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!
Seller financing (or buying in cash) is the only option, you can’t get a bank or SBA loan with negative cash flow. WTF are you paying for when the primary value to a business is a cash flow multiple?
Right. I’m currently working with the bank and the seller to see why it has negative cash flow. Is it an operation issue? Or straight up trouble collecting from clients.
I don’t know what a typical AR value is that’s normal for a roofing company to carry.