The process is quite simple to the seasoned veteran of 24 years in the business. You will require the services of a lawyer or accountant to register a limited company or partnership. This is only the beginning of their work.
The next step you could take is to search newspaper or internet advertising and select a business to purchase. Otherwise, you can employ the services of a business broker or real estate agent. Usually, the agent or broker will be compensated by the seller, who would list the business on M.L.S. (Multiple Listing Service). This is the single biggest advantage a real estate broker has in exposing and selling a business in order to reach a large customer base. The private individual does not have access to the M.L.S. You have to be a broker member of a local real estate board.
The work experience an individual has will dictate the type of business you qualify for, unless there's special training provided by the seller or the franchisee. Which brings us to the next question of whether to purchase an independent business or a franchise? The cost of a franchise could be double or triple the price of a smaller independent business. The sales volume will also be double or triple. The franchise will also receive royalties and national advertising funds, which are obviously expenses to the buyer.
The next question is the financing. Where to get the money at the cheapest rate? The cheapest way to borrow money is with your principle residence. The mortgage could be registered against your home at a prevailing rate of about 5 %, could be 4% with excellent credit history. If you do not own a home you will likely require a chattel mortgage on the equipment you will be using to run your business. Those rates are likely to start at 7 or 8 % and can be as high at 10 or 12 %. Again, this will depend on good or average credit. Make sure all your taxes are up to date when applying for mortgages. You may invest months searching for a perfect business and then find out either your personal taxes are not up to date or you are behind on your home's property taxes. The mortgage lender will not advance any money unless taxes are current. In fact, they may hold it against you and probably charge you a higher rate. So, play it smart and apply only when your tax situation is all up to date.
Most businesses are run from leased space. Therefore you will have a Landlord and a commercial tenancy agreement, also known as a lease. You should always try to have a 10 year lease with an option for a further 10 years before entering into business. If your lease is too short, you will have difficulty selling your business at a later date since most buyers have at least a five year business plan. Your renewal rate will likely be bumped higher by the Landlord. If you negotiate the 10 year lease at the beginning, you control your destiny for at least 10 years and your rent is settled. Therefore the next business owner can assume or take over the lease by signing an assignment of lease form. Obviously with qualifications including a credit check. If you are financially well off, you should purchase a building and business. Or buy a building in a desirable location and renovate the building to operate your business.
A lawyer will do title searches on the building you propose to buy. Start up costs could cripple a business before the doors open. An accountant can help you with a business plan which will help in securing good financing, make sure you do not run out of money and show projected cash flow of the business to service the debt, pay off suppliers and hopefully show a nice profit after all taxes are paid.
Accountants can also help you with your taxes. Canadians are the highest taxed nation in all of the world. You have Canada and Ontario corporate taxes, Goods and Services Tax, Retail, Provincial Sales Tax, Liquor Tax and your personal income tax. Just names a few of the taxes.
Always shop around before making big business decisions. Also be selective when choosing a lawyer, accountant or agent. Sometimes friends or relatives can refer you to the proper professionals. Good luck in your new or existing business venture.
By: Emanuele Famulari, Broker
Prudential Grange Hall Realty, Brokerage
Maple, Ontario
Tel: 416-450-3217
E-Mail: efamulari@rogers.com
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