Matthew W. Lucas

703.821.5522

Chou was a recent emigrant.  He decided to purchase a “Dollar StoreHe was told by the owner, that the store did over $60,000 a year in sales.After nine months of operation he came to us wanting to sue the seller.He said that the store had not earned $60,000 even though he and his wife were working 98 hours a week in the store.He was very disappointed to learn that sales of $60,000 were not the same as profits of $60,000.Two months later he was bankrupt. 

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This is an extreme example of ignorance, but not that uncommon.Alice came to me with a stack of credit cards four inches high, all maxed out.She had been working with a distant relative selling athletic equipment.The business was doing great (as far as she knew) and she enjoyed the work.

When the owner died suddenly, Alice offered to buy the business.The widow sold it to her for $400,000 plus the existing debt.

Alice took out a second trust deed on her home and her mothers farm for the down payment and ran the business.Unfortunately, before committing her money she did not have an accountant look at the books.

The widow’s sister had done the book keeping.Alice just assumed the business had been profitable because she had received commissions for what she had sold. Actually the business would have been overpriced at $150,000. Because Alice continued to use the old bookkeeper she never had a true picture of how the business was doing.Before she knew it, she was deeply in debt and the only way out was for her to declare bankruptcy.

She avoided losing her and her mothers home only by taking on two jobs and working 80 hours a week. Never rush into buying a business.You must investigate thoroughly and be extremely careful.Expect to spend money during your investigation.You should consult a C.P.A. an attorney, and possibly several other.