What should I ask about a shredding company’s one-time purge job customers?
Ask how many purge customers there were, how each found the company, whether any became regular accounts and how the work was priced. A purge brings a spike, not a base, so find out what share of revenue came from one-time jobs and what the company does to turn those customers into repeat ones.
One-time purge jobs, such as an office clear-out, a closing business or a records cleanup, can make a good year look better than the underlying business really is. They are real income, but they are not recurring, and you should keep them apart in your analysis.
Ask for a list of purge jobs with dates, customer types and amounts. Then ask where each came from: referrals, advertising, a relationship with a records manager or a one-off event. Sources that repeat are worth more to you than luck.
Next, ask what happened afterwards. Did any purge customer sign on for regular pickups? If conversion is rare, the business may rely on a constant stream of new purge work to keep revenue steady. Ask what the company does to follow up and who handles it. Look at how purge work is priced and handled. Is the margin similar to that on regular routes, and does it tie up trucks or staff that regular customers need? Ask also how confidential material is documented for these jobs, since customers will want evidence of destruction. Your accountant can help you separate one-time revenue from recurring revenue in the financial statements.
Key takeaways
- Keep one-time purge revenue separate from recurring pickup revenue in your analysis.
- Ask where purge customers came from and whether any became regular accounts.
- Check how purge work affects trucks, staff and documentation for regular customers.
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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
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