Do you really have a business? Part 4

A business lost

A few years ago I said I would help a friend who was thinking seriously about buying a nightclub or “venue”; that is one which had live entertainment.

Of course I was happy to help my friend, and said she should ask for copies of the recent accounts produced for the business. What she received and sent to me were records which had been obviously compiled by the owner overnight using QuickBooks, and which in my view were entirely fictional. It was clear that they left out not just a lot of the more obvious expenses such as the bar cost; hardly any beer purchased compared with that sold; but also hardly any staff costs (either left out or paid in cash, no questions asked).

My friend did not understand that side and she was looking to part with nearly £100K.

So here is a tip. If you are looking to buy an existing business, even a small one, ask for certified copies of accounts from a reputable firm of accountants or tax advisers. If the owner is a DIY bookkeeper-accountant, ask your professional to go through the books and give an opinion as to whether they add up not just numerically, but in a business sense.

Don’t part with your hard-earned money until you know what you are buying and how much it is really worth. Buying a business is one of life’s big decisions. You need to get it right, don’t you?

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