Although some say it is a good idea to clean up your client list
prior to listing your business for sale, a wholesale cleanup is
likely to raise red flags for potential purchasers, says Toronto
forensic accountant and chartered business valuator Patricia
"You shouldn't just say, 'OK, I've decided to
sell my business so I'm going to look at the client list and
then cut some,' because if you're forecasting revenue and
you've got a forecast decrease you'd better have a good
explanation as to why you've lost or cut particular
clients," Harris, partner at Fuller Landau LLP, tells
Succession Planning, a special supplement published by The
Bottom Line and Lawyers Weekly.
Harris notes that if a client is not paying, the owner of a
business should be addressing that well in advance of a sale, and
weeding them out along the way.
"In terms of doing a cull right before you sell, it
doesn't seem like it's really normal practice or something
that's really advisable," she explains.
"In my mind, as long as you've been doing this and
looking at your clients on a regular basis, there should be no
reason just prior to a sale to go through over and above what
you've already been doing."
One danger of culling the list is that, even if the client
isn't paying on time, they're still producing revenue for
the business, Harris says in the article.
"If somebody's looking at buying your business they
want to see how big it is and one of the best ways to see how big
it is, is the revenue. They'll look at profitability for sure
but by culling a client you're going to have to have some good
explanations as to why you did so and why the company who's
buying or the person that's buying it won't be able to
expect that revenue."
Also, a special purchaser might be buying the business for the
clients rather than the business itself. A buyer may believe they
will be able to establish a better relationship with the clients
and make more profit. Therefore, under that scenario, says Harris,
cutting the client list would detract from the purchase price.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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