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!
Why not just start your own. Roofing is not a repeat business unless you’re a sub for a very busy homebuilder. Google reviews are crap. What exactly will you be buying? Here’s a tip: I need a new roof. I’ve been collecting bids. I have 6, starting at $11K thru $19K. Who do you think I’m gonna hire? How’d I find them. They were doing a roof that I passed on my way to work. They had stuck a sign out by the road. I didn’t google it and I did no searches. Except for the guy with the sign they were all word of mouth. I could be in the roofing biz tomorrow if I was so inclined. So could you.
Here are few reasons why I liked this brand I’m planning on purchasing. Established in the area, many word of mouth sales tenured employees, and already established relationship with subcontractors.
The google reviews are more to get the clients to trust the company. There are a lot of construction scams in the area, so I want to leverage the reviews as much as possible.
I do see valid points in your advice which I’m going to consider. We just entered due diligence so definitely have some time.
I would say you can duplicate all of that for much less than $1M.
The biggest roofing company in my area has a whopping 17 google reviews and they have 150 employees and roof everything from a house to a million sqft warehouse. The biggest fab shop in my area has less reviews than that and they’re operating at 300 plus guys and are booked over a year out (personally know them). You’re putting way too much stock into google reviews. I’ve never picked another contractor based on their reviews, it’s always been word of mouth from someone.