As a small business owner, the idea of handing your company over to a competitor may seem off-limits, especially if you’ve spent a decent amount of time separating yourself from the competition. However, this business move can potentially turn into a win-win situation for both the buyer and yourself if you put in the work and plan appropriately. Below, we’ll share helpful advice on how to sell your business to a competitor in British Columbia.
Tips on Selling Your Business to a Competitor in Vancouver
Business owners looking to sell can find some of the most qualified buyers through their existing competition. Your competitors already benefit from understanding your industry’s ins and outs and a working knowledge of how to run a company. Plus, they may even be willing to pay more, as they can likely already spot your business’s real value upfront.
Despite these advantages, there’s still some degree of risk involved during the selling phase you wouldn’t necessarily find with a non-competitor. However, you can avoid getting yourself into an unwanted scenario with proper preparation and ultimately get the most out of your transaction. Follow these four tips as you head into the selling process.
1. Calculate your Business’ Value
Chances are, the first thing a competitor will question when presented with a Vancouver business sale is the selling price. They may even try to negotiate with you in hopes of lowering the price. Knowing this, you’ll want to have conducted a thorough and accurate business valuation before approaching them with an offer. Ensure this pricing reflects your business’s true worth and isn’t based on your attachment to the company. Hiring an independent appraiser can ensure you’re asking for a reasonable price based on Vancouver’s business transaction environment and other determining factors.
2. Separate the Serious and Non-Serious Buyers
Once you’ve caught the interest of one or more of your competitors and made some initial progress, you’ll want to ensure they’re serious about the sale of your business. A simple way to separate the serious and non-serious buyers is by asking for deposit money and a signed non-disclosure agreement (NDA).
Besides affirming interest in your business, this type of confidentiality agreement can also help safeguard sensitive information, including intellectual property, trade secrets, and customer lists that may otherwise be inadvertently disclosed during the due diligence process. The last thing you want is to disclose confidential information only for a competitor to walk away from a deal and use it to their advantage.
3. Get Your Financials and Business Documents Organized
No matter what type of business you’re selling, serious prospective buyers will need to do their due diligence before signing a purchase agreement. Be ready to respond to their requests to see important financial data and documents. They may ask to look over anything, ranging from tax statements and leasing agreements to cash flow records. Ultimately, they’ll set their priorities on justifying their investment and spotting any red flags. If you need assistance getting your financials in order, consider enlisting the help of a professional broker or accountant.
4. Set the Pace and Your Expectations
Lastly, as you’re getting closer to the final phases of a sale, don’t forget to make your expectations clear. Although potential buyers have a lot of say when it comes to the business’s future operations, sellers can still negotiate final arrangements. Let the buyer know if you intend to preserve a legacy, keep some key team members employed, or want them to adopt a specific practice of your business moving forward. Also, confirm that they agree to take on the business debt, accounts payable, and any other standing expenses once the sale is closed.
Ready to exit your business and sell it to a competitor in British Columbia? Consider reaching out to the professionals at Pacific M&A and Business Brokers. With years of experience under our belts, we can help guide you through every step of the seller journey and close out with a profitable sale. Get in touch with our office today to schedule a consultation!