The Voice of the Market

Canada's business brokers say that services
and old-style manufacturing are hot properties

December-January 2002

PROFIT - The Magazine for Canadian Entrepreneurs

To get the benefit of being your own boss without the pain of starting from scratch, consider buying a business.

"Many entrepreneurs are ready to retire, but haven't given thought to an exit strategy," says Gary Ostir of Marlton Business Brokers in Winnipeg. "Nor have they developed their business to its fullest potential."

Doug Robbins, president of Hamilton business intermediary firm Robbinex Inc., has two tips for people looking to purchase. First, buy what you know how to run. "Too many people say they want to get a Tim Horton's franchise," he laments. "But they're not prepared for managing 80 or 90 employees and running a 7/24 operation." Second, look for a retiring entrepreneur who will stay on to help you through a transition period and may provide financing.

With banks increasingly risk-averse, Robbins has been steering customers toward service businesses that have low capital requirements. Good bets along these lines, he says, include computer schools, public-speaking instruction, security firms and florists.

Robbins is also a great fan of low-tech manufacturing firms whose major competitors are 20 times larger. "If you're doing $100 million, you have systems that take away your flexibility to service your customer," he says. "A smaller company can turn on a dime."

"Manufacturing has a lot of growth potential," agrees Brian Perry, director of Certified Business Brokers in Saint John, N.B. "That's what many buyers are looking for." Perry says companies that fabricate metal products for chemical or manufacturing companies are particularly desirable right now.

Perry also predicts growth in tourist accommodations, such as inns and bed-and-breakfasts, as Sept. 11 nervousness keeps travellers closer to home: "With airlines plummeting and the stocks going crazy, there are going to be a lot of Americans who'll awnt to get in their cars and drive somewhere safe."

If you're buying a business, says Toronto business intermediary Dan Sadowy, expect to pay three to five times the firm's annual discretionary earnings (the cash flow generated by the business before the owner takes a salary). "The pricing of small businesses has never been volatile," he says. "It's timeless." LP

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