Selling an IT support & break-fix shop in Canada

An owner who has decided to sell a break-fix shop is really selling a handover. The question to prepare for is whether the phone will keep ringing once the owner is gone, so the order of preparation matters more than the listing itself. This guide follows a sensible order of preparation: getting what only the owner knows out of the owner’s head, letting clients meet someone else, working out what client information can be shown to a buyer and when, settling the restrictive covenants a buyer may expect, and understanding the closing steps the CRA sets out for a sale of a business. Business brokers and advisors who work with small companies can help with each of these, and none of them depends on finding a particular kind of buyer.

Get what only you know into the company’s hands

Network diagrams, asset inventories for each client, administrator credentials, and the accounts for remote-support tools and parts suppliers are what a handover is made of. If they live in the owner’s memory, a personal password manager or accounts registered in the owner’s own name, a buyer cannot be given the business, only a promise. A practical first step is moving credentials into a system the company controls and listing which supplier and software accounts are held in whose name. BDC’s guidance for sellers makes the same point in general terms: document and update standard operating procedures so the company’s operations are more easily transferred to a new owner. Doing this early also means a buyer’s later checks find a tidy answer instead of a long list of gaps.

Let clients meet someone else first

If clients deal only with the owner, a buyer has little evidence that they will stay, and the remedy can be gradual rather than announced. Routing calls through the shop’s main line, putting another technician on routine tickets and having that person introduced at the next visit shows that the relationship runs through the shop. It also leaves records a buyer can read: tickets handled by someone other than the owner, and repeat calls that did not involve the owner at all. Our answer on reducing owner dependence covers the general approach, and the same habit helps with the later question of how long the owner stays on after closing.

Showing client information to a buyer

Client records become personal information as soon as they concern identifiable individuals, and a prospective buyer may want to see them. Under section 7.2 of PIPEDA, organizations that are parties to a prospective business transaction may use and disclose personal information without the individual’s knowledge or consent if conditions are met. The organizations must have an agreement requiring the party receiving the information to use it solely for purposes related to the transaction, to protect it with safeguards appropriate to its sensitivity and, if the deal does not proceed, to return or destroy it within a reasonable time, and the information must be necessary to decide whether to proceed and, if the deal goes ahead, to complete it. After closing, a further exception in section 7.2 applies if the parties have an agreement meeting further conditions, among them that the information is necessary for carrying on the business that was the object of the transaction and that one of the parties tells the individual, within a reasonable time, that the transaction closed and their information was disclosed. Neither exception applies to a transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. Part 1 of the Act does not apply to business contact information that an organization collects, uses or discloses solely for the purpose of communicating or facilitating communication with the individual in relation to their employment, business or profession, so that exemption does not cover client records beyond that, such as a household customer’s details. Quebec’s Commission d’accès à l’information describes its own permission, with conditions, for disclosure necessary to conclude a commercial transaction.

The restrictive covenants a buyer may ask for

Where a shop’s value sits in client relationships the seller built, a buyer may ask the seller to promise not to compete and not to solicit clients; the comparison of non-compete and non-solicit clauses sets out how the two differ. An Ontario law firm’s article on territory in seller non-competes notes that courts assessing reasonableness ask whether the restricted area matches where the business actually competed and built its relationships, that an over-broad area can give a court reason to strike the whole clause, and that a business with meaningful remote-service reach may justify a wider area than a single storefront. That last point matters for a shop that supported clients remotely, where a radius around the counter may not describe its real market. The article speaks to Ontario, and how a covenant is treated where your shop operates is a question for a local lawyer.

Closing steps the CRA sets out

When a business is sold, the CRA says a seller with a business number may need to cancel it, a seller with employees must close the payroll account, and a seller with a GST/HST account must contact the tax services office to close it. The sales agreement may set a price for each asset, a value for the inventory and an amount attributable to goodwill. When a business, or part of one, is sold, the CRA says the seller may be able to elect jointly with the purchaser so that no GST/HST is payable on the sale, apart from certain supplies it lists, but it also says the election cannot be made where only one or more assets of the business are sold, or where the seller is a registrant and the purchaser is not. Whether it applies is a question for an accountant.

Items worth settling early

Each item below can cost time if it is left until a buyer’s review.

• Credentials and diagrams that turn out to be incomplete once the buyer’s technician starts testing them.
• Supplier, software and remote-tool accounts registered in the owner’s personal name, each needing its own transfer or reopening.
• Client information requested before a confidentiality agreement that meets the section 7.2 conditions is in place.
• A non-compete whose territory or duration the parties cannot agree, particularly where the shop served clients remotely.
• Disagreement over how long the owner stays on to introduce clients, and on what terms.