“I speak to business owners all of the time in Toronto and they are constantly looking for ways to expand their business and increase it’s overall value.” Explained Adam from Zulo.ca who offers Toronto SEO services. He continued “My main advice to anyone who is looking to purchase a business would be for them to do their homework, don’t get caught making an impulse decision.”
With that we dove into the world of business buying and selling in Toronto to see what we could come up with to set you off in the right direction.
Where to find businesses for sale in Toronto.
If you’re looking to buy an existing business in Toronto, you have one of three options. The first option is to look at online directories which have a mix of businesses for sale by owners and businesses for by brokers. This is often the starting place for most buyers as it can give you a general idea of what’s out there. The most important thing to keep in mind however is that it’s not everything that’s available. Lots of business owners choose not to list their businesses in online directories because they don’t want their clients, competitors or even family members to find out that the business is for sale. For this reason, they go strictly with brokers.
That brings us to our second option, a business broker. There are some great business brokers in Toronto and often times it’s the most secure way of zeroing in on a potential business to buy. The broker will normally vet you first and then have you sign a Non-Disclosure Agreement before giving you access to their inventory of businesses for sale. The only disadvantage in this case is that you’re limited to the businesses that this particular broker has access to as most brokers won’t go out and try to acquire individual “off the market” businesses for you unless you specifically request that service. It can also end up costing you extra.
Which in turn brings us to the third option, targeting a business by yourself and pursuing it. This can be tricky and if you’re not a seasoned buyer or at least knowledgeable about the industry that the business is in it’s not advisable. However the best “steals” or at least deals can usually be attributed to buyers who walk up to existing businesses and express their interest. Chance are you’ll need to approach several business and be willing to disclose your financial resources as well as sign NDAs in order to open up the conversation, however if you’re willing to go that far, it can allow you to find businesses in Toronto that can be true gems.
Considerations before buying a business.
There are many important factors you need to consider before buying a business, as one might imagine. The first and most important is understanding the industry. Often times when someone wants to sell their business it’s because they can foresee hard times ahead. If you’re not familiar with the industry of the business you’re considering buying, it can often times pay it’s weight in gold to check with an attorney familiar with the industry. Just a simple consult with a knowledgeable attorney can let you know if the business might be subject to changing laws, regulations or other variables that could affect it’s profitability.
Another check and balance you’d do well to put in place would to have an accountant thoroughly review the financials. Small businesses especially are subject to questionable accounting practices which can drastically affect the valuation of the business. This doesn’t need to be nefarious on the current owner’s part, it can be as simple as a difference in opinion on what constitutes a business expense. By checking with an accountant and having them review the financials you can avoid a lot of the pitfalls of small business accounting practices.
Speaking to clients, suppliers and employees of the business in a one on one environment can help give a stronger understanding of the business’ operations. You want to know how healthy the company is both in terms of it’s financials but also it’s company culture and standing in the business community. By speaking to multiple people who have different perspectives of the business’ operations you can get a better 360 degree outlook on where the business stands.
Ways to finance the purchase of a business.
There are four main ways that you can secure financing for your purchase of a business in Toronto. The most common approach would be to get a secured loan through other assets that you have in your portfolio, whether that’s equity in your home or if it’s another asset is completely up to you. Assuming you don’t have sizable assets that could be used as collateral, another popular option would be mezzanine financing. If you would like to learn more about mezzanine financing you can do so by clicking here.
Yet another option for securing financing to purchase a business would be to raise additional equity. Getting venture capital, or a new partner or an angel investor can also help bring expertise and other non-tangible resources to your new business. Last but not least there’s always the option of obtaining financing from the seller. If the seller is looking to sell the business because they lost their house at a poker game, chances are they won’t be open to financing the sale however a lot of the time sellers are looking to retire or reduce their roles and their much more concerned with the right person taking over. If they have no immediate need for an influx in cash, they could be open to a pay-as-you-go model that could benefit both you and them, so don’t be afraid to raise that as a possibility.
Hopefully this overview has given you the confidence boost you needed to go out there and start digging for your dream business. Whether you’re looking for a business as an additional source of income, or as a career change or for some other reason, the one truth is that there’s a business out there for everyone – you just need to find it!