Roofing Company Due Diligence Requests
Interested in buying a roofing company? Wait a minute, are you sure? There are many risks to deal with. That’s because, in 90% of the cases, you’ll encounter very poor financial and operating data. Turnover is high. Marketing and selling processes are generally not repeatable. So are you still sure you want to buy a roofing company?
A Simple Checklist for Buying a Roofing Business
Let’s assume you’ve contacted Cathy or Jim, and they are willing to sell you their company. What do you need from them?
Below is a ten-minute discussion on what you’ll need. I don’t explain what to do with that information. That’s a conversation for next time. Plus, your financial manager will have the answers.
Get Your Financial Person Involved
This will sound self-serving. But have a financial expert help you. If you are devouring this post, you probably don’t have a project accounting, controller, or CFO. Then find one.
The problem with the CEO or operating manager asking for the requests is that you’ll be lucky to get 10 to 20 percent of this information. Then what? That’s where the financial guru can help.
Business Optics
Before asking for financials, I want to know everything I can about that business. Who is the customer? What’s a typical deal size? The margin? How long from start to finish? Is this residential or commercial? You want weekly data for leads, quotes, sales, starts, finishes – in units and dollars.
Financials
Good luck. The accounting will probably be a mess. We still need to ask for 36 to 60 months of financials. That’s P&Ls and balance sheets. I also want three years of tax returns, recent WIP reports, and a few months of bank statements
Employee Census
Turnover is generally high, but you probably know that already. Get a list of every employee with start dates, salary levels, recent bonuses, and the benefits package. Go through every employee with the owner and ask if they are a keeper or not.
Insurance
While this will be an asset purchase, I want to read their most recent insurance binder to find out what they insure. Get a loss run request for all coverages over the past five years.
Above All – Be Patient
I love entrepreneurs. They write me checks. That’s why I have work. However, let a business-minded expert with a strong financial background who has worked in M&A for years help you through this process.
Many headaches and unintended consequences could have been avoided had the advice provided in the video been applied.
