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Buying a Business - A Step-by-Step Checklist  

Selling a Business - Preparation of Selling Your Business

Question of the Month:  I Have a New Business Idea in Mind, but I'm Concerned that it May Not be Profitable?  What Should I Do? 

Current Businesses for Sale

Upcoming Seminars     

Rural Gas Station/Convenience Store       

The Undersigned Has Acted as an

Advisor to the Vendor

Beal Consultants

Steven Beal, MBA, CGA, CFA, CBV

204-478-7266 ext. 109

www.bealconsultants.ca

Many people dream of owning their own business, and they just assume they have to start it from scratch. The reality is that starting a business from scratch can be risky. Buying an existing business can be faster, cheaper and safer than starting a business. But buying a business has its own risks. The good news is that most of these risks can be reduced if you know how to do it. Over the next 12 months, we will cover a step-by-step checklist for the "due diligence" process on buying an existing business.

Initial Review

As you are looking at a business, you need to review the information and determine it is the right fit for you. Take a look at the business and its history and its operations. Determine how much the business is worth. Review its assets, its financials, and its potential.

Over the next 12 months, we will go into specific areas for review. This month, we will just cover the highlights. Start with the easiest part - the financial statements:

Balance Sheet

The balance sheet shows, at a given point of time, the position of the business: what it owns and what it owes (and the difference between the two, which is its net worth, or net equity.) 

The typical things on a balance sheet, and what you need to review are:

- Assets

- Cash (typically not sold with a company)

- Accounts Receivable (if you are purchasing then)

- Inventory

- Machinery and Equipment

- Furniture & Fixtures

- Real Estate (if included)

Liabilities

- Accounts Payable (if assumed)

- Notes Payable and Mortgages Payable (if assumed)

Income Statement

The income statement shows the profitability of a business over a period of time (monthly, quarterly, yearly). The profit and loss statements for the past 3 to 5 years should be reviewed, and attention must be paid not only to the profit, but also to the owner's salary, fringe benefits, non-cash expenses, and one-time expenses. Some time should be taken to review normal financial ratios (eg gross margin, net margin, etc), and other key issues. Specific items to be addressed over the next few months will be:

- Discretionary Costs / Perks & benefits

- Financial Ratios

Non-Financial & Strategic Factors

Finally, it is important to review non-financial & strategic factors. Specific issues to examine include:

- Personnel

- Leases

- Marketing / Web Site

- Goodwill

- Competitors

- Legal Issues / Patents / Insurance / Environmental

Each of these issues will be examined over the next few months.

In the meantime, if you would like more information on buying a business, contact us at 204-478-7266x110.

When you sell your house, you give it a coat of paint, perhaps hire a home "stager" who will help you show your house at its best. It's even more important when you sell your business. Preparation can take months or years. A buyer will want to see a good track record of earnings before paying top dollar. Specific issues include:  

Management/Operations: Do you delegate? Can you take a two-month holiday? Will your business still exist when you get back? If the answers are no, it will be hard to sell or transition your business to your children.

Financial: Ensure your bottom line is healthy. Your business is valued based on a multiple of sustainable income. You need to prove your business makes a good profit, and that it is sustainable.

If you would like more information on selling or valuing a business, contact us at 204-478-7266 x110.

Frozen Food Distributor

Sandwich Franchise 

Seasonal Contractor 

Hunting Outfitter 

Specialty Building Product Retailer

Online Electronic Store

Fast Food Sandwich Franchise

Diner Style Restaurant 

Specialized Local Trucking/Disposal Bin Business - Conditionally Sold 

Construction and Renovation Company  

Trucking Company - NW Ontario  

Greeting Card Distribution Route  

Plum Creek Gifts - Price Reduced 

Rural Restaurant and Convenience Store  

Winnipeg Convenience Store   

High Volume Retail Chain  

Small Town Convenience Store 

Thompson Hotel and Restaurant    

Prepared Fine Foods - Catering, Wholesale, and Retail 

Addiction Treatment Center

Established Painting Franchise 

   Marine Dealership and Services - Saskatchewan  

 Existing Quick Service Sandwich Franchise 

 Web-Based Specialty Food Seasonal Importer & Retailer - Conditionally Sold  

Manitoba Bottled Water Plant & Retail   

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To review any of these business profiles, please click  here .

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We do not advertise all of our listings to the public.

If you have a specific type of business in mind,

please call 204-478-7266 x110 to inquire!

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 Beal Consultants Website  

 "Experience enables you to recognize a mistake when you make it."  

  Franklin P. Jones      

Question of the Month: I Have a New Business Idea in Mind, but I'm Concerned that it May Not be Profitable?  What Should I Do?

 

Great question.  It is important to evaluate the risks and benefits before committing to a novel business idea, entering a new market, or embarking on a start-up with large capital costs. A feasibility study is an important step in the decision making process; it will help indicate whether or not your business will have a positive return on investment.

A feasibility study examines two general areas: The Market and Financial Performance.

In order to determine the level of demand, a feasibility study would examine the market size and its growth trends, publicly available industry statistics, the number of current competitors and their strengths and weaknesses, and may incorporate other market research such as surveys, interviews, observations, test marketing.

Other areas to analyze are your own strengths and weaknesses in serving a market, ease of entry for new competitors, possible distribution channels, marketing costs needed to reach your target and more.

The market analysis allows you to estimate the possible market share percentage that you could potentially capture. It is important to establish this as it ensures your financial forecast is reasonable.

Using the market share information, your next step is to prepare a financial forecast that includes an income statement, balance sheet and cash flow analysis. The forecast will paint a picture of how profitable your venture may be by examining various profitability ratios, such as payback period, return on equity, etc.

For more information, contact us at 204-478-7266x110.  

Beal Business Growth Consultants, Inc. helps owners of small and medium-sized businesses to buy, sell, value, and grow their businesses.  We also work with individuals who are looking to buy or start a business or franchise.

Call us at (204) 478-7266 x110 for a free, initial 30-minute consultation to explore how we can help you buy, sell, value or improve your business.  .

Copyright 2013 by Steven Beal, Beal Business Growth Consultants, Inc.  The information herein is not complete and is intended only to provide guidelines to supplement counsel the reader receives from a qualified professional.  It is distributed with the understanding that the author is not rendering legal, accounting or tax advice or opinions on specific facts or matters, and accordingly, assumes no liability in connection with its use.

Published by Beal Business Growth Consultants, Inc.