Flooring and tile showroom due diligence

Diligence on a flooring and tile showroom is largely about testing whether the business can actually deliver on what it has already promised customers, since so much of its apparent revenue sits in jobs sold and deposited against but not yet installed. A buyer who verifies the deposit schedule, the installer relationships and the real condition of warehouse stock closes from a very different position than one who accepted the seller’s summary of each.

Build the real schedule of deposits and unfulfilled obligations

Reconcile every open job — deposit collected, materials ordered or received, installation scheduled or completed — against what the seller represented in the data room, and treat any gap between the two as the deal’s real contingency rather than a rounding error. A schedule that cannot be reconciled cleanly is a sign the business’s own bookkeeping around jobs in progress may not be reliable more broadly. Where the schedule shows a job as deposited but materials have not been ordered weeks after the fact, treat that gap as a signal the operation may already be behind on commitments the buyer is expected to honour.

Trace how a job actually moves from quote to completion

Pick several completed and several in-progress jobs and trace each one through the paper trail — the original quote, the deposit received, the materials order and receipt, the installation schedule and any change orders — to confirm the business’s records match what actually happened on the ground. A gap between what the file says and what a customer or installer confirms happened is one of the more reliable ways to test whether the seller’s overall record-keeping can be trusted, and it often surfaces informal practices, like verbal change orders or undocumented pricing concessions to a builder account, that do not appear anywhere in the financial statements.

Confirm staff and coordination continuity

Where a staff member rather than the owner personally coordinates installer scheduling or manages a major trade account, confirm directly with that person, not just with the seller, whether they intend to stay on after the sale, since losing that coordination function partway through the transition directly threatens the store’s ability to deliver on its existing job backlog. Also review the lease assignment status with the landlord, and confirm any customer deposits held against special orders not yet delivered are properly reconciled against what has actually arrived in the warehouse.

Confirm installer and subcontractor status directly

Request a workers’ compensation clearance certificate — issued by the WSIB in Ontario, and by the equivalent board in other provinces — and proof of liability insurance for every active installer or subcontractor the showroom books work through, rather than relying on the seller’s assurance that everyone is covered, since a showroom that books an uninsured crew can carry its own liability exposure if that crew is injured on a job. Separately, confirm directly with each key installer, not just through the seller, whether they intend to keep working with the business after the sale.

Pull the supplier agreements and read the exclusivity clause

Get the actual current supplier and manufacturer agreements, not a summary, and read the territory or exclusivity clause specifically to see whether it requires the buyer to reapply, whether it lapses automatically on a change of control, and what pricing or terms apply if exclusivity is not renewed on the same basis. A showroom whose margin depends heavily on exclusive terms is worth less if that exclusivity is genuinely at risk during the transition.

Search the registries before relying on the balance sheet

A personal property registry search against the corporation and its principals shows whether a lender or supplier already holds a registered security interest over inventory or fixtures the buyer expects to receive free and clear, and an execution or judgment search can surface debts that do not appear in the financial statements. Both are inexpensive checks relative to the risk they can catch before closing rather than after.

Separate showroom samples from warehouse inventory in the count

Verify directly, rather than taking the seller’s word, that the inventory valuation used in the deal genuinely excludes display samples and applies a real discount to damaged stock and lines the supplier has discontinued. A count that blends samples in with sellable warehouse stock, or that values discontinued lines at full original cost, overstates what the buyer is actually receiving.

Findings that actually kill this kind of deal

• Outstanding deposits and unfulfilled installation obligations larger, or less documented, than the seller represented
• A key installer confirming directly that they do not intend to continue working with the business
• An installer or subcontractor found to be working without workers’ compensation coverage or liability insurance
• A supplier confirming it will not continue territory or exclusivity terms with the new owner
• A registered security interest against inventory or fixtures the buyer expected to receive free and clear