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Why A Business In Canada Is More Difficult To Buy

Guest post by: Steve Skrlac

Article Overview: Many Canadians thinking of buying a business turn to the Internet and read the wealth of information available. The trouble is that the information they ready is usually based on the US market and the Canadian business resale market is much different.

Why A Business In Canada Is More Difficult To Buy

Many Canadians thinking of buying a business turn to the Internet and read the wealth of information available. The trouble is that the information they ready is usually based on the US market and the Canadian business resale market is much different. Buying or selling a business in Canada is very different for a number of critical reasons that this article will hope to address.

Firstly, the availability of credit to buy a small business in Canada is not as readily available in the country. The banking system is much more conservative and for most financial institutions there is no weight given to the asset of goodwill, which is intangible. Some buyers are successful dealing with the Business Development Bank of Canada, as they pride themselves as cash flow lenders but they too are selective on the deals they will look at, their criteria is strict and their credit is costly. Many deals rely on a portion of the purchase price being funded out of cash. This cash usually comes from savings, RRSPs, lines of credit, friends & family and so on. Some of the price may be funded out of an institution willing to look at the deal, such as the BDC. Another important source of business acquisition financing will also come from vendor financing. Business owners looking to sell a business and insisting on the all-cash deal are usually not realistic.

Secondly, it is sometimes said that Canadians are not as entrepreneurial in spirit as Americans are. The implication here would be fewer serious and qualified buyers in Canada, on a per capita basis. The US is the home of entrepreneurialism and has a deeply entrenched culture of small business ownership, risk taking and chasing the American dream. Canadians, while they are certainly capitalists in the fullest sense of the word, are not as risk averse to our neighbours to the south. This leads to riskier companies being picked over in the business resale market and generally lower cash flow multiples in sales.

The important point to remember is that if you are a Canadian business buyer about to embark on the process of searching for your dream company, take a grain of salt with the information you find online. The implications on the above will usually mean a more difficult search with more buyers competing for the truly outstanding companies. Also, valuation data will be off based on American experienced. Work with a Canadian business broker who is familiar with your local market to give you a better insight.

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Article Tags: selling a business



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BDC - [quote="IWDCanada":jib6tqt9]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:jib6tqt9] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.
Clothing Niche - Yasunori, can you dig deeper into the clothing niche? e.g. Business Casual for people 6ft and taller (men only, women only or both). Victoria Secret is big in Canada because they don't have retail Stores here and the only way to get their product in Canada is thru online purchases. They have a great Hassle-free return policy too.
canada resources - I used to have a connection to a franchise consultant in Canada at "Franchise Officer" in Toronto. I wish I could remember his name ( but I can check my files at the office tomorrow). Anyway, he had a lot of connections to banks in Canada. He may know of them and may be able to offer some feedback. If you are looking for a business loan, Canada has similar business loan programs to that of the USA's Small Business Administration (SBA). I think its SLBS in Cananda, and I probably have the list of it's lenders in my office also. Do you think either can be helpful? If so, I can get back to you with this information tomorrow. Let me know!
Re: BDC - [quote="Jones":255lkmrn][quote="IWDCanada":255lkmrn]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:255lkmrn] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.[/quote:255lkmrn] I'll be working with the BDC later this month on a few projects. From what i've been told they are really great when it comes to small business. Their loans have a little higher interest but their payment terms are a lot easier to swallow. I can give you a contact if you need.
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.


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