We went out to lunch yesterday. It is a traditional December outing with friends. They come and pick us up as we don't own a car and take us somewhere quiet, simple and cheap. This year J.... chose a place they had eaten at a number of times.
It is a tiny place - just eighteen seats at the side of a gift shop. The shop has a Parisian theme from an early part of last century. It is on the corner of a very busy road and a quiet side street.
The new owners have had the shop for only two months. The old owners had it for some years.
It is the sort of shop that J.... feels quite at home in. It is filled with all the sorts of fussy, frilly knick-knackery that some people love and others loathe. There are cushions and candles, boxes and bears, tablecloths and towels. There are clocks, beads and bangles, crockery and more. Soap, hand cream and pot-pourri give the place a pleasant, clean smell.
It is a good place to walk into - even the Senior Cat agreed with that. You do not have to like the sort of thing sold there to appreciate that, for some people, it is filled with "lovely" things.
But there is a problem in this small paradise.
Put simply, the new owners were conned. They bought it believing that the business was booming. The figures they were shown suggested that it was. They were shown stock and told there was more like that, along with furniture, in storage.
"You'll need a shed to store the stock," the old owners told them and indicated, all too quickly, a shed on their own property apparently filled with stock.
There were lists and all the paperwork seemed to be detailed. They signed the contract.
They signed the contract and discovered that yes, the stock existed but the description of it did not match the items. This was stock they had not chosen well, that they had not been able to shift. It was, quite simply, rubbish. The books had been "cooked" in other ways too. There was nothing major but it was just enough to make the business look much better than it really was. It was all very, very cleverly done and yes it would have taken a very alert accountant to pick it all up. Nobody did.
And so, two people have bought a business that they now know will be very hard to keep. They have been advised they have a case against the previous owners but the previous owners have the money to fight it and, in the end, the new owners are likely to lose not the case but the value of any compensation they might receive. It will do more damage to them than it will to the previous owners. J...ran a small business for many years. It was a hobby for her. They needed to break even (and occasionally made a small profit) but did not need to make a living from it. J's... husband is a former accountant. He knows about cash flows and other things. He has talked with the new owners at length.
If the business can be saved the new owners will do it through excessively hard work and long hours and with free advice from a man who has pulled more than one business back from the brink of bankruptcy.
Meanwhile the old owners are "retired" and apparently enjoying life. They have apparently just shrugged and smiled and said "You knew what you were buying."
Oh yes, "Caveat emptor" - and how do you say, "And how do you sleep at night?"
Thursday, 4 December 2014
Oh "caveat emptor"!
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