This week, I received a frantic call from “Rosie,” who had been referred by a colleague of mine. She plunked down a huge chunk of change (well into the five figures) to buy a day spa from the current owner. The seller told her he wanted to get out of the business because he wanted to retire. Of course it generated more than enough to meet its expenses, he cooed. It’s a great business, terrific location. The seller didn’t want to get lawyers involved: “They always complicate matters.” Rosie wanted to do the deal without laywers, too– it’s cheaper that way. So she bought it–the business… and the seller’s lines about the health of the company.
Turns out, there was very little the seller told her that was true, smooth operator that he was. And Rosie fell for it, hook, line and sinker. What didn’t she do?
- She didn’t ask to see the financials to verify his rosy (no pun intended) reports.
- She didn’t ask to see the lease for the premises to verify arrangements with the landlord.
- She didn’t ask to see the corporate documentation, verifying the seller’s ownership of the company.
Rosie wants out, but getting her out of this deal now is like trying to get milk out of the coffee when you realize you should have had cream. She can’t afford proper legal help because she sank her money into the deposit and on shoring up the ailing business.
As Twilight Zone creator Rod Serling would say: “Offered for your consideration.” Rosie rushed into the deal without guidance from an attorney or any other professional advisor. For whatever her reasons, she had to have this particular business now. For want of spending a few thousand dollars to make sure she got good advice and had seasoned experts watching her back, Rosie is now facing the possible loss of tens of thousands of dollars (that is, a perfectly good down payment that could have been put to better use), additional tens of thousands to get the business up and running (which should already have been up and running), and tens of thousands in possible litigation fees (to either sue the seller or be sued by the seller should she choose to walk away).
So I ask you: When you do the math, is it worth it not to get lawyers involved?