Cash Businesses – Should I buy?
We always hear about cash businesses, but what does it really mean.
In the past, they were businesses with undeclared income. Buyers would investigate and purchase based on this undisclosed cash income.
Nowadays we refer cash businesses to those without clear documentation. This doesn’t mean that they are hiding cash, it just means that they have no financial statements or BAS statements to back up their claim of turnover and profit. It could be because the business is new and no financials have been prepared.
So how do you deal with these?
Generally, buyers will purchase this type of business with a trial clause in the contract. This trial clause gives the buyer the opportunity to work in the business and count the takings for (1 or 2) weeks.
My thoughts have never changed on these businesses.
Just because a business has financial records, it doesn’t mean that you do not have to do a solid due diligence
and with that in mind
Just because a business does not have any financial records, it doesn’t mean that the business is bad.
Investigate Investigate Investigate