His Attorney Was Careful, Competent, And Completely Wrong For This.

His attorney was careful. Detail-oriented, responsive, twenty-two years in practice, and he had never once closed the purchase of an operating business.

So nobody read the customer contracts for assignment language. Two of the top five accounts, together about a third of revenue, carried a clause saying the agreement could not be transferred without written consent on a change of control.

The buyer closed on a Friday. He found out about the clause in month two, when one of those customers used it. The other one used it in month four.

Nothing was missed through carelessness. It was missed because that lawyer had no reason to know to look, and the buyer had no reason to know that mattered.

What You Are Actually Buying With The Fee

Here is the thing nobody tells first-time buyers about professional fees. You are not buying hours of thinking. Thinking is cheap and every competent professional has plenty of it.

You are buying a list. Specifically, the list of things this person has already watched go wrong on deals shaped like yours, which is the only reason they know to check for them before you sign. A general-practice attorney can read a contract as well as anyone alive. He cannot check a box he does not know exists.

You are not paying for advice. You are paying for the list of things this person has already seen blow up.

So the question you ask every single person you are about to hire is the same one, and it has a number for an answer. How many acquisitions of operating businesses in this size range have you closed in the last two years. Not deals. Not transactions. Closings. If the answer is fewer than five, you are paying somebody to learn on your money.

The Three

First, a transaction attorney. Not a litigator, not an estate attorney, not the person who set up your LLC. Someone whose practice is buying and selling small companies, who has an asset purchase agreement template from the last six months and a diligence checklist he did not download. On a deal in the $1,000,000 to $2,000,000 range, expect roughly $8,000 to $15,000 for the full engagement through closing, and expect it to be worth several times that the first time he finds something.

Second, an accountant who does quality of earnings work. This is not your tax preparer, and the difference is not seniority, it is the assignment. Your tax accountant looks backward at what was reported. A quality of earnings engagement reconciles the bank statements to the income statements to the returns, tests every add-back the seller claimed, and tells you what the business actually earned as opposed to what the P and L says. That runs anywhere from $15,000 on a small clean deal to $40,000 and up, which is exactly why buyers skip it.

Worth knowing: under the SBA rulebook taking effect October 1, a formal quality of earnings report becomes mandatory once the purchase price hits $3,000,000, measured before any equity or seller debt. Below that number it is still your call. And your call is where buyers save twenty thousand dollars and lose two hundred.

Third, a lender who does SBA acquisitions constantly. Not your relationship bank, unless your relationship bank happens to be a top 7(a) shop. The difference shows up in speed and in candor. An experienced SBA lender will tell you in week one that a deal will not clear underwriting. A bank learning the program will tell you in week nine, after you have spent the money.

The Two

Do not use the attorney who is doing you a favor. Rate is not the issue. Every hour that person spends learning your deal type is an hour you are paying for at a discount that is not a discount, and the gaps do not show up as bad advice. They show up as silence about a question nobody asked.

And be careful with the broker's recommendations. This is not an accusation. Most brokers refer people they have watched close deals cleanly, which is genuinely useful information. But understand the alignment. That attorney and that lender got the referral because deals with them close, and your interests and the closing are not always the same interest. There are nights when the right advice is to walk, and you want that advice coming from someone whose next referral does not depend on you signing.

A good lawyer who has never done your kind of deal is still a lawyer who has never done your kind of deal.

What This Costs, Honestly

After 35 years of watching people assemble deal teams, the number that keeps buyers from hiring properly is the total, so here it is out loud. On a $1,500,000 acquisition you are looking at somewhere between $25,000 and $60,000 across attorney, quality of earnings, and the valuation and lender fees, depending on how clean the books are.

That is real money and it lands before you own anything. It also has to go into your cash-in number from the beginning, not as a surprise in month three. And every dollar of it is spent while you still have the option to walk, which is the only time money spent on a deal can save you.

Put those costs into the model before you decide what you can afford to buy. Run the full cash-in picture through DealScore Pro with the professional fees included and see what it does to your payback. Most buyers have never once run that version.

Skipping diligence to protect the budget is how buyers end up owning the thing diligence would have found.

What This Means For You

Before you sign an LOI, ask every professional you are about to hire how many operating-business acquisitions in your size range they have closed in the last two years. Under five and you keep looking, no matter how much you like them.

Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.

Forward this email. Tell them to grab Mike's free book - Real Estate Is for Suckers: Buy a Business Instead. Same framework Mike uses to stress-test every deal.