You dream of going into business, but you’re terrified at the idea of launching your own? There’s another option: buy out an existing business.
People think that going into business for yourself necessarily means starting from the ground up. After all, that’s how titans like Guy Laliberté and Jean Coutu began, before building their empires.
But that comes with a price. Launching your own business often means working alone at first, and tackling one obstacle after another. It’s an adventure that calls for extremely long hours, and involves a degree of risk: it’s estimated that barely one-third of new businesses survive the first five years.
Success through succession
Business owners, like everyone else, get older, and sooner or later they start looking for someone to whom they can pass the reins. The catch is that many of them haven’t planned how to do so, to either family members or employees.
In fact, lots of companies are in this predicament. According to the HEC Montréal Chair of Small and Medium-size Business Development and Succession, which maintains the FromSuccessToSuccession.com site, by 2020 more than 38% of Québec companies will be looking for someone to take them over. That’s one company in three!
Why not seize this opportunity?
Finding the perfect fit
Now that you’re interested in buying a business, you have to decide which one.
You can find listings in economics publications or on web portals like Acquizition.biz, lesPAC or even Kijiji. But to start with, you’re best to visit the Centre de transfert d'entreprise du Québec (CTEQ) and the HEC Montréal Chair of Succession and Family Enterprise.
You can also earn an attestation of college studies (AEC) on acquiring and managing a business from the École des entrepreneurs, the only organization offering this training in Québec. An AEC will help you find the best type of acquisition for you.
Discuss your plans with people you know, especially anyone with business connections: consultants, bankers and accountants. Remember that not all opportunities are advertised – but also that sooner or later every business goes through this process.
Give some thought to the type of business that would interest you, too, and draw up a list of search criteria. You’re more likely to be successful if you find a company that suits you and matches your interests and abilities.
The next step
So you’ve found that rare gem that suits your personality?
Then it’s time for that essential step, the due diligence review. You wouldn’t buy a house without having it properly inspected, and the same applies to a business.
Experts will pore over the company’s papers and accounts, picking through its financial statements and all other corporate documents.
It’s like a diagnostic examination of the business. The state of its market and its competitors will go under the microscope, along with information on its debts or any contracts with other organizations, for instance.
This review will let you decide how much you’re prepared to pay to acquire the company, and then negotiate with the seller and seek financing.
Once again, you’re best to call on expert professionals for advice. The CTEQ and the consultants in the PME MTL network can guide you and give you valuable advice on finding financing.
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This article was written in collaboration with Ranko Djogo, Director of Business Services with PME MTL Centre-Est.