Written by Dr. Jerry Osteryoung Friday, 07 April 2006 08:37
Q- I am in the process of buying a business and am having all kinds of trouble with both the business broker and the seller. I was coerced into signing a terrible contract that did not mandate that the business remain open and it has now shut its doors one week before we were supposed to close on the sale. I was also told that all of the debts were paid for and now I find out the seller owes the landlord over $30,000. On top of all of this, I put $20,000 down and they are threatening to keep my down payment if I do not follow through with this deal. Help, what should I do?
Without question, the first thing you need to do is to run (not walk) over to a lawyer with experience in dealing with business buying and selling. You need not good, but great legal advice. Finding a lawyer that has the requisite experience, and one whom can you trust, is critical.
As your lawyer will show you, signing a bad contract is not the worse thing in the world. The question should be, given the contract and the assets in place, are you getting a good deal if you continue on the path towards buying this business
What concerns me is that the seller has already tried to disguise the truth about the rent payments. This raises what I call the uh-oh factor. Once you start to have these uh-ohs or doubts, then it is time to re-examine the deal. Sometimes it is better to walk away from the $20,000 than to continue down a path you know is not going to end well. It is not a question so much of saving the $20,000 as it is a question of how much more money you can you afford to throw into a bad deal.
Buying a business is a tricky process because it requires, in my opinion, more expertise than does starting from scratch. When you start a business, you progress in small steps but when you buy an existing business there are so many things you need to be concerned with all at one time. You have to renegotiate the lease, deal with vendors, tolerate the seller and put this all together so the business will stay running. This is a very tough job.
While buying a business, in terms of both the number of transactions and the speed it takes, is complicated, it is still a better way to go into business than starting your own. By buying an existing business, you generally pick up the existing customer base, unless the seller closes the thing down, and you have viable employees to help you through this difficult period.
Complicated business deals are just going to mandate that you find a great attorney to help you down this perilous path.
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