I entered the due diligence period, and I have until December 31st to back out. This is my first business purchase, and I want to make sure I am making a good decision. Here is some information over the business. Established in 2013. Over 300 Google reviews (4.5 stars). In 2023, approx $6m in revenue, $1.5m in A/R. currently showing negative $100K loss ( $1.4m net if all A/R is collected). The business has 14 employees.
The purchase price is $1m + $75K from A/R.
The owner says he is selling because he wants to focus on real estate and will sign 3 year non-compete.
A way I can see improving the business is by trimming the unnecessary expenses (currently $270K per month) and focusing on keeping A/R account low.
Does anyone have any experience or advice in purchasing a business for the first time, or in roofing/ construction? What are the most important questions I need to ask the current owner? Are there any red flags I should be aware of?
This is a huge decision and I am looking for any advice or guidance!
$270k a month of trim is absolutely insane. How certain are you that over $3mm of expense per year can be trimmed that easily without impacting production?
Also, you need to call in as a fake customer to “secret shop” the company. Do this several times. Ask as many questions as possible about the status of the company, how do you know you can trust them, ask if they are a “fly by night” sort of shop.
Many roofing companies are really only worth their client list and marketing engine. Ensure you use a drip automation tool to remarket to all of their aged lead database — this can often give you a quick influx of leads for a low price. This may serve to impress salespeople and alleviate their anxiety during the transition. Overspend on marketing the first 2-3 months and ensure the salespeople are extremely well-fed. This short-term damage to your profits will pay dividends as the salespeople get excited about the change in leadership. It is 100% your biggest priority to retain your top salespeople. Tell them you plan on expanding and blowing this thing up, but you need their help. Ask them for referrals.
If lead-flow supports it, hire 2-5 salespeople every month, and let go of the bottom 20% each month. Only start this after 3 months or so once you prove to the current staff that you have their back. Do this for one year and your sales floor will be significantly stronger by sheer, draconian number forcing.
Find your key players and win them over immediately — appeal to their greed by offering bonuses and pay raises contingent on performance. Have daily meetings for the first several months.
Hire 3-4 consultants to review and analyze the business on a weekly or bi-weekly basis. A financial consultant, a marketing consultant, an operations consultant, and an industry expert from a different region. You can use score.org for free mentoring and consulting.
Also, let me know if you need help financing that AR :)
I’m definitely not expecting to be able to trim all expenses. Just lean them out. About $135k is in wages and 45k for marketing per month. I’ve reviewed some leaner construction companies that are getting by with not too many op expenses. I will be reviewing each expense and consider if necessary or not.
That’s a great idea about calling them a few times as a potential client. I’ll try that after thanks giving.
Such good nuggets of advice you gave me. Which sound like great ideas to implement.
These next few weeks I’m going to learn about how exactly they are generating leads, and what software they are using for CRM. Do you have any that you used that you like?
I’d love to find only one software that can do all aspects of operations for a roofing business.