Seeking Industry Advice: Towing & Auto Parts Company

professional profile

October 05, 2024

by a professional from Purdue University in Philadelphia, PA, USA

My partner and I are looking to acquire a towing and auto parts company, but we’re new to this industry. This will be our first acquisition, so any advice or industry-specific insights would be greatly appreciated. We’d also love to know what specific information we should be asking for during the due diligence process, such as key financial metrics, operational challenges, or customer relationships. If you or anyone you know has relevant experience, we’d really value your input. Thanks!

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Reply by a searcher
from Brigham Young University in Lehi, UT, USA
Congrats on exploring the towing and auto parts industry! Here's a focus for due diligence: Financials: Check gross margins, seasonality, accounts receivable, and cash flow stability. Fleet Condition: Assess the age and maintenance of towing vehicles; repairs can be costly. Customer Base: Understand if revenue comes from individuals or stable contracts with insurers or shops. Inventory: For parts, review inventory turnover to avoid cash tied up in slow-moving stock. Regulations: Ensure compliance with all local licenses and zoning laws. Competition: Know the local market share to gauge competitive pressure.

This will help you spot strengths and risks quickly. Good luck!
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Reply by a searcher
in Philadelphia, PA, USA
I have never run a towing business but have owned and operated similar service businesses. The simple answer is you don't know what you don't know so I would strongly recommend you find someone with industry experience and make them an equity partner or a consultant for the first year. I feel so strongly about it that I would venture to say not to do the deal if you don't have one. I still do it, even if I know the business well.
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