BCBusiness

bcbusiness.ca T he business Tao bought from Thompson—like two- thirds of small businesses in B.C., according to an exclusive Insights West/ BCBusiness survey (more on that on page 44)—was a family business. With so much of the economy taking the form of family- owned private enterprises, almost every type of small and medium- sized business eventually changes hands as owners retire or as fam- ily circumstances dictate (death, divorce and disputes being among the most common). Buying an existing business may lack the romance of build- ing one from the ground up, but from a practical perspec- tive there are advantages that shouldn't be ignored. Buying a business carries less risk, says Pino Bacinello, founder and president of Vancouver-based Pacific Business Brokers Inc. While some small and micro- businesses are bought and sold through word-of-mouth, many other transactions are guided by business brokers like Baci- nello's firm. Brokers are to small business owners what real estate agents are to homebuyers: they help market companies for sale, and guide buyers and sellers through the transaction. Bacinello says buyers of busi- nesses have it much easier than founders: all the hard work of find- ing suppliers, hiring staff, finding a location and building a clientele has been done. "The business has been established, the learning curve is over," he says. "The seller has learned through the mistakes; they've paid the price. And so there's very little risk compared to starting one." Industry Canada reports that 30 per cent of small businesses don't survive beyond two years, and about half make it to five years. Bacinello says that one of the biggest reasons for that is "underplanning and underestimating the required capital." It takes time to build a rep- utation, find reliable suppliers and hire skilled employees, he notes. New businesses can burn through cash working through those kinks, without the revenues to balance expenses. When you buy a business those issues should have been taken care of already. "You've got instant cash flow starting the day you open the door." Tao concedes that building a new clinic from scratch would have let her control every last detail: "Everything is designed the way you want; you get to pick absolutely everything in there including the colour of the walls, the type of floors, the hand pieces you use." But, she's quick to add: "Then you open your doors and there's nobody there." When Tao put her own name on the shingle, the chairs were already in place and the appointment cal- endar had names of people waiting to fill them. And while launching a brand new dental practice with mid-range equipment can cost upwards of $400,000, according to Tao, there's no limit to how much you can spend if you want the most advanced equipment and a bigger clinic that can handle more patients and staff. Buying someone else's practice costs a similar amount, she says—yet while the equipment and furniture aren't new, the cash flow is instantaneous. "Starting your own practice is a huge financial outlay with very scary results. I think if you have good skills, eventually you'll build your practice the way you want to," Tao says. "But it was a little too scary to dump that much money into some- thing that had zero patients." And while Tao has plenty of clinical knowledge, she says she'd be lost trying to market and promote a new clinic. When Penny Thompson sold her practice, her inten- tion was not just to retire but to ensure her patients and staff were in good hands. She worked part-time in the clinic for about eight months after Tao bought her out, and she did everything she could to ensure a smooth transition. "She was really invested in making the transition a success," says Tao. "It's really hard to find a buyer and a seller whose goal is singular, which is to promote the practice and keep everybody happy." Tao says almost all of Thompson's roughly 1,400 patients stayed through the transition, and some of those who left did so because the practice became too busy to slot them in. There were also patients who fol- lowed Tao from her previous clinic, despite her being contractually bound not to entice them. While some businesses, like dental practices, require pro- spective owners to have special- ized expertise, many just need startup capital, initiative and some skilled management in place. Paula the issue small Business It takes times to build a reputation, find reliable suppliers and hire skilled employees. New businesses can burn through those kinks, without the revenues to balance expeneses. When you buy a business those issues should have been taken care of already sePTeMbeR 2015 BCBusiness 41

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