How do I learn about buying a small business, and where do I start?

One way to learn about buying a small business is to follow one clear outline rather than reading everything at once. The Business Development Bank of Canada publishes guidance on buying a business. Work through it in order, learn the vocabulary, and keep a list of questions for the advisors you will hire. You can also compare the idea with starting from scratch in Buying a business vs starting one.

Learn the four phases

BDC says it helps to think of buying a business in four distinct phases, from preparation to post-merger integration. The other two are initial and pre-sale negotiations, and due diligence and final negotiations. Reading each phase before you start gives you a sense of the order of work and where decisions fall.

Assemble your advisors early

BDC says anyone buying a business needs trusted legal and financial advisors to call on. Treat them as part of your learning: ask a lawyer and an accountant what they would want to see in your target, and what they charge to review it.

Understand due diligence and protection

BDC says due diligence gives crucial information on a target’s finances, prospects and legal issues. On liabilities you may not know about, BDC notes that you can protect yourself by getting an indemnity agreement from the seller, promising to be responsible for any unforeseen liability that could arise for a period after the sale. Ask your lawyer how such an agreement would work in your deal.

Learn how financing works

The federal government says the Canada Small Business Financing Program makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders. Ask a lender whether the program could apply to your purchase, and what else the lender would need from you.