Successfully managing the sale of a private company is a complicated and challenging task. It requires a high level of professional know how in the area of business valuation, banking, finance, marketing and all round business savvy. The folks at M&A Canada have that know how.

M&A Canada is dedicated to excellence in the management of ownership transitions of privately held companies. Today, M&A Canada is based in Halifax Nova Scotia and has affiliate relationships across Canada and throughout New England.

Why use a business broker? There are some compelling reasons. The failure rate for new business start ups is over 50 percent during the first 5 years. For established businesses which change hands between buyers and sellers without the help of professionals, that failure rate is 10 percent. In the business sales that the associates of M&A Canada have been associated with, less than 1 percent have failed within the first three years. For sellers who finance a portion of the selling price, this is a very important consideration.

The reasons for such a success rate are simple. The philosophy that there should be no losers in a business sale permeates everything that M&A Canada does. Being totally dedicated to a smooth ownership change ensures that both sellers and buyers are winners in every transaction.

Why a business broker and not a real estate firm? Business brokers and real estate brokers are often considered to be the same. In reality, they live worlds apart. A good real estate broker must tell as many people as possible as much as possible about every listing he has. A good business brokers tells as few people as possible as little as possible about his assignments. Why is this?

Confidentiality. The information about a business for sale includes a great deal about the owners personal income for the past several years. Most sellers don't want this to become generally available public knowledge. It is therefore very important to only give such information to people who are both financially qualified and personally committed to buying the business. This is tricky. Learning how to market a business confidentially takes time, experience and above all, patience.

Confidentiality in a business sale is important for other reasons. Rumors get started, employees get nervous and productivity suffers and good people leave. The competition gets nasty and calls on you best accounts telling them that you will soon be history. If too much of this goes on, you may have nothing to sell.

A good business broker works in the business sale market every day. Like any good specialist he should be able to tell an owner in advance what kind of price and terms he will receive from a typical buyer. This is very important to a seller. It allows a seller to make that critical sell or don't sell decision before exposing the business to the market. Many sellers have very legitimate financial goals or objectives such as, "I must have at least $500,000 clear before I can consider selling." If you have a good honest and experienced broker, he will tell you within 5 percent-10 percent what the market will offer. If the market will offer $200,000 and you need $500,000 then placing your business for sale for $500,000 will lead to extraordinary and unnecessary stress and disappointment. It would be better to hold back and make the changes in the business that will let you realize those goals. A good broker will tell you what you must do to get your price.

M&A Canada will only accept assignments for "successful" private companies. What is a successful private company? Well, surprise, surprise, size has nothing to do with success. A successful company is one which has developed a sustainable cashflow which has a high probability of continuing after a new owner has taken over. The operative word here is "sustainable." Many businesses have developed fabulous profits which are totally dependent on the continued participation of the current owners. When that owner leaves-so do the profits.

A good business is also a business which is priced with the sustainable cashflow as the focal point. There is a saying in the business brokerage community, "if it won't cashflow, it won't sell." What this means simply is that a business must generate enough cash to allow a new owner to meet 3 compelling needs. These are:

1) receive a reasonable salary;

2) pay the debt incurred to buy the business; and

3) receive a reasonable return on equity.


In a normal market, if these conditions are not met, the business cannot be sold.

So a broker tells you what to expect for your business. That's great. You may already know that. What else does he do?

Let's face it. You do not want a lot of people coming in for "showing" as if you were selling your house. A good broker must do an in-depth analysis of your business so that he knows all of its important strengths and weaknesses as well as the upside opportunities.

These points must be explained in a concise marketing package so that buyers can determine their actual interest level without ever meeting the seller. That in-depth analysis of your business properly communicated to the prospective buyers will help a seller avoid meeting over 90 percent of the prospects who will not make an offer.

M&A Canada also helps buyers develop the confidence to complete a purchase by assisting in and encouraging the development of solid business plans and banking presentations. A properly financed business will not fail. M&A Canada makes sure that all of its sales are properly financed. This ensures the seller that all future note payments will be made.

Is this a good time to sell a business? This is both the best of times and the worst of times. It is the best of times because there is a virtual flood of highly qualified buyers in the market with good equity available to invest. These, in part, are middle aged professional managers who have been victims of recent corporate downsizing during the recession. "Recession induced career changes." It could also be the worst of times if your business has not performed well in the past few years or if it is not showing strong turn around trends.

A business in decline or one losing money cannot be sold to the owner's advantage. You must turn it around, make it grow and make it profitable before placing it on the market. Otherwise, you are faced with an asset liquidation.

When is the best time to sell your business other than when it's profitable and growing? The best time to sell is when you have an important or compelling reason to do so, unrelated to the financial consequences of the sale. Good reasons include health matters, burn out, retirement or the need to move. If you do not have a good or financial reason to sell, you will never complete a sale.

Many business owners decide to sell their business for financial gain and are disappointed to discover they are never as well off financially after the sale as when they owned the business. This discovery during the selling process frequently kills the sale and leaves both the seller and the buyer bitter and disappointed.

The mystery of why a seller is usually better off running a profitable company rather than selling it is no mystery at all. When you run your own business, you get rewarded for three things: your time, your risk and your investment. After the sale, you will not be paid for your time and you will likely gravitate towards lower risk, more highly liquid investments. Your financial rewards will naturally be lower. So, never plan to sell unless you have a good non-financial reason. A good business broker will tell you just that.

How do you find a good business broker? The broker you hire owes allegiance to you but may, in fact counsel the buyer too. Ask whether the broker is a member of the International Business Brokers Association in Reston, VA, which has a strong code of ethics.

Find a broker who will do a careful evaluation of your business and who won't treat it like a real estate open house. A good broker brings only a few prospective buyers to your attention.

He or she should agree to protect the confidentiality of the transaction and find buyers who will comply by signing a confidentiality agreement. Brokers should also financially qualify prospects to eliminate the casual lookers.

Questions to ask: How long has the broker been in business? How does the broker's firm evaluate clients and find buyers? How will it market your business? How many companies has it sold and how many are like yours? Find out what percentage of the listings it sells and whether those businesses are still going strong. Get the names of five or six sellers and buyers with whom the broker has dealt and talk with them.