newspapers are a good place to start if you want to buy a business in your geographic area. But also check out the "Business Opportunity" section of large metropolitan newspapers in other local areas, as sellers tend to use this approach to gain more visibility. Remember that many businesses can be relocated, so look at newspapers from other cities.
Place your own ad in a newspaper or trade journal. Be specific in your requirements, but be sure to use a post office box so you are not inundated with calls.
Intermediaries
Professional advisors such as your attorney, accountant and banker can be sources of leads. Insurance brokers also have extensive networks, and know about impending retirements since they handle pension plans. Clients often confide in their professional advisors, or seek their advice before seeking a buyer for their business. Professional advisors benefit from finding a suitable buyer so that they can continue their business relationships. They can also provide you with financial reports, help you negotiate the sale and evaluate any assets that may be included in the offer.
Business brokers and commercial realtors have extensive databases, and can help you find businesses that match your criteria. They can obtain the necessary financial documentation and act as the intermediary between the buyer and the seller.
These types of brokers can save you time in the initial search but remember that business brokers generally represent the seller, not the buyer. They earn a commission of about 10 percent from the sale, and will try to get the best selling price possible. The broker's mandate is to sell the business, not to match the right buyer to a business. The seller may also raise the price to recoup the commission paid to the broker.
Wholesalers, vendors and suppliers are in close contact with their clients, and have information about a company before it becomes public. Since they are already doing business with the company, it is in their interest to make contacts that will continue their business relationship.
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