I wouldn’t approach the seller right away with the idea of seller financing. I would first establish trust.
If the seller could, they would prefer to sell their asset for all cash. Typically seller financing gets involved when they don’t have many other options.
There’s no such thing as a free lunch. If you are able to get seller financing, you probably would be paying more for the asset or possibly more in interest than what the bank would provide.
Why not just drive Uber?
It sounds like the business has cash flow issues already, as they have $1.5 million in A/R. I’m assuming you plan on using a SBA loan to finance the purchase, that’s going to be about a $12k a month payment you will have to make. I would really dive into the numbers with an accountant to make sure the cash flow works.
You aren’t really getting much for $1 million. The business is a couple of trucks, a GMB profile, and some employees. If you have never ran a roofing business before, there’s a chance the employees will leave and start competing businesses. If you haven’t ran a roofing business before, there’s a chance you will make mistakes and get some negative reviews (hurting the GMB profile).
Buying a business, especially with debt, is life-changing. You can buy a great business, survive, and end up years/decades ahead than starting from scratch. Or you buy a not-so-great business, go bankrupt, and end up losing your house and reputation.
Unfortunately, I think most roofing businesses fall into the 2nd category.
Just saw a comment that mentioned this was real estate, similar to a waterfront hotel.
An operating water front hotel in San Francisco probably trades at a 4% cap rate. SBA rates right now are at like 11%. Commercial real estate loans are probably like 8%. I find it very unlikely the numbers would pencil.
Depends on your earnings but I would be cautious naming someone a “CEO”. I’ve seen other small businesses give elevated titles earlier on, and have it come back to bite them when a true “CEO” is needed.
You should establish a regular meeting cadence with your operator.
You should also monitor important KPI’s to your business at a regular interval, which you are likely doing already. This is arguably more important now because you aren’t going to be there day to day.
In terms of functions you still hold on to, think of ways that the operator could bankrupt the business. Then think of systems you could implement to prevent the risk from materializing. If you can’t think of a system, hold on to the task.
I would suggest listening to some Acquiring Minds podcasts. Some episodes that come to mind include one where a highly paid tech executive bought a towing rescue business, hired an operator day one, and kept his job (with Matthew Saskin). Also one where an accounting firm owner bought a tree service business and hired someone to run it (with Landon Mance).