Administrators Report, page-20

Thanks for the recommendation Dan, I'll be sure to get a copy of that book.

While some real dodgy stuff went on with the books, another lesson I see here is that at the end of the day, when you're buying a business you need to do more than just look at the books and the numbers. Even if the numbers aren't a complete fraud, how do you know their product isn't just a fad, or is about to overwhelmed by a wall of cashed up competitors who can just copy their business model?

Numbers tell you wants already happened, not what's going to happen.

A long time ago, a high school friend shared an anecdote about his first accounting lecture at uni and I have never forgotten it. It goes like this:

The lecturer asked the audience, "In accounting ,what does one plus one equal?"

The first guy said "Two?".

Lecturer: Wrong answer. He asks the next guy, "what does one plus one equal?

The second student responds hesitantly, "...four?" Wrong.

Turns out the answer he wanted was, "What do you want it to be?" Not sure if they all teach it like that, but the point I think he was making was that you can often legitimately obfuscate in accounting. Which is something I think the book you're suggesting might help me with.

BIG however, obviously did far far more than this, but still the lesson for me is to look beyond the books - understand the business, the business model, find out about their customers, work out if their service or product is worth it.

Fortunately, thanks to the work of others, I could see BIG failed all these tests. Their business model for growth with FC Capital with their huge fees made no sense. The apparent 'swapping' of customers for videos who didn't want it made no sense.

I asked a friend in the industry what they thought of the quality of BIG's videos and if they thought the prices charged were reasonable - they said it was a joke. He said people must be really naive and uninformed to be paying thousands for stuff he could churn out in a day or two. He said in his experience, it was very very hard to get small businesses to part with their money (everyone wants quality on a tightwad budget), which is why he does not target that market.

Turns out he was right - I contacted around 10 random businesses who BIG had shot videos for, not a single one said they paid for it. Small sample, but alarming.