CLEAN IT UP!!!

Well it just happened…. I am always advising potential sellers to have their books cleaned up, their files in good order, etc. before putting their business on the market. I am representing the buyer and co-broking with another broker in another office. It started off wrong. The broker would not provide the Trailing 12 month financials. This is an easy thing to get if one is using QuickBooks. We made our offer contingent on getting those numbers, which showed us that the last 12 months were down 20%. We still moved forward…

When due diligence began, the files were a mess. The Seller gave the Buyer incomplete employee files and wasn’t sure where two of the employee files were…RED FLAG… The sub-contractor fees were $100,000 higher on the tax returns than were reported on the P &L’s… RED FLAG. The 1099s that were given were the red copies which are the ones that are suppose to be filed… Were they filed? RED FLAG. The
Tax return showed a combination of his wife’s business and his business. Now we also need the wife’s business financials so the tax returns make sense.

When the Buyer inspected the equipment and vehicles, only one vehicle was insured out of five total, and one quarter of the equipment needed to run the business was in need of repair, which will amount to over $10,000. There also was a new fee that has been imposed for the equipment that will add $850 per month in expenses.

In summary, this deal will never happen, and it didn’t have to be this way. If the broker had advised the Seller to get his ducks in a row prior to listing this business, it would sell. It is in a hot industry. The Buyer REALLY wanted it to work out, and even if the price is lowered considerably, now the Buyer really doesn’t trust anything that he is given due to the mess the business is in.

Before selling, get things in order. Look at your business as if you were a buyer. Would YOU buy it the way it is now?