How do I tell whether a concrete company’s work comes from municipal bids or private clients?
Ask for a job list for recent years that labels each project as public tender, private contract or repeat customer. Compare that list with the invoices and the bank deposits. The mix shows how the company wins work and how much of it you could lose.
Public work is usually won by submitting prices against others, while private work often comes from relationships and reputation. Each has its own risk. Tender work can swing on a single lost bid. Private work can disappear if the owner who knows the clients leaves. Ask the seller how each type was won.
Ask to see the last several bid packages, including the ones that lost. How often does the company win, and by how much does it come in above or below the winner? Check whether any current contracts are tied to the seller personally, or need qualifications that a new owner would have to earn again.
Match the job list to the financial statements, so you know the labels are honest. Look at receivables by customer type, because public clients and private ones may pay at very different speeds. Your accountant can help you read these numbers, and a lender will likely ask the same questions. Also ask about the time it takes the company to prepare and price a bid. Estimating is real work, and a buyer should know who does it, whether that person would stay, and how many bids are normally needed to land one job.
Key takeaways
- Label every job as public tender, private contract or repeat customer.
- Ask for bids that lost, not only those that won.
- Check whether any contract depends on the seller personally.
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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 are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentWhat are financial statements?
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