Flooring Business Buyer Checklist: What to Check Before You Buy in Australia

The Complete Flooring Business Buyer Checklist

Phase 1: Initial Screening (Before You Sign the NDA)

Use these questions to rule out obvious problems before investing time in full due diligence.

• Revenue mix: What percentage of revenue is residential vs commercial? If over 80% residential, apply a lower multiple (2.0–2.5x SDE).
• Owner involvement: Does the owner install, quote, and manage client relationships? If yes to all three, you are buying a job, not a business.
• Years in operation: Is the business at least 5 years old with consistent revenue? Newer businesses command lower multiples regardless of profitability.
• Asking price vs earnings: Calculate the implied multiple (asking price divided by normalised SDE). Is it in a reasonable range for this type of business?
• Geography: Is the business operating in a single metro area or spread across regions? Concentration in one postcode is fine; a scattered team is harder to manage.
• Staff situation: How many installers, and are they employees or subcontractors? Subcontractor-heavy models have lower margins but also lower risk.

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Phase 2: Financial Due Diligence

Get three years of financials (tax returns plus management accounts). Use the EBITDA normalisation checklist alongside this section.

• Consistency of earnings: Does EBITDA trend upward, flat, or declining? A single strong year followed by decline requires explanation.
• Owner's wage review: Is the owner being paid at market rate for their role? Most owner-operators understate their wage to inflate EBITDA. Add back to market rate before applying a multiple.
• Personal expenses: Review add-backs claimed by the seller. Common flooring business add-backs include: personal vehicle costs, mobile phone bills, tool purchases used personally, travel expenses.
• Revenue verification: Cross-check total revenue against BAS statements. Large discrepancies between income tax return and BAS lodgements are a red flag.
• Accounts receivable: For commercial work, are any invoices over 60 days old? Slow-paying commercial clients reduce cash quality even if revenue looks strong.
• Cost of goods benchmarking: ATO floor covering benchmarks show COGS typically between 30–50% of revenue. Significantly outside that range requires explanation.
• Labour cost ratio: Labour (including subbies) typically runs 25–40% of revenue in residential install. Higher ratios may indicate inefficiency or complex commercial work.
• Seasonal patterns: Does revenue spike around new year renovations, quieten over Christmas, or track new housing starts? Understand the cycle before you assume last year's revenue is stable.
• Working capital: How much cash is tied up in outstanding invoices and prepaid jobs? Commercial work typically creates a 30–60 day cash gap between job completion and payment.

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Phase 3: Supplier and Product Due Diligence

• Supplier list: Get a full list of suppliers used in the past 12 months. Who are the top 3 by spend?
• Account transferability (asset sale): Contact the top suppliers directly — as a buyer, not as the owner — to confirm they will establish new credit terms in your entity name and what those terms will be.
• Preferential pricing: Does the existing business have volume-based pricing or rebates? Confirm whether these transfer or reset. This is critical for businesses doing over $500,000 in product volume annually.
• Product mix: What flooring types does the business install — carpet, timber, vinyl plank, tile, epoxy, commercial carpet tiles? Broader product capability generally means a more defensible client base.
• Sample and display stock: If there is a showroom or vehicle-mounted samples, who owns the display stock? Is it included in the sale price?
• Exclusivity arrangements: Does the business have any exclusive territory agreements with suppliers? These can add value — and sometimes restrict what you can sell.

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Phase 4: Commercial Contracts and Client Review

• Contract list: Get a schedule of all active commercial contracts — client name, annual spend, contract expiry, notice period.
• Client concentration: Does any single client represent more than 20% of revenue? Higher concentration increases risk and reduces the multiple.
• Contract assignment: Do commercial contracts allow transfer of the contract to a new owner, or do they require client consent? Some council and government contracts are not transferable.
• Verbal vs written: How many client relationships are documented in writing versus informal verbal arrangements? Verbal arrangements are real revenue but not verifiable value.
• Relationship holder: For the top 5 clients, who do they call — the owner personally, or the business number? Personal relationships reduce transferable value.
• Builder relationships: If the business works with residential builders, are those relationships documented in any preferred supplier arrangement, or are they ad-hoc?
• Reference checks: Call at least 3 commercial clients and ask: would they continue work with new management? How do they rate the quality and responsiveness?

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Phase 5: Equipment and Vehicles

• Vehicle schedule: List all vehicles — year, make, odometer, condition, whether owned or financed. Are any vehicles outside the sale?
• Finance check: Run a PPSR search on all vehicles and equipment. Confirm what is encumbered and what debt will be cleared at settlement.
• Key equipment: Inspect carpet stretchers, underlay staplers, floor nailers, adhesive mixing equipment, moisture meters. Note what needs replacement within 12 months.
• Tool inventory: Get a written inventory of hand tools. Replacement cost of a well-equipped flooring team is typically $15,000–$40,000. Confirm what is included in the sale.
• Workshop or storage: Does the business have a lease on a warehouse or storage facility? What are the lease terms and will they transfer?

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Phase 6: Staff and Subcontractor Review

• Employee schedule: Full-time employees — name, role, tenure, current salary, leave entitlements accrued.
• Subcontractor agreements: Are subcontractors engaged under written agreements? Do those agreements contain non-solicitation or exclusivity clauses?
• Key person risk: If one installer leaves, what percentage of the business's install capacity walks out the door? Is that installer compensated at market rate, or are they underpaid and likely to leave?
• Licence requirements: Does the business perform any work requiring a trades licence (e.g. waterproofing under AS3740)? Confirm all required licences are current and transferable.
• WorkCover history: Request the WorkCover claims history for the past 5 years. High claims frequency in a physical trades business like flooring can signal either poor safety culture or an opportunity to improve.

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Phase 7: Valuation Cross-Check

Use the industry multiples cheat sheet to compare your calculated multiple against the broader trades market.

• Calculate normalised EBITDA: Start with stated profit, add back owner's wage excess above market rate, personal expenses, depreciation, and interest.
• Calculate implied multiple: Asking price (excluding net working capital and plant) divided by normalised EBITDA.
• Sense-check the multiple: Owner-operated residential (2.0–2.5x SDE), mixed with some commercial (2.5–3.0x SDE), commercial-focused with contracts (3.0–4.5x EBITDA).
• Asset value: What is the net asset value of vehicles and equipment? (Gross value minus any PPSR-secured finance.) Add this to your valuation view.
• Working capital peg: Agree a target working capital level as part of the contract. Flooring businesses with active commercial work often have significant receivables — confirm what is included in the sale price and what is treated as a working capital adjustment.
• Market check: Cross-reference against current listings on businessforsale.com.au or linkbusiness.com.au for comparable flooring businesses. Comparable listings give you a reality check on the asking price.

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Phase 8: Legal and Settlement

• Business name: Confirm the business name is registered and can be transferred.
• IP and website: Does the website domain belong to the business entity or the owner personally?
• Lease assignment: If the business operates from a commercial premises, confirm the landlord will approve a lease assignment or new lease on commercial terms.
• Restraint of trade: Negotiate a restraint preventing the seller from establishing or working for a competing flooring business for a minimum of 2 years within the trading area.
• Handover period: Agree a minimum 4-week paid handover. For flooring businesses with significant commercial relationships, 8–12 weeks is more appropriate.
• Settlement conditions: Confirm all conditions precedent (finance approval, satisfactory due diligence, lease assignment) are clearly documented in the sale contract before signing.

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Download this checklist as a PDF, or use it alongside the EBITDA normalisation checklist for a complete financial review framework.

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