How to Evaluate and Purchase a Granite Countertop Business

 

Many people are looking to buy granite countertops, so purchasing a business that installs countertops can be a wise financial move.

Granite is one of the most sought-after materials for kitchen renovations due to its beauty, durability and functionality.

These are also some of the so-called “recession resilient” businesses – as most home services like plumbing and HVAC are – because they are generally still viable during down times. As belts get tightened, people will usually stay home and invest in their homes. 

Buying an existing granite countertop business can also be a much safer venture than starting one from scratch. You’re buying the business and all its components, including skilled installers, existing clients and tools or trucks. 

Here’s how to evaluate and purchase a granite countertop business. 

Evaluating a Granite Countertop Business

✔️ • Market Research

You’ll want to conduct some serious market research before you think about buying a granite countertop business. 

This can include getting information on how many clients in your area are likely to spend money on kitchen renovations. How many new builds are there in your area? 

Are there several granite countertop businesses in the area or just the one you want to buy? 

You should also gather some information about how much granite countertop businesses sell for in your area. What multiple do they sell for if they’re owner-operated or management-run? 

✔️ • Financial Evaluation

One of the most important steps in any small business purchase is to conduct a thorough due diligence where you pore over every aspect of a business to search for any potential problems. 

This can include going over at least three years of financial data, including tax returns, balance sheets, and profit and loss statements. You’ll want to be sure that it is a profitable one. 

You should also make sure there are no outstanding legal issues. 

Make sure that the business has all permits or licenses that are required to operate in your state. 

✔️ • Quality Evaluation

You should also conduct a little research into the quality of services provided by the business. 

This could mean talking to new home builders in the area to see what the reputation of the business is. 

You can also look at any information that is available online, like Google reviews, to see what people in the area are saying about the business. Are they mostly satisfied or are there a handful of bad reviews? 

You could even reach out to some people you find online and chat with them directly to see what their experience was. 

Choosing the Right Granite Countertop Business

✔️ • Location

There are a couple considerations when it comes to location when you’re looking for a granite countertop business to buy. 

First, is whether you’re looking near to where you live currently or are you able to move (perhaps out of state)? 

You will certainly get more opportunities if you look farther afield but many people cannot simply pick up and move across the country. 

If not, that doesn’t mean you’ll have to move but you’ll likely have to spend a lot of time getting the business running smoothly once you purchase it. 

Second, you’ll want to see what other similar businesses are operating in the area. 

Granite countertop businesses generally have a large addressable market, perhaps with a radius of 25 miles. Do you have a lot of competition or is this the main granite business in the area? 

✔️ • Size and Scale

Another important consideration when buying a granite countertop business is how large of an operation are you looking for? 

One way to measure the size of a business and to evaluate its financial success is to look at how much EBITDA (earnings before interest, taxes, depreciation, and amortization) it generates. 

There is often a sweet spot of businesses that earn between $600K and $1.2M in EBITDA because they are too large for most individual buyers and too small for private equity. 

However, thanks to cheap capital through the SBA loan program, many of these businesses can be had for a relatively small down payment. 

✔️ • Expertise and services

You should think about what types of products and services you’re going to provide. 

Many countertop installers also manufacture the materials themselves. This means you’ll be able to buy granite countertops for your installations cheaper than having to buy from a third party. 

You can also sell countertops to other installation companies at a markup, furthering increasing your profitability. 

You can also get into adjacent industries like manufacturing marble-topped end tables or accents of stone on cabinets or backsplash doors. This can be a good way to use up the cut-off pieces or miscuts from your main installs. 

Purchasing a Granite Countertop Business

Once you’ve settled on a business, it’s time to reach out and start the process of buying the business. 

There are several formal steps, like getting a letter of intent and signing a nondisclosure before getting access to detailed financial information. 

Then you’ll have to negotiate a price that feels good to you and the current owner. 

Don’t discount the personal and get to know the business owner. Many people put years, if not decades, into growing their small business and they often care about its legacy. They’ll be more likely to sell to you if your values align. 

It can also be extremely helpful to have the previous owner around for a short time to help you with any unforeseen issues that arise. 

Conclusion

You’ll want to conduct some market research to get a sense of the granite countertop industry in your area before you start your search. 

What sort of company are you looking for? What size? Does it install only, or does it manufacture and install? 

Do as much research as you can into the company by looking at financial data as well as online reviews to get a sense of its reputation. 

Then you’ll have to get down to negotiation before settling a price and, ultimately, closing the deal. 

Business Finance