What should I ask about an insulation contractor’s reliance on a few big renovation builders?
Ask which builders supply the work, how much of the total each represents and how the relationships started. Then ask how the builders pay, whether pricing is negotiated each job and what happens to the contractor if one builder slows down or switches suppliers.
Begin with a breakdown by customer. A list of builders and what each brought in is more useful than a story about long relationships. See whether one name stands out, and ask what the contractor would do tomorrow without that builder.
Next, find out how the work is secured. Is there a written agreement, a standing price list, or only a handshake and repeat calls? Ask how quickly the builders pay and whether any accounts are slow or in dispute. Late payment from a large builder can strain a small contractor’s cash, especially when materials are bought up front.
Then ask about the people. Does the builder deal with the owner personally, or with the site supervisor? If the relationship rests on the owner, the buyer should ask whether the owner will stay for a handover and introduce them. Consider calling the builders, with the seller’s consent, to ask what they value and whether they have other suppliers. Your lawyer can advise whether any agreement passes to you. Ask how the contractor got those builders in the first place, and whether it was by price, speed or quality. The reason tells you how easily a rival could take the same work away.
Key takeaways
- Get revenue by builder and see how concentrated it is.
- Ask how the builders pay and whether any invoices are disputed.
- Find out whether the relationship belongs to the owner or the company.
Related reading
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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 are the steps to buying a business?
- 03Canadian Home Builders' AssociationIndustryCanadian Home Builders' Association
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