How Do I Conduct Due Diligence?
Some of the reasons why we were attracted to this business were the steady work, weekly pay and how the business has few moving parts. Let’s take a look at how we verify a business. We strongly encourage our Buyers to have their CPA and attorney help with this decision! Most due diligence periods are 30 days or less.
Revenue is verified by weekly FedEx settlements and 1099s.
Payroll should be between 40% to 50% of the gross revenue. Most Contractors have a payroll company that produces weekly payroll reports.
Fuel accounts for 10% to 15% of your weekly revenue. This is verified either by showing on the settlements or credit card receipts.
Repairs and maintenance are typically around 10% to 15%. This depends on how old the trucks are and how kept up they have been. Be sure to hire a mechanic to inspect the vehicles before closing!!
Truck CapEx: You will always need trucks in this industry! It’s good to budget 10% for truck payments.
Workman’s comp and truck insurance account for 5% of your total cost and can be quickly verified by invoices.
Other miscellaneous costs includes scanner leases, uniforms, and tools – about 5%.