Asset-light business and goodwill

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by a searcher from University of Toronto - Joseph L. Rotman School of Management
in Durham, ON N0G 1R0, Canada

1yr ago

Asset-light business and goodwill

Hi all,
I'm under LOI with an interior design and renovation business but they don't hold any inventory and they don't hold any hard assets. I can absolutely see the positives here (no warehousing costs, etc.) but I'm having some trouble with the evaluation, especially when it comes to goodwill. Has anyone acquired a business like this? I would love to learn from your experience!

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reply by a professional 1yr ago
from Pace University in New York, NY, USA

I would also consider where the materials for the renovation projects would be sourced. Are the products being sourced locally? If internationally, would the business be affected by the tariffs? would you now have to pass on any increase cost to the customer? what will that mean for the business?

reply by a searcher 1yr ago
from London Business School in Sevenoaks, UK

There have been previous posts about this type of issue. There’s a specific risk re: a lack of items moving through the books may mean purchases are moving off the books , creating potential tax / other issues. I would be thinking about how established this business really, ie with this asset light model what are you really buying? How difficult will it be for the seller to start again and take customers / referrers with him or for senior employees to do the same. A business like this can be successful based on personal relationships of the seller but that doesn’t mean it would survive a change of ownership.