There are basically two ways of buying an existing business – buying an existing business or buying a franchise (new or existing). With a non-franchise business there is less support than with a franchise business, but there are also no franchise fees and/or royalties to be paid. For the purposes of this blog, we will not be looking at manufacturing or inventory-based businesses, but more service-based small businesses.
One of the first steps that someone taking over an existing small business should consider is to do a review of its history and the way it operates. This means having a thorough look through its’ financial statements (this is best done by an accountant who knows what to look for). The buyer should also review the operating documents and practices. Some of the items to be reviewed include:
Accounts Receivable
Accounts Payable
The Business’ Accrued Liabilities
The potential buyer should be provided with a schedule of accrued liabilities. Determine the accounting treatment of:
Income Statements
The profit/loss statements for the past 2 -5 years are a good indication of the viability of the business and performance over that term. Tax returns can also give you an insight into profit and losses, as well as the earning power of the business. Knowing if the business has been audited or providing audited statements for compliance purposes can also help in determining its viability.
Real Estate Holding or Leases
Staff and Key Personnel
When buying an existing small business, a buyer needs to know how many employees (if any) they are inheriting and what the details of their compensation and benefit packages are. A buyer also needs to know what key employees will remain with the company and what their job roles and responsibilities are. What are the future office needs for grown in personnel?
Intellectual Property Holdings
The seller of the business should have a prepared list of trade secrets, trade names, trademarks, logos, copyrights, patents, industrial designs, formulas and even domain names they own. In terms of patents and other intellectual properties that have expiry dates, it is important to know how much time is remaining before each expires in order to establish their value to the business.
Marketing and Business Reach
Competitors and Competitive Advantage
Having a list and understanding of who the business’ competitors are and how they stack up in terms of market share as well competitive advantages and disadvantages, will provide a better understanding to a buyer of just where they fit in.
Conclusions
The more homework you do when considering purchasing an existing small business, the better you will know if it is the right decision and investment.
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General Manager
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37 King Street East
Toronto, ON
M5C 1E9
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Website: www.omnihotels.com/hotels/toronto-king-edward
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General Manager
Executive Hotels and Resorts (Boutique)
8 Colborne Street
Toronto, ON
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General Manager
Hotel Victoria (Boutique)
56 Yonge Street
Toronto, ON
M5E 1G5
Tel: 416-363-1666
Mobile: 647-574-5832
Website: www.hotelvictoriatoronto.com
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Reservations Manager
One King West Hotel
1 King Street West
Toronto, ON
M5H 1A1
Main: 416-548-8100
Reservations: 1-866-470-5464
Website: www.onekingwest.com
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General Manager
Cambridge Suites Toronto
15 Richmond Street East
Toronto, ON
M5C 1N2
Direct: 416-601-3757
Hotel: 416-368-1990
Website: www.cambridgesuitestoronto.com
1. Michael Pagliaro
Carisma (Italian)
15 Toronto Street
Toronto, ON
M5C 2E3
Tel: 416-864-7373
Website: www.carismarestaurant.com
2. Patti Shaw
Terroni (Italian)
57 Adelaide Street East
Toronto, ON
M5C 1K6
Tel: 416-203-3093
Website: www.terroni.com
3. Declan
Restaurant 20 Victoria – Michelin guide approved
20 Victoria Street
Toronto, ON
M5C 2A1
Tel: 416-804-6066
Instagram for reservations: https://www.instagram.com/twentyvictoria/
4. Mana
Nami (Japanese)
55 Adelaide Street East
Toronto, ON
M5C 1K6
Tel: 416-362-7373
Website: www.namirestaurant.ca
5. Restaurant Lucie
100 Yonge Street
Toronto, ON
M5C 2W1
Tel: 416-788-9054
Website: www.restaurantlucie.com
6. Niam H
Cantina Mercatto
20 Wellington Street East
Toronto, ON
M5E 1C5
Tel: 416-304-0781
Website: www.cantinamercatto.ca
7. Siva Sathasivam
Uncle Tony’s
38 Wellington St E
Toronto, ON
M5E 1C7
Tel: 416-455-6650
Website: https://uncletonys.ca/
8. Pizzaiolo
104 Yonge Street
Toronto, ON
M5C 2Y6
Tel: 416-860-0700
Website: www.pizzaiolo.ca
9. Robin Singh
Woods Restaurant and Bar
45 Colborne Street
Toronto, ON
M5E 1E3
Tel: 416-214-9918
Website: www.woodsrestaurant.ca
1. Thom Tullo
Morpheus8 by Inmode
47 Colborne Street
Toronto, ON
M5E 1E3
Tel: 416-863-6564
Website: www.amanspa.ca
2. Altitude Athletic Training
56 Colborne Street
Toronto, ON
M5E 1E3
Tel: 416-366-3838
Website: www.altitudeathletictraining.com
3. Physioheath Studios
33 Victoria Street, #130
Toronto, ON
M5C 2A1
Tel: 416-368-2525
Website: www.physiohealth.com
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