Sell without losing: how to prepare your business for a successful transaction

Selling your business isn't simply about signing a contract and cashing a check. It's a complex process that requires meticulous preparation. Many entrepreneurs think their business is ready to be put on the market until a potential buyer points out flaws they hadn't anticipated. In Quebec, the consequences of poor preparation can be severe: extended selling delays, reduced offered price, or even losing the ideal buyer. The question to ask is therefore simple: is your business truly ready to be sold today?

Selling a business isn't just about numbers and contracts. It's also about transferring years of work, reputation, and business relationships.

A poorly prepared transaction can:

• significantly reduce your business's value.
• expose your assets to tax and legal risks.
• lead to post-sale litigation.

The objective is twofold: maximize value and reduce risks. This involves protecting your assets, optimizing your taxation, and presenting your business in its best light.

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Common cases encountered

Profile 1: The rushed executive "I want to sell quickly so I can move on to something else."

• Common mistake: neglecting to organize financial and legal documents.

• Recommended strategy: Before even looking for a buyer, compile a complete and professional sales package, including:
  
  • audited financial statements from the last three years;
  • an up-to-date list of assets (equipment, properties, intellectual property);
  • all key contracts (clients, employees, suppliers, leases);
  • corporate resolutions, shareholder registers, partnership agreements;
  • a clear summary of the business model and key performance indicators (KPIs).

This preparation reduces the risk of discovering a problematic element late in the due diligence process.

• Advantages:
  
  • Strengthens the seller's credibility from the first exchanges;
  • Accelerates decision-making for the buyer;
  • Reduces opportunities for downward renegotiation;
  • Significantly shortens the timeframe between offer and closing.

Profile 2: The overoptimistic overvaluator "My business is worth at least double what I'm being offered!"

• Common mistake: evaluating the business based on emotions rather than objective analysis.

• Recommended strategy: Engage an independent business valuator (CPA, CFA, or specialized firm) for a rigorous evaluation based on:
  
  • discounted future cash flows (DCF);
  • comparison with comparable transactions in the sector;
  • analysis of market multiples according to industry and size.

The expert can also identify valuation levers (e.g., owner dependency, client concentration) that could be improved before the sale.

• Advantages:
  
  • Ground negotiations on an objective and credible basis;
  • Avoid scaring away serious buyers with unrealistic expectations;
  • Support your negotiating position with concrete figures;
  • Enable better anticipation of buyer questions during due diligence.

Profile 3: The tax-conscious planner "I want to sell, but I don't want to lose half of it in taxes."

• Common mistake: ignoring available tax strategies before the sale.

• Recommended strategy: Begin tax planning 1 to 3 years in advance, with the support of a tax specialist. Depending on the context, this may include:
  
  • a corporate reorganization to roll qualified shares to a family trust;
  • crystallizing the capital gains exemption (CGE);
  • creating a management company to receive sale proceeds;
  • income splitting with family members;
  • partial or progressive sale through an estate freeze agreement.

• Advantages:
  
  • Maximize the cumulative exemption (up to $1 million per person);
  • Reduce tax on capital gains and dividends;
  • Protect net assets from the sale for potential family succession or reinvestment;
  • Avoid unpleasant post-transaction surprises with the tax authorities.

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Tax or legal levers used

1. Small Business Capital Gains Exemption

• Definition: tax deduction allowing you to avoid paying tax on a portion of the gain when selling qualifying shares.

• How it works in practice: if your business meets the criteria, up to $1,016,836 (2025) in capital gains can be exempted per shareholder.

• Advantages: substantial reduction in taxes payable. Example: a couple each holding 50% of the shares could save over $500,000 in taxes.

2. Estate freeze

• Definition: tax technique allowing you to freeze the current value of the business and transfer future growth to other family members or to a trust.

• How it works in practice: common shares are exchanged for preferred shares at a fixed value; new common shares are allocated to chosen beneficiaries.

• Advantages: facilitate transmission while planning future taxes. Example: an entrepreneur freezes their business value at $2M and allocates future growth to their children through a trust.

3. Pre-sale corporate reorganization

• Definition: adjustment of the legal structure to optimize the sale (holding company, subsidiaries, asset transfer).

• How it works in practice: separation of essential and non-essential assets, creation of portfolio companies to isolate certain elements.

• Advantages: protect assets not being sold, simplify the transaction and improve taxation. Example: a company transfers its building to a holding company to sell only its operations.

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A Mandate we completed 

A Quebec entrepreneur in the manufacturing sector, after 25 years of activity, decided to sell his business. His assets included an operating company, an industrial building, and significant cash reserves. Before putting it on the market, he proceeded with a corporate reorganization by transferring the building and cash to a holding company, then conducted a complete audit of client and supplier contracts, as well as an independent business valuation. He also established a family trust to maximize the capital gains exemption.

This meticulous preparation allowed the transaction to close in only 7 months, achieve a sale price 15% higher than the initial offer, and realize tax savings of over $600,000.

What we often forget

1. Reverse due diligence: Not checking in advance what the buyer will verify leads to surprises and downward renegotiations.
2. Hidden liability management: An old dispute, a forgotten clause in a contract can scare off a buyer and cause the sale to fail.
3. Internal communication: Making the announcement at the wrong time can demotivate the team and drive away key talent.

Essential questions to ask yourself

• Do I have an independent and recent valuation of my business?
• Are my legal and financial documents complete and up to date?
• Have I identified and reduced the risks that could scare off a buyer?
• Does my current structure allow me to fully benefit from tax advantages?
• Can my business operate without my daily presence?
• Do I have a clear plan for the post-sale transition?

Waiting for "the right moment" without preparing can be very costly:

• Fiscally: loss of access to certain exemptions, heavier taxation.
• Commercially: decrease in value perceived by buyers.
• Strategically: missing an advantageous offer due to lack of preparation.

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Planning the sale of your business means protecting the value of what you've built. This not only maximizes the price, but also reduces risks and ensures a smooth transition.

A business ready to be sold is one that inspires confidence, demonstrates its strength, and reflects exemplary management. The question isn't whether you should prepare, but when you start.