April 20, 2024

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Business Brokers and the Business Sale Market

Searching for business listings in Canada can be a time-consuming and frustrating endeavor. In comparison to our neighbors to the south, Canadians do not have much to choose from when it comes to an active small business for sale marketplace (relatively speaking, of course). So, this leads to the natural question of why? Why is the company resale market in the US so much more active than it is here in Canada. That is the central topic that this article shall explore.

Canadians are generally more risk averse
When buying a company or most other types of investments, Canadians are generally much more risk averse than Americans. Buying a venture requires assuming a level of risk and a degree of entrepreneurialism that may be more frequently found in our US neighbors.

The business brokerage industry is in its infancy in Canada
On a per capita basis, there are significantly fewer brokers in Canada than there are in the US. The industry is still nascent in Canada and poised for growth. Because of this, there are simply fewer corporate intermediaries in Canada to service the needs of sellers, but especially buyers.

Small business financing
Americans have access to lending programs that, in comparison, do not exist in Canada. The US SBA has lending programs that will lend capital against a business’s assets – including goodwill, which is an intangible business asset.

Multiple representation with business brokers
Because there are many more business brokers down south than there are in Canada, some states are more prone to multiple representation of clients by brokerages. What this means is that if a broker were to list a business for sale, they would take on the seller as a client. Since there are so many professionals specialized in the field of business brokerage, they may not necessarily find the buyer in the transaction. A different broker may find the buyer and then the two professionals would share in the commission earned on the transaction.

This is not the case yet in Canada. Here, there are relatively few professionals that have the focus, skill or background in selling companies. Business brokers in Canada usually handles both ends of the deal and take on both the buyer and seller as their clients. This is called a multiple representation or dual agency situation.

The business re-sale marketplace in Canada is set to grow exponentially due to the aging population and the number of companies that must be sold in the coming years. Because of this, the business brokerage industry in Canada will grow and mature and start to resemble the industry as it exists in the US. The end results should be a more liquid market for buying and selling companies and a better overall experience for clients.