A client called and shared the title to today’s blog with us this past week. For the past 10 years, this client was in a partnership relationship with the owner of the company which he purchased. Although he had a business plan, our advice and a lot of drive and desire, it took 3 years longer than expected to finally be able to buy out the owner of the store, his partner.
One of the key factors our client, the new store owner shared with us was the fact that knowing “the books” and having a real good sense of accounting was paramount to running a small business. This client has a real good sense for numbers, accounting came easy, however, he never envisioned, nor did we, that it would take 3 more years than planned to finally buy the owner out.
OK, what is the lesson here? The lesson here is that the “books” need to be clean, squeaky clean. Unfortunately, that was not the case in this instance. Although the senior partner suggested and intimated that was the case, our client soon found out that was NOT the case. In fact, they were much worse than ever anticipated or envisioned. Was due diligence done? Yes, lots of it. Were all the right questions asked? Yes and then some. Well, how did this happen? As many folks know, “smoke and mirrors” can be involved until one really gets in and understands the actual operations of the company.
What do you need to do to insure that this does not happen to you– either as a business owner or business buyer or business partner? Know the books– all of the books. Know accounting– if you don’t, find a good accountant to help you. Yes, this will cost money, however, the money spent now will be a lot less than if you get in and find out that all is not what it is represented to be.
Using a good business consultant is always great advice–especially when your money is involved. The business consultant will ask lots of questions, take a very fact based, non emotional approach and be able to ascertain if the deal is as it is represented. You may not agree with the answer, however, if the advice saves you thousands of dollars, it was money well invested.
In the case of our client, all things turned out successfully. Not that there was not stress and worry involved. There was lots of both!. However, our client did identify that he installed a new accounting system, knows his cost of goods sold each day, knows how much to put away to buy more goods as well as additional resources to add to his product line. In the end, the story turned out OK. However, that is not always the case. If you are thinking of selling, thinking of buying, or just not sure, perhaps now is the time to have a visit with one of our consultants before you spend way more money than you may need. After all, why are you in business? To make Green Dollar Bills.