How can I tell whether a trailer manufacturer is profitable before I buy it?
Read the builder’s job costing. Compare what each unit was quoted with what it cost to build, and look at material swings between quote and delivery, warranty claims, dealer stock units, order backlog and labour per unit. These help show whether the shop earns on what it ships.
A trucking company earns from lanes and fuel. A trailer manufacturer earns, or does not, on how well it costs each build. A shop can look busy and still lose money on units if quotes were off. The books will show it, if you know where to look. This page lists what to check. It does not set a value or tell you whether to proceed. Your accountant can help you read the statements.
Quotes against actual cost
Ask for job costing on recent units: what was quoted, what the materials and labour actually cost, and what was left. Steel and aluminum can move between the day a quote goes out and the day the material arrives. Ask how the owner handles that. Some build the risk into the quote, some pass it on and some absorb it.
Warranty claims
Warranty work is a cost that can arrive long after the sale. Ask to see the claim files, what the typical issues were and how much time the shop spends on them. Ask whether the books carry a reserve for claims still to come, and your accountant can tell you how it is recorded.
Dealers, stock units and backlog
If dealers carry the builder’s stock units, ask who owns the units, who pays for the financing and what happens to unsold ones. Then look at the order backlog. A full book is reassuring only if the work in it was quoted well. Ask how much labour each unit takes, and whether that has been changing.
Related reading
15 pages on the same subject, grouped by topic.
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Due diligence
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat is inventory
- 03Canada Revenue AgencyGovernmentInventory and cost of goods sold
- 04Business Development Bank of CanadaGovernmentWhat is Cash Flow
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