"Without that loan, the company was about as profitable as a broken guitar."

A Costly Mistake: Why Skimping on Due Diligence Can Cost You More Than a Siesta

Buying a business sounds like a great way to skip the startup headaches and dive straight into success, right? Well, not so fast. Just like trying to make paella without saffron, skipping proper due diligence can leave you with a bad taste—and a lot of regret.

The Real Case

Meet Juan. He thought he’d struck gold when he bought a luxury furniture company that seemed to be swimming in profits, according to the accounting reports handed over by the seller. But after the celebratory tapas, Juan took a closer look and found out that a big chunk of that “profit” was actually a loan disguised as revenue. Without that loan, the company was about as profitable as a broken guitar.

This shocker is a textbook example of why thorough due diligence is critical before you buy a business. Don’t just trust the numbers the seller shows you—dig deeper.

Common Mistakes in Due Diligence

• Excessive Confidence
  Thinking you can handle everything yourself? Unless you’re a whiz in finance, accounting, and Spanish corporate law (and can also inspect the business premises), you might want to rethink that strategy. Professional help isn’t just a luxury; it’s a necessity.

• Wrong Priorities
  Bargain-hunting for help? Finding the cheapest assistants might save you a few euros now, but it could cost you big time later. It’s better to clearly define your goals and get the right professionals on board.

• Trusting Reports Blindly
  Reports from the seller might look all shiny and nice, but they’re not the full story. Always check the primary documentation to ensure the reports aren’t just smoke and mirrors.

• Avoiding Confrontation
  If the seller’s subcontractor isn’t handing over all the necessary documents, don’t just shrug it off. Be firm and persistent—your future depends on it.

• Neglecting Staff Checks
  Especially in industries like restaurants, labor laws can be tricky. Ensure the staff records are in order, especially if you’re planning to apply for immigration status.

How to Avoid Mistakes

• Hire professionals with expertise in finance, accounting, Spanish corporate law, and physical inspections.

• Set clear goals and tasks for your assistants, and ensure they stick to deadlines.

• Don’t just rely on reports—investigate the primary documentation behind them.

• Be assertive in obtaining all necessary documentation from the seller and their subcontractors.

• Pay special attention to verifying the company’s staff employment records.

Conducting thorough due diligence isn’t just a step in the process—it’s the process. To buy a business with confidence and avoid costly surprises, dig deep, verify everything, and don’t shy away from asking the tough questions. The right preparation can turn your business dream into a reality, rather than a nightmare.

Checklist:

• Don't assume reports are accurate—verify with primary documents.

• Hire experts in finance, accounting, Spanish corporate law, and inspections.

• Insist on getting all required documentation from the seller.

• Pay attention to staff employment details, especially for immigration.

• Avoid cutting corners by prioritizing quality over cost when hiring help.

For more questions about buying a business call us +1 (561) 867-7697