In order to properly vet the company, I decided that I would engage Centurica; a company that specializes in diligence on Internet businesses. I could have done it myself but given I am new to the industry, it’s always smarter to hire an expert. During the LOI process I had them do the valuation and they did a great report. So, I engaged them for a due diligence report. For those that don’t know, a diligence report is when you verify the income and other aspects of the business. This is the stage when the seller discloses all the confidential information, opens the books, google tools, etc.
I connected Centurica with the buyer and waited for about a week until they are done.
Ever hear the saying the if something is good to be true, it is? Well, that definitely was true in this case. It turns out the seller overstated revenue by 22%. 22%? Wow…. When I questioned the seller, she had a whole bunch of excuses and tried to tell me they didn’t include sales that didn’t show up in the paypal reports. Wait a second? there are transactions that occurred outside of the internet in an internet business and you put them on the P&L but didn’t tell me about it?
Have a nice day and best of luck with your sale. Being scammed is not for me.