Business transfers: what to consider before to sell your business

21 June 2024 by National Bank
Five professionals sitting around a desk

Selling a business is one of the most important – and likely emotional – financial decisions you’ll make as a business owner. It’s also a lengthy process that can take up to three to five years. Here’s how to prepare for the transaction.

What should you consider before listing your business for sale?

To achieve a successful sale while ensuring the smooth transition and long-term viability of your business, there are several things you need to look at. Here are five priority areas to consider.

The state of your business’s finances

Start by asking yourself if your business’s finances are in order. If your answer is yes, you need to be able to substantiate this. If the answer is no, take the time to put your financial statements in order before going further. 

In both cases, ensure you can offer potential buyers an accurate overview of the situation. To do this, you need clear, up-to-date financial statements and, ideally, financial projections for up to five years. A historical analysis of your performance is also useful. 

Don’t have financial projections or a historical analysis? It’s never too late to draw them up. These documents can help you identify your business’s growth drivers over time and demonstrate its value to potential buyers.

Your business’s sales and customer service 

Without revealing confidential data, tell your buyers which segments of your customers are driving your business growth. Can you tell them what services or products these people buy from you? That’s even better! 

Your operations and human resources

It’s important to have all the documents related to your personnel, procedures and operations on hand as well as details of your business’s infrastructure and all purchases made from suppliers. 

Do you frequently assess your team’s level of happiness at work? Consider including these results and any conclusions you’ve drawn in the documentation you present to potential buyers. This can only work to your advantage.

The legal aspect

Assemble all your incorporation documents, contracts, licences and insurance policies before transferring them to the buyer. 

Have you had a regulatory, legal or litigation problem in the past? These things happen. Make sure it gets resolved so that it doesn’t affect the transaction, and above all, avoid hiding it. It’s always best to be transparent with potential buyers. It can also help you gain their trust. 

Technology and protection of confidential data

Whether you’re using your platforms for online sales, employee compensation or any other electronic access, you need to be able to provide programming code and security features when asked. The objective? Demonstrate the reliability of your IT systems.

Good to know: Whether you want to sell your business or not, it’s essential to professionalize it. Here are a few ways to do that:

  • Formalize strategy, policies and relationships by putting them down on paper. 
  • Institutionalize them and make them systemic for the whole business. Remember to include your staff in this process, it can help increase their sense of involvement and commitment.  
  • Be sure to notarize and document all agreements so they can be shared, referenced and ingrained in business operations through annual reports and strategic plans, for example.

How can you increase the value of your business?

Optimizing the value of your business before transferring it involves several steps that can take years to materialize. Is your business already in good shape? The following factors can also help you maintain its health. 

Make your business attractive

What is required for your business to be attractive to buyers?

Develop a strategic business plan

  • Strategy for growth
  • Financial forecast

Invest in operations

  • Well-maintained asset base
  • Capacity for growth

Invest in people 

  • Full breadth and depth of management
  • Well-trained employee base

Invest in systems and procedures

  • Financial and operational data reporting systems
  • Timely, accurate, informative data

Develop a strategic plan

Before purchasing your business, potential buyers will want to be sure that it’s viable in the long term. This means you need to be able to demonstrate your growth objectives and the strategies needed to achieve them. 

Invest in operations

If you have any infrastructure, make sure it’s well- maintained and in good condition. A shortfall in this area can deter a potential buyer.

Do you anticipate business growth? If so, ask yourself whether the current infrastructure can accommodate it. Keep in mind: if a buyer needs to invest in additional buildings or equipment, these expenses should be deducted from the value of the business.

Invest in employees

To keep your business running smoothly, you need a management team capable of supporting your growth or maintaining the current pace. They also need to keep the rest of your staff motivated. This means choosing the right people for your team, even if the recruitment process is time-consuming. 

It’s also important to think about implementing a retention plan to help secure your qualified staff and allow them to climb the career ladder over time. 

Invest in systems and procedures

Data is essential to any business, so it’s vital to be accurate, meaningful and, above all, easy to analyze. It should be able to convey a comprehensive snapshot of your business at a glance. That’s why investing in financial and operational systems capable of producing precise, relevant and informative data is a must. 

Don’t have a system that lets you accurately track your activities? Consider implementing one. It will make the selling process easier since you’ll already have all the information the buyer might ask for on hand. 

And don’t forget to file and keep all your legal and tax documents. They’ll help you measure the fiscal impact of your business transfer.

What factors influence the value of your business?

Several factors impact not only the real value of your business but also its perceived value in the eyes of those looking to acquire it. Here are a few of them:

1. Macroeconomic environment

The macroeconomic environment has an impact on the value of your organization. This includes the economic outlook, geopolitical stability, interest rates, monetary policy and other factors. Is your company in good health despite an economic downturn? This can certainly work in your favour.  

2. Your business’s profile

The larger your business in terms of sales, profits, market share and operational autonomy, the higher the price multiple you can obtain. The same applies to your high-value-added products and services. Have you recently developed a product that perfectly meets a new need? Think about promoting it, even if you’re not yet certain of its impact. 

The sector in which your business operates is also significant. Is it a promising area of growth, or is it slowing down? It’s a necessary question to ask yourself. Keep in mind: the more promising the industry, the more your business benefits. And the more difficult it is for a competitor to penetrate this market, the more your business’s value benefits. 

Do you work in a field where opportunities are limited? It’s never too late to adapt to the market by reorienting your organization toward an offering that meets a real need.  

3. Future cash flow 

When a buyer evaluates your business, they take the level of profitability, risk and potential profit growth into account. They also assess the amount of investment required. Then there’s the capital cost of acquiring your business. 

This is where budgeting can help. 

4. The number of buyers

With more potential buyers competing, the value of your business will increase in their eyes. When there’s competition, even if it’s just a matter of perception, it generally drives interested parties to make better offers. 

In short, it’s always preferable to have several potential buyers.

How do you set up a competitive sales process? 

Working with specialists can help you set up a competitive sales process and get a better price for your business. It can also give you access to a network of potential buyers. 

The chart below outlines the various stages in the competitive sales process.

Run a competitive process

Multiple engaged bidders can drive premium valuation

Identifying potential


  • Identify and contact buyers
  • Small handful to over a hundred buyers

Qualified leads


  • Subset of buyers will have interest

Attractive bids


  • Use competition amongst buyers to push valuation

Best offer


  • Take the best offer

When is the best time to start the sales process?

The process can be lengthy, so it’s best to start as early as possible. Plan for at least six to nine months before the expected sale date. Add another one or two more years for the transitional process. 

Ideally, you should plan for an average of two to five years before retirement, and a further three to five years to prepare your business properly. 

Would you like to sell your business within the next year, but haven’t started the process? It’s entirely possible. But you need to make sure you’re surrounded by people who can help you speed things up.   

What kind of professional support do you need?

A business broker can gather and organize the required information, prepare the necessary materials, contact qualified buyers and manage discussions and negotiations with them. Tax specialists, lawyers, accountants, business valuation and communication specialists are also valuable resources to have during the process.

Because these people know what buyers are looking for, they know how to properly position your business and mitigate the risks perceived by potential buyers. By enlisting the help of a team of specialists, you increase your chances of selling your business at a price that reflects your efforts over the years.

Whether you’re planning a career change or looking to retire, make sure you take the time to plan the sale and transition of your business. Remember, it can take several years, and you can always call on a team of specialists for help.

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