What would you do?

**a_k615** · 04-13-2009 10:57 PM

Hello. I have the funds to purchase an existing $250K business that's for sale. The business has existed for 5 years. The current owner refuses to disclose any information about the business (income statements, P&L, cash flow, etc.), except for monthly revenue figures for 2008 only. I have already signed an NDA.

The owner will not allow access to any other piece of information without a $10K refundable deposit. She says this is standard business practice. She also says that under no circumstances will I receive audited financial statements because that is not required.

Something seems REALLY fishy to me. Are deposits usually required to view financial #'s on a business for sale? How could I possibly know if I'm interested in buying something having no other info than 1 years revenue numbers?

Any advice would be appreciated.

Thank you,
Frustrated

**ejansse2** · 04-19-2009 07:54 PM

Very interesting situation. In short, it would be up to the entrepreneur to decide what information to disclose, but it would be in her best interests to be open and honest with you about her numbers.

Before you even look at the numbers, make the decision if this is a good business to buy. Does it look good? Does it smell right? Does it feel right? From the very beginning, this deal doesn't pass the smell test with me.

Next ask yourself 'why are they selling'? They're going to give you one reason but what is the real reason? Can you appeal to that to soften this woman up slightly?

Then, explain to her logically why you need to perform the proper due diligence before you make a decision on this deal. There is a typical "offer to purchase" agreement that you could draft and sign in lieu of the $10,000 deposit. After you decide that this is a business that you would want to purchase, draft some terms stating that you need 30 days to perform due diligence and pending your findings you'll make/not make the final offer.

This is an interesting situation and I'd like to hear the follow-up.

**mcstartup** · 05-06-2009 07:43 AM

No. You don't want that business. For $250k you can find plenty of businesses for sale and get into the details. You need to have someone conduct a full audit of their business before you jump in. Look for a different opportunity.

**Neustance** · 05-06-2009 09:35 AM

Not the usual case, usually the owner is more than willing to give you all the information he/she has at hand and make public everything right from the start. A business owner is still a business owner and wants its best for its business, instead of hiding information they usually are as helpful as they can be. I would believe she's hiding something but if you really believe in the business and think you can set it in a nice track then go for it.

Not to be hijacking your interest but what industry is your business and what country do you live in? I have just started a advertising business and would be nice to have partner outside the USA market. If the industry is familiar and motivates you, don't hesitate to contact me privately to share more info.

Regards,
FG

**nonrate** · 05-06-2009 01:30 PM

Originally Posted by mcstartup

No. You don't want that business. For $250k you can find plenty of businesses for sale and get into the details. You need to have someone conduct a full audit of their business before you jump in. Look for a different opportunity.

This is good advice. Because, depending on your state laws, you may end up owning more than the business, but any existing problems be it with the property, lawsuits, etc. "Standard business practice" doesn't mean it's right. It was standard business practice to give loans to people who couldn't afford them. You know the result of that mess.

It's up to you to decide what's standard for your business practices. If she has no other buyers and is desperate to sell, you'll get the info you want.