Does anyone have any experience buying a contracting company

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by a searcher from Columbia University
in Wichita, KS, USA

3yrs ago

Does anyone have any experience buying a contracting company

I'm considering purchasing an interior and exterior stair contractor. The major downside, IMO, is the project revenue. What are your thoughts on such a business? How would you think through such an acquisition?

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reply by a searcher 3yrs ago
from Northwestern University in San Rafael, CA, USA

Oleg--As a real estate investor, I think about stairs as life safety, meaning I will replace stringers and risers before I do almost anything else. They are non-discretionary. Stairs are also acyclical. Its true that customers may try to delay replacement, and you may get fewer jobs to build a new set in conjunction with remodeling activity, but there should be some subset of stable demand driven by required replacements. I would try to understand what proportion of the company's work is replacements vs. renovation related, and customer composition as well.

reply by a professional 1yr ago
from Villanova University in West Chester, PA, USA

Hi Oleg, I've seen these kinds of revenue concerns in a lot of different types of businesses. An important part of considering risks in revenue (i.e. if a client decides to stop or can't pay mid project) is looking over contracts during the due diligence process. This is important in understanding the flow of obligations between parties and how well they're protected against downside risk. Diversification plays a role as well. I also have a few episodes covering due diligence on my podcast Dealmaking with Laura DiFrancesco, especially in Episode 6: redacted. I'd be happy to discuss this further.