Selling a sporting goods store in Canada

An owner who has decided to sell a sporting goods store faces a sequencing problem before a pricing one. The store’s results rise and fall with the seasons, its best customers may know the owner by name rather than the store, and its service department may depend on a few people. A buyer may test all three. The order of the work matters: choose a window that shows the store fairly, put the relationships on paper, tidy the stock and the records behind it, and only then start the conversations with landlord, vendors and staff that can slow a close. The Business Development Bank of Canada observes that taking the right steps early can help maximize the sale price and minimize tax liabilities and other expenses.

Choose a window that does not hide the best months

A listing that opens just after the main selling season can leave a buyer looking at the weak half of the year. Prepare statements that cover complete seasons as well as interim periods; the BDC notes that buyers ask for historic and interim financial statements, projections and tax returns, and that an accountant helps prepare them. Decide early which season you are aiming to close in, too. A closing at the end of a season can leave the buyer holding stock that is about to be marked down, and that can become a price discussion. Monthly sales by category, ready in advance, let you steer it.

Put the technicians and the accounts on paper

Two things that can be hard to hand over are the people who tune, sharpen and fit, and the team, school and league customers who reorder each season. Write down who the accounts are, how each renews, who deals with it and what it bought in recent seasons, then plan introductions so the buyer meets the key contacts while you are still there. The BDC advises sellers to address supplier or customer concentration or, if that is not possible, to think about ways a buyer could mitigate it, and warns that a buyer may insist on a lower price if the seller cuts all ties. Talk to the technicians about their own plans before the buyer does. Ontario’s Employment Standards Act guide credits an employee hired by a purchaser with past employment for certain entitlements, unless the purchaser hires them more than 13 weeks after their last day with the seller or the day of the sale, whichever is earlier, and the British Columbia Act treats employment as continuous when all or part of a business is disposed of.

Tidy the stock and the paper trail behind it

Aged stock is better dealt with before listing than argued over at the count. If clearing it means advertised reductions, keep the sales history behind any regular-price claim, because section 74.01 of the Competition Act makes an ordinary-price claim reviewable conduct unless the retailer can establish the sales or good-faith offering that supports it. Gather the product records too. The Canada Consumer Product Safety Act requires a retailer to prepare and maintain documents showing from whom a product was obtained and where and during what period it was sold, and to keep them until six years after the end of the year they relate to, unless another period is prescribed. A buyer may ask where those records are.

Handle customer information with care during the sale

Team and school accounts can involve names and contact details for coaches, administrators and families. The federal Personal Information Protection and Electronic Documents Act allows parties to a prospective business transaction to use and disclose personal information without the individual’s knowledge or consent if the organizations have entered into an agreement that requires the recipient to use and disclose it solely for purposes related to the transaction, protect it with security safeguards appropriate to its sensitivity and, if the transaction does not proceed, return or destroy it within a reasonable time, and if the information is necessary to decide whether to proceed and, if so, to complete the transaction. A confidentiality agreement that says those things, and a data room that releases account detail in stages, can protect the store while it is for sale. Which privacy statute governs depends on the province, so confirm with your lawyer.

Landlord, tax and registry steps that set the closing date

Commercial leases are a provincial matter. In Ontario, section 23 of the Commercial Tenancies Act deems a covenant against assigning without consent to carry a proviso that consent is not to be unreasonably withheld, unless the lease contains an express provision to the contrary, and lets a judge decide on application whether it was; other provinces have their own rules, so read the lease and ask your lawyer. See can my landlord refuse to assign my lease?. On tax, the CRA’s GST44 is the form used to elect that GST/HST not apply to the sale of a business or part of a business. In British Columbia the Ministry of Finance advises a purchaser to hold a PST clearance certificate before buying a business, and says PST applies to taxable assets such as shelving and display equipment but not to inventory bought solely for resale, so expect questions about how the price is allocated.

What can delay a close

• A vendor that has not yet said whether dealer or territory arrangements continue with the buyer
• A landlord who has not answered the assignment request
• A technician who has not decided whether to stay
• An inventory count date the two sides cannot agree, or one that falls just after the season’s peak
• Old security registrations that no one has asked the lender to discharge