I just read an article that said 9% of Canadian convenience stores closed last year. Wow 9%. I know that the economy was tougher but that is a big number.

I generally do not do business transactions, I leave that to Graham Hein of our office who specializes in retail businesses, but I do know a few things of note.

Buying a business is one of the toughest decisions to make. It is a well-known statistic that the vast majority of businesses for sale are over-priced. A going concern business should sell for somewhere between 2-5 times one years net profit - and that is net profit using Generally Accepted Accounting Principles, accounting for a reasonable management salary, and not hiding some of the income under the mattress. All too often this is something many business owners are not doing.

When you think about it, why would you pay any more? I can keep on working at my day job for a good salary and keep my money invested for an 8-10% rate of return quite safely, thank you. If the business, for all the risks involved, does not return me substantially more than this, why would I quit my good paying, safe job, and buy a risky business venture with my safely invested money? The business return has to equal the risks.

This is bad news for those of you business owners wishing to sell your business, but that is the difficult truth. For this reason, most commercial real estate agents do not sell businesses. It is a tough road to sell a business. Just look at the failure rate of convenience stores mentioned in the article I read today.

The bright side is, if you do your homework, shop wisely, and wait, wait, wait for that right opportunity to come along, owning your own business can be the pleasure of a lifetime. So do your homework, find a good commercial real estate agent who specializes in businesses like Graham Hein of our office, and exercise caution.

Now, if the business involves purchasing some commercial real estate along with the business, that needs to be evaluated separately. Evaluate the business as a business, and the property as commercial real estate.

A little common sense and patience will go a long ways to keeping you from being a 9% statistic.