Silver and Gold Magazine Winter 2019/2020 | Page 30

TIME TO SELL?
– By Mark Borkowski
W ith the economy expanding in Canada, many owners are
wondering if this is the year to consider selling the business.
In most of the major regions of Canada, there are five
specific reasons why it would make sense to sell sooner than
later – the financial condition of the company, valuation,
growth cycle, profit history, and the current market. Usually,
the best time to obtain the highest price occurs when sales
and earnings are good and trending upward with a history
of good performance. This gives buyers more confidence in
projected future earnings.
Value is dynamic, and proper timing makes a big difference
in the prices paid for business acquisitions. External factors
such as the economy, industry trends, stock market volatility,
competition, investor confidence, interest rates, and geopolitical
considerations are cycles of constant change that impact value.
Internal conditions within a company also change. Often
in combination with external factors, sometimes independent
of those factors.
So how should you determine if 2020
would be the right time for you to sell
your business?
The following are five factors for Canadian business owners
to consider.
First, get a business valuation to determine what your
business is worth in the current market. This is an initial step
in determining if a sale would meet your objectives. Seek a
reputable advisor, as most may charge you for this service,
while others like myself, will not.
Secondly, understand that the current status of the mid-
market business market place, in provinces like Ontario, is one
of the best in Canada and policies are in place for continued
prosperity and growth. We are going to pop up on a lot of
radar screens as a place to relocate or expand for businesses.
Ontario gained more residents than any other Province as the
recession deepened in 2008 and early 2009, and as job seekers
migrated to one of the nation’s strongest labour markets.
The metro Toronto area enjoyed
the second largest population growth
than any other city in 2009, and has the
second-highest number in Canada.
It has doubled in 2019.
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As a third point: Buyers in every category are looking
for alternatives to traditional investment avenues. They are
looking for stability, better predictability, and control. Business
acquisitions offer all of these and can also offer a better
return than traditional investment opportunities, Ontario
and Alberta as a whole, are prime targets because of future
economic expectations and long-term outlook.
The fourth item is that the capital gains tax rate is presently
at historic lows at 15%. However, effective Jan 1, 2021, this
rate will increase, possibly by as much as 69%. Therefore,
business owners considering a sale should sell by Dec 31,
2020, in order to keep more of their proceeds.
A fifth point, and most importantly, even in our current
economy, buyers exceed sellers, and we have a robust small
business exit market – for now. The time will come when
the flood of baby-boomer business owners ready to sell will
outweigh the ready buyers.
Fuelling the market are the different categories of buyers
looking to put their money to work, by acquiring profitable
businesses in areas with a good economic future:
• Early baby-boomer corporate retirees
• Management-level refugees who have suffered a downsize,
who typically have severance pay or pension funds to
invest and are looking to go into business for themselves.
The stock market, or putting money in the bank, does not
look attractive to these corporate refugees at this time in
their lives.
• Foreign buyers seeing U.S. businesses as investment
opportunities while the dollar is valued lower against their
own currency.
• 30-something up-and-comers aggressively buying and
building.
• Strategic Buyers, both public and privately-held companies,
are actively acquiring smaller firms as part of their strategy
for quick growth and innovation. (Merrill Data – Sept 2019)