Buying a Walk In Walk Out Business - WIWO Beware!

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Buying a Walk In Walk Out Business - WIWO Beware!

Posted by Admin
15 March 2019
 

If a business is advertised as a Walk In Walk Out (WIWO) be wary. There will be no trial, not subject to finance and you are buying a business with very little information and relying on the sellers word. Caveat Emptor - Buyer Beware.

A Walk in Walk out (WIWO) business for sale is typically a small cash business such as a cafe, restaurant, take away or small convenience store, where sales are predominantly paid in cash.

A Walk in Walk out business sale means a sale where the buyer is entering into a contract with eyes closed. Apart from having landlord approval for an assignment of the lease, there may be no other conditions.

A typical business of a WIWO nature has a sale price under $100k and if you sighted a tax return, it would in most cases be losing money. Reported revenue may be significantly less than actual, as the vendor will no doubt explain, as a cash business he/she only reports sales what they want to report.

Many unethical business brokers will sell a WIWO and turn a blind eye to the actual performance of the business. Their interest is to get a sale and with a $10,000 commission paid on a sale, their interest is not with the buyer. In fact, some may hope the buyer fails, so they can get the listing to sell the business to another vulnerable purchaser and get another $10,000 within six months.

Unless you have experience in the industry be careful about purchasing a business advertised as a WIWO. There will be no trial to confirm revenue and little due diligence to check the operations and systems. It is what it is and don’t expect to get finance. A WIWO is a purchase not subject to finance.

By law, the vendor must provide a Vendors Statement (Section 52) for a business with a purchase price of $450,000 or less. The S52 is signed off by the vendors accountant as a true reflection of the business financial trading result. Don’t be surprised if it is suggested that it is not necessary because what vendor really wants to pay an accountant to prepare a report confirming they are losing money. An ethical business broker will insist the S52 is provided.

Don’t let a WIWO purchase be your problem. Make sure you spend time assessing the business. There may be good reasons to purchase an underperforming business as it may present itself with growth opportunities but be wary.

Remember, the business broker peddling the sale of a business that is consistently losing money, may not have your interest at heart.