Case Study of a business purchase
A couple, who after several years of family bereavements, wanted to quit their jobs and buy a lease on a rural pub. They came to see us for advice on the purchase. The current owners had kept no record of income and had produced ‘accounts’ based on the doubling of price of purchased stock.
After an initial conversation they asked us to investigate the accuracy of the accounts by going through paperwork at the pub and interviewing the current owners.
As there were no income records, and only card takings were banked, we decided to use industry knowledge and prove that purchases were recorded accurately so that we could estimate income based on gross profit percentage. We obtained a listing of purchase invoices and checked them against criteria to prove they were relevant and reliable.
We also interviewed the current owners to gain an understanding of the business and relate this to the data we obtained from them.
From our work we produced a 5 page reporting highlighting our results, draft profit & loss statements and recommendations of price negotiation.
They have since decided to postpone the business purchase due to the work we did which showed the business not to be as profitable as first believed.