How do I assess a rental yard’s relationship with equipment dealers and suppliers?
Ask which dealers and suppliers the yard buys equipment, parts and service from, on what terms, and how long the relationships go back. Then find out whether pricing, credit or priority supply depend on the owner personally and whether those arrangements will continue for a new owner.
Get a list of the main suppliers with a rough idea of what is bought from each. Ask about payment terms, any volume arrangements, and whether the yard has a credit line with them. Check the accounts payable for any overdue balances, since a strained supplier may be less willing to help you.
Then ask about the benefits that are not on paper. Does a dealer give the yard first call on new units, quick parts or loaner equipment when something breaks? Does it buy back used units at a predictable price? Those help the yard run, and they may rest on a friendship with the owner.
Ask each main supplier, with the seller’s agreement, whether the arrangement will carry on after a sale. Find out how the yard would cope if a supplier dropped it. Look for alternatives nearby. Your accountant can help you read the payables and ratios, and your lawyer can review any written supplier agreements for terms on a change of ownership. Ask too about warranty support and how disputes with a dealer have been resolved before. A yard that has never had a disagreement may simply be small, while one that has settled them fairly suggests a relationship that can survive the change.
Key takeaways
- List main suppliers and check terms, credit and overdue balances.
- Identify unwritten perks such as priority parts and loaners.
- Ask suppliers whether arrangements continue after a sale.
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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 CanadaGovernmentEquipment purchase financing for entrepreneurs
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