What is a septic services company worth?

Two septic companies with the same revenue need not be worth the same, and the questions to ask are specific to this sector. A company can mix two kinds of work: installation projects and recurring pumping and inspection service. Useful questions are about where the money comes from, what it costs to keep producing, and what moves to a new owner and what does not. None of this produces a number on its own, and nothing here is a valuation. It is a guide to the questions that make a valuation conversation productive.

Route work against project work

Ask for the revenue split between installations and service. If most of the income is installation, ask how the company finds that work, and whether it depends on a few builders or developers. If a large share is pumping and inspection, ask how customers are scheduled and how much of the route would survive a change of owner. Ask locally whether a health-unit or municipal re-inspection program exists in the area, whether it brings the company scheduled work and whether it will continue. Ask whether customers deal with the company or with one driver, and test the answer with customer lists, service dates and invoices. Ask also how long each customer has been served, and what happens to a customer whose tank is due for service while the sale is pending. A route that has stayed intact through a change of driver or dispatcher is better evidence than a seller’s assurance.

Trucks and excavation equipment

The vacuum trucks and excavation machines can be a large part of what changes hands. For pricing, the questions are age, condition, maintenance records and when each unit will need replacing. If several trucks will need replacing at once, ask how that replacement cost should be reflected in the price. When assets are sold, the CRA notes that, depending on your situation, you may have a recapture or a terminal loss of capital cost allowance on the sale of your assets, so ask the seller’s accountant early how that applies to this sale. The CRA also notes that if you are selling your business or part of your business, you generally set an amount for the entire business, so ask how that amount would be divided among the trucks, the equipment and the rest. The equipment question also runs the other way: if the seller has kept the trucks in good repair, the maintenance file is evidence of that and belongs in the discussion. Ask for it unit by unit, including major repairs, so that a unit near the end of its life is not hidden inside an average.

Regulatory standing is part of the asset

Ask which approvals the province where the company works requires for hauling and disposing of septage. In Ontario, the Ministry of the Environment, Conservation and Parks states that section 27 of the Environmental Protection Act requires an Environmental Compliance Approval for the transportation, management or disposal of certain types of waste. Ask which body issues installer registration and hauler approvals where the company works, and whether each is held by the company or by a named person. Ask the seller to show current standing, because you cannot assume the work can continue the day after closing. Ask too whether the approvals carry conditions, such as limits on what may be hauled or where it may be taken, since conditions shape what the route can actually do.

Recasting earnings

In an owner-run company, the statements can mix owner pay, vehicle costs and family expenses with the cost of running the business. Recasting means restating the statements to show what the company earns apart from the owner’s personal choices, and replacing the owner’s own labour with a cost for the person who would do that work. Ask for the work behind each adjustment: invoices, fuel and maintenance records, payroll and any cash handled outside the books. The CRA’s record-keeping guidance says records are all of your accounting and other financial information documents, so ask the seller to produce them. An adjustment with no record behind it is one you cannot check.

Liability that outlasts the job

A failed system can lead to a complaint long after the work is finished. Ask whether any complaints, orders or claims exist, how installations were documented, and what insurance covers past work. How the deal is structured affects who carries that risk, so it belongs in the price discussion rather than only in the contract. A lawyer can explain how the structure allocates it. Ask also how long past installations have been in service and whether the company inspected them after installation, because that history is what a claims record would be measured against. See what to check before buying a business for the wider checklist, and what is my business worth for the general mechanics of valuation.

• Revenue split between installation work and recurring pumping or inspection service
• Age, condition and replacement timing for each truck and excavation unit
• Current approvals for hauling and disposal in the province where the company works
• Documentation behind every adjustment the seller makes to earnings
• Any complaints or claims tied to past installations, and the insurance behind them