So many buyers are looking to spend their life savings in a business and then complain that they have to pay a consultant, accountant, lawyer fees to help them with the business they are going to purchase. Many buyers who spend $100,000, $300,000 or even $1 million don’t want to pay very much in fees. Yes, it is prudent to watch what you spend but is the cheapest consultant the best?
There is a saying, if you want to get something done, give it to a busy person and you know that it will be looked after. Busy people have a successful business. If their business is successful, they probably charge more than another consultant. That is the supply and demand concept, the busier you are, the more you can raise your prices and the customers can then decide if they want to use your service or not. Whenever you hear that a famous person has had a run in with the law, who do they use, the most expensive lawyer that they can find. Why – they believe that they hired the very best and they do not want to take any chances.
Same goes for a business, you are going to spend your life savings on a business for sale and many investors want to pay the least amount of money for someone to help them buy a business. If things go right and there is no problem, then you were lucky and got away with having to spend a lot of money. The issue is never when things go right, the purpose of a consultant is to avoid when there is a potential for something to go wrong.
In business, many people go into partnership and their lawyer will advise that they need a partnership agreement. why? The purpose of the partnership agreement is for when things go wrong, if there is lots of money and everyone is happy, no one ever looks at the partnership agreement. The same concept exists for paying an accountant to do due diligence. You can pay someone who has never done it before and they may not know what they are looking for. Will they find a potential fraud or issue? Typically, the more knowledgeable a person is and the more experience that person has, the more expensive they will be.
There is no right or wrong answer, you will pay what you feel is the best for your situation. Too many people shop for accountants, lawyers and consultants by asking what price do you charge. Isn’t the right question, what experience do you have and what can you do for me? If you are shopping for price, you really do not care about their experience and if things go wrong, you will have to pay the consequence. Not long ago, an investor called me and asked questions. She was in a partnership agreement and their was a shotgun clause to get rid of the partner. This investor was questioning the experience and actions of her lawyer. By then it was too late. If you are questioning your consultant when you are in trouble and there is a problem, you are probably stuck in the situation. I asked why she picked that particular lawyer and she said it was because he was cheap but now when there was a problem, she was questioning whether the lawyer was looking our for her best interest. In summary, you get what you pay for and if price is all that matters, quality of work is secondary.