The evidence is out there: more women in Canada now own businesses and more women in Canada are now engaged in starting businesses.  The count varies according to who reports what and where.*

But what our brokerage can report firsthand is that more women today are selling businesses and buying businesses:

• The percentage of women clients selling businesses is around 20 percent, and
• The percentage of women clients buying businesses is around 30 percent.
• Other members of the International Business Brokers Association (IBBA) have also experienced an increasing percentage of business sales and purchases by women.

I was pointed recently to an online article in Entrepreneur on why women entrepreneurs should consider buying a business. The article was accompanied by a large infographic “Women and Acquisitions” that showed dramatically how only 3 percent of women were involved as buyers and 7.5 percent of women were involved on the buy-side or sell-side of an acquisition.  And of those selling their business 50 percent were involved in female-based niches i.e. home décor, baby and mama. That the infographic was based on a three-year study of women participation in buying or selling online businesses appeared in smaller type.

 

 

 

Most of the people who come to us to buy a business are first-time buyers. And likewise, most of the business owners who contact us about selling their business have never gone through the process before. Buying or selling, there’s a lot for them to absorb. And while we do our best to guide them each step of the way, the subject matter can be a bit daunting for those unused to the terms that come up as we help them get to their goal line.

We’ve pulled together the following "dictionary" with commonly used terms applied in buying or selling a business. And as a further reference, we’ve tied most of them back to blogs posts where they appear in context.

As a buyer, you are excited about the opportunity to purchase a business and confident you have enough money for its purchase. But do you have enough money to keep it “working?” If you plan to grow the business, do you have enough working capital to fund its growth? Growing businesses require more working capital than shrinking businesses as receivables are growing.

Are you a business owner thinking about retiring or changing your career? Or maybe you’re at the other end of the spectrum, thinking about buying a small or medium-sized business.

I was recently interviewed on the subject of buying and selling a business by Norman Jack for CFRA Radio’s Experts on Call program.

The interview is divided into four segments that you can listen to or choose to read the transcript (below in this article), according to your preference.

Here’s what we covered:

Segment 1

• Why this is an exciting time for business owners who want to sell and retire or move on to other things in life AND for buyers.
• The process of selling the business

[Updated Sept. 7, 2016.] Buyers usually prefer to purchase the assets of the business including intellectual property, the right to use the name, telephone number, websites and all the tangible assets. If purchasing the assets at market value the buyer may be able to achieve a greater depreciation expense going forward and reduce their taxes in future years.

You’ve done the math. And the message is clear. You won’t have enough money to fund your retirement and maintain the lifestyle you’ve come to know and expect.

You’re not alone.

Many 60-and-over Canadians are finding they need to keep working to make ends meet, especially if they want to maintain the lifestyle they had when they were working. Some have already retired and find they need more cash.

There’s a real concern they will outlive their savings: a growing number of people will spend almost as many years in retirement as they have spent in their professional career.

Semi-retirement is fast becoming the new normal, although I’ve yet to see it as an employment status checkbox!

What the numbers tell us

The funding you need in retirement depends on your lifestyle, of course. Some advisers say you need retirement cash flow equal to 70% to 80% of your peak pre-retirement income; others recommend a replacement ratio of 50% to 60% for couples, and 60% to 70% for singles, assuming you have a paid-for home and your kids are financially independent.*

A crisp new year… have the country’s banks opened their wallets any wider for the purchase of small businesses in Canada? Don't bank on it!

Instead, prospective buyers depend on the seller taking back a percentage—usually some 20 to 50 per cent—of the agreed-upon purchase price in the form of a loan.

Seller-provided financing still funds 99 out of 100 purchases that go through our offices. Without it, the deals wouldn’t get done.

Through this financing arrangement, known as vendor take back or a seller’s note, the buyer agrees to pay back the funds over time, with interest. The buyer realizes lower risk, better terms and a greater commitment of the seller to ensure his or her success. It’s a good option for the seller as well.

Compared to current returns on most other investments, the five to six per cent interest sellers can get from lending funds to the buyer is attractive and reasonable, based on a secure investment. While a failed business has questionable value to a bank, a seller could run the business if they had to take it back and their business brokers could resell the business for more than the loan outstanding. To offset the risk, seller-provided financing usually translates to a higher purchase price.