What are the steps in a business sale roadmap?

A sale is easier to manage as a sequence than as one big event. The stages below follow the guidance published by BDC and the Canada Revenue Agency. The stages can loop: BDC says that if a valuation comes in below your expectations, it is an opportunity to go back and look at ways to improve the business. For timing, see how long a sale takes.

Decide what you want and build a team

BDC says being clear on your goals helps you structure and prepare for a transaction that satisfies them. You may end your involvement completely or stay on through vendor financing, an earn-out or a phased transfer. BDC lists an accountant, who prepares year-end and interim statements and projections, and a lawyer familiar with business transitions, who supplies information to buyers during due diligence and negotiates the purchase agreement. Other advisors may fit, depending on the business.

Prepare and value the business

BDC says many people underestimate how long it takes to get a business ready for sale, especially if there are issues to fix. Buyers want to understand financial performance and see a track record. You may not resolve every issue, but BDC suggests showing a buyer you have a plan for them. A valuator can prepare reports from basic to highly detailed.

Find a buyer and negotiate

BDC says a business broker is one route for smaller businesses and an investment banker for larger ones. At the letter of intent stage, BDC says negotiation focuses on the headline price range, general deal structure and the framework for due diligence. It says buyers’ diligence findings can lead to price adjustments or changes to terms, such as holdbacks or funds in trust. When the legal teams draft the binding purchase agreement, BDC says the focus shifts to representations and warranties, indemnities, closing conditions, post-closing adjustments and other legal protections.

Close, then wind down the accounts

The CRA says that if the business you are selling has a business number, you should contact your tax services office because you might have to cancel it, that you must close the payroll account if there are employees, and that you must contact your tax services office to close a GST/HST account. It also notes a possible recapture or terminal loss of capital cost allowance on assets, so involve your accountant before you sign.