B2B Plumbing versus Residential
June 04, 2024
by a searcher from University of Virginia-Darden - Darden School of Business in Walla Walla, WA 99362, USA
I'm exploring a deal that is B2B Plumbing and Mechanical. Very well run. Projects are large (often multi-million dollar projects) so revenue and profitability is a bit bouncy, but strong relationships with contractors and a preferred sub-contractor in the region. This doesn't have the typical service component with recurring revenue. How have others thought about that cash flow profile? Is it worth less as a result? Too risky? Hard to leverage? What should I be concerned about? Would appreciate thoughts from others.
from Simon Fraser University in Port Coquitlam, BC, Canada
-Seasonality, depending on the weather profile in your region.
-Often cyclical, with competition potentially being very tough in some markets, especially during downturns.
-Exposure to price escalation for materials and equipment (consider bidding on a project now and finishing it in two years).
-Depending on the type of projects you focus on, it can be extremely technical.
-Expect months when your working capital is double your annual EBITDA, again depending on the project type.
-Not reliant on sales and marketing.
However, if the business is solid, has a good reputation, significant size, and reliable staff, all the items above can act as a moat, making the business very resilient.
from University of Toronto in Vancouver, BC, Canada