Deciding to become an entrepreneur in Newfoundland & Labrador is a big step forward. However, it’s only the beginning.
The next step is determining whether you want to start a business from scratch, or you want to purchase someone else’s business that’s already up and running.
Buying an existing business in the NL province has some advantages and disadvantages versus starting a new business where you do all the prep work yourself.
If you would like to learn more about how to purchase a business for sale in Newfoundland and how to make it your own, we have some tips for you. We’ll also point you in the direction of multiple resources that are available in Newfoundland & Labrador for those wishing to buy a business.
Pros and Cons of Buying a NL Business vs. Starting a New One
Before making a decision about whether to buy an existing business for sale in Newfoundland & Labrador or to start a business from scratch, take the time to weigh the advantages and disadvantages of each option.
- Advantages of Starting a Newfoundland & Labrador Business From Scratch
- Be the boss: As you start your own business in the NL province, you can make every decision about how the business will look and operate.
- Seeking grants: Some business grants for Newfoundland & Labrador businesses are only available to startups, rather than to existing businesses.
- You don’t inherit problems: If you purchase an existing business, you may inherit problems the previous owner caused. Starting your own business eliminates this problem.
- The sky is the limit: With a new business, the income potential is unknown. Your business could fail, but it also could become a success beyond your wildest dreams. You don’t have any limitations with your new business.
- Disadvantages of Starting a Newfoundland & Labrador New Business From Scratch
- Long hours: Most business owners work long hours, but those who are starting a business from scratch tend to work far more during the startup process than they do when actually running the business.
- Tough to find funding: Traditional lenders may not be as willing to lend money to a startup business as they would be when you are buying an existing business in Newfoundland & Labrador that has a financial track record.
- Uncertain future: You can work incredibly hard when starting your NL business from scratch, but there’s no guarantee of success. When you buy an existing business, you have some financial results you can rely on from the previous owner.
- Advantages When Purchasing an Existing Newfoundland & Labrador Business
- Running the business faster: If you are more interested in simply operating the business, rather than going through a long preparation process during the run up to opening day, buying an existing business allows you to start operations faster.
- Inheriting existing customers: If you are unsure whether you can find customers, buying an existing business takes some of the unknown out of the process, as the existing business should have a set of customers that you inherit.
- Easier for new entrepreneurs: If you have never run a business previously, purchasing a business for sale cuts down on the learning curve, leaving fewer chances for making a mistake versus starting from scratch.
- Option to buy a franchise: If you want help with things like brand promotion and advertising, buying a franchise in Newfoundland & Labrador may be a great option. The franchiser gives you quite a bit of guidance during the setup process.
- Disadvantages When Purchasing an Existing Newfoundland & Labrador Business
- Locking into a location: When buying an existing brick-and-mortar business, you likely will be buying a building. If you don’t believe the business is in a good location, you’re stuck in that location for a bit before you can sell the building and move somewhere else.
- Verifying the financial records: Although an existing business owner may have impressive financial books, you should always verify the numbers yourself with the help of a lawyer or accountant. Someone else could swoop in and buy the business while you are verifying the numbers, but you need to take the time to be certain the numbers are realistic.
- Some franchises are scams: You need to thoroughly investigate any franchise opportunities before buying, as some Newfoundland & Labrador franchising opportunities are scams. Have a lawyer and accountant look over any franchise agreements before you sign.
How to Find Newfoundland & Labrador Businesses for Sale
Multiple resources are available that can help you find potential businesses for sale in Newfoundland & Labrador.
Reaching out to a business broker is a great place to start when seeking to buy an existing business in Newfoundland & Labrador.
A business broker is someone who has extensive knowledge about the business market in the province. This person can help you find a business that meets criteria you may have, including:
- A business in a particular location
- A business in a niche industry
- A business below a certain price point
- A business where the owner is willing to stay on and help for a few months
- A business with a track record for at least a certain number of years
A business broker may be able to watch for certain types of businesses to come onto the market that meet your needs, even if nothing is available right now. Brokers may learn about businesses that are almost ready to come onto the market, giving you a heads up.
When you are negotiating for the purchase of a business, the business broker can facilitate the negotiations, helping you reach an agreement faster.
Some of the top business brokers to consider in Newfoundland & Labrador include:
If you have a particular location where you’d like to buy a business, such as in a business park in Newfoundland & Labrador, tell your business broker about this, and the broker can keep an eye on this area for you.
- Online NL Business Marketplaces
Multiple websites exist that advertise Newfoundland & Labrador businesses for sale. Even if you don’t actually purchase a business from one of these websites, they provide some good information for what types of businesses are available and how much they cost.
- NL Real Estate Brokerages
Real estate brokerages tend to focus more on residential properties and commercial properties than on actual functioning businesses, but you may find some businesses for sale in Newfoundland & Labrador worth considering through these brokerages’ websites.
- For Sale by Owner Business Classifieds in NL
You may be able to find some smaller businesses for sale in Newfoundland & Labrador through online classifieds websites where the owner is selling the business without the help of a broker. Even though the process of buying a business like this may feel less formal, always have a lawyer and accountant look over the financial statements and the purchase agreement for you.
How to Buy a Business in Newfoundland & Labrador – And Mistakes to Avoid
Sorry to be the bearer of bad news, but you will make mistakes as a new business owner. It’s just part of the learning curve. We put together some tips that may help you reduce the impact of your mistakes or reduce the number of them as you purchase a business in NL.
- 10 Tips for Buying a Business in Newfoundland & Labrador
- Think about your personal strengths: When purchasing a business, your chances of success may be higher if you stick to a topic that you already know and understand, rather than something that doesn’t play to your strengths.
- Seek help and advice: Just deciding to buy a business probably isn’t enough to guarantee success. Take some time to seek out advice about entrepreneurship to make sure you understand what you are facing.
- Research the business: A business for sale may look great on paper, but it may have issues you don’t know about, like a poor reputation among customers or a history of downgrades from the NL Better Business Bureau. Check with organizations like the Business Association of Newfoundland & Labrador for more information on the business’ reputation.
- Study social media: It’s tough for any business to have success these days without a strong online presence, especially regarding social media. Visit the business’ social media pages to see what the business is doing now and look for areas where you could make improvements.
- Speak to customers: If you want to know how customers truly view the business, see if you can engage with some of them online, on social media, or in person. Or, even better, visit the business yourself as a customer and see how you are treated.
- Double check everything: Never just take the word of the business owner regarding sales performance, income, and other items. Have your own lawyer and accountant look over all documents to understand the business’ performance.
- Look at local regulations: Although the Digital Government and Services NL website provides information about provincial regulations for businesses, you may have some local business regulations to consider when buying a business in an NL location with which you are not familiar, such as Gander or St. John’s.
- Speak with past owners or employees: If you are buying a business with decades of history, you may be able to talk with an owner from a couple of decades ago or with employees who previously worked at the business to gain an idea for how the business works.
- Value the business properly: The business owner may have a valuation in mind that is not realistic for the business. Seek help for valuing inventory and assets accurately, perhaps by speaking with an accountant.
- Stay positive: It’s easy to become discouraged when looking to buy a business. Ups and downs are common in this process. Just because negotiations fall through on one transaction, it doesn’t mean the next opportunity will fail, too. Keep trying!
- 5 Common Mistakes When Buying a Business in Newfoundland & Labrador
- Not showing patience: Although it may be tempting to just buy the first business you encounter, show some patience. Make sure the business fits your skills and is a good value for you before you agree to buy it.
- Not consulting an attorney: Even if the existing business owner does not want to put things in writing, you should always make sure documents are part of the transaction and that your attorney reviews them for you.
- Not considering the future: Some businesses may be operating at a high level now, and the owner wants to sell now to maximize value. But such businesses may become obsolete in several years because of technology or another reason. There’s nothing wrong with buying this type of business, but your offer should reflect both the current and long-term value.
- Not understanding the full cost: You will have a price for the purchase of the business that is easy to understand. However, there may be other immediate costs that are less certain, such as needed equipment repairs, the need to increase the number of employees, or a large increase in the cost of necessary supplies. Take these costs into account for the value of the business, too.
- Being too skittish to finalize the agreement: Buying a business is a huge step for anyone, so it’s understandable to be nervous about the process. However, if you did your homework, consulted with experts, and made sure the business fits your skills, be confident in signing the agreement and in starting your new career as an entrepreneur.
