Taking over a business is an important decision that has to be thought out rather than taken on the spur of the moment. Once you have consulted with the people around you and identified your target, you should ask yourself whether you feel passionate about the activity sector and stimulated by it.
Then you have to analyze the business’ financial situation and determine its value creation components. Conduct an in-depth analysis of the business’ sales, debts and contracts, and how these affect it, as well as of its degree of innovation and its management’s reputation, and assess the competition and its competitive advantage. Find out about its growth prospects and the reasons it is up for sale, assess the suppliers and staff, and check on the condition of the equipment, the facilities and any legal disputes in process or pending.
In short, acquiring a business requires knowledge and time (12 to 18 months on average). Be sure to ask for help from independent professionals (notary, lawyer, etc.) in conducting a diligent audit. Organizations like Développement économique – CLD Gatineau can advise or guide you.
DE – CLDG
“Most entrepreneurs mistakenly believe that the transfer is wrapped up once the financing is completed and the analyses and negotiations between the seller and the buyer are finished (including the transfer protocol). Many of them forget the last crucial phase in the acquisition, which is the first contact with the employees, clients and suppliers. Prepare for these meetings. Never fly by the seat of your pants. You have to reassure the people and show that you are serious.”
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List of accounts receivable
Request the list for the last three years, complete with balances to identify the regular clients and determine their significance to the business.
List of accounts payable
Request the list for the last three years, complete with balances to identify the regular suppliers and determine their significance to the business.
List of capital assets and financial leases
These documents will help you determine what the business really owns, as opposed to what it leases. It may prove useful in determining your monthly obligations.
Financial statements and minimum reviews
Request the financial statements and minimum reviews for the last three years. This information will help you determine whether the accounting is up to date and where the business’ financial situation stands.
Request the provincial and federal tax report, GST/QST reports, annual wage statement, CSST reports, etc. Carefully review these documents and, ideally, compare them over a three-year period.
The minute book and the lease book
These documents will enable you to confirm the business’ legal structure, information about key decisions made over time and leases so you can determine its legal obligations.
- « DE – CLDG is there to serve entrepreneurs who have a business idea. For additional information, call 819-595-8002. Our services are free and confidential.