20 critical checks across financials, equipment, labor, warranties, and customer mix — built specifically for epoxy and concrete coating acquisitions.
Acquiring an epoxy flooring business in the $1M–$5M revenue range requires a disciplined review process that goes beyond standard financial due diligence. Because revenue is project-based, crews are often small, and the owner frequently serves as estimator and lead applicator, standard business metrics can mask serious risks. This checklist covers the five domains every buyer must evaluate: financial quality, customer and revenue concentration, equipment and materials, labor and licensing compliance, and outstanding warranty or legal obligations. Use it alongside your M&A advisor and CPA before signing a letter of intent or committing SBA financing.
Validate that reported Seller's Discretionary Earnings are clean, consistent, and defensible after normalizing owner add-backs.
Review 3 years of tax returns and CPA-prepared P&L statements side by side.
Inconsistencies between tax returns and internal financials signal unreported cash or inflated add-backs.
Red flag: Tax returns show significantly lower income than the adjusted P&L presented by the seller.
Reconcile gross revenue to job-level invoices and bank deposit records.
Project-based businesses are prone to revenue timing manipulation and undeposited cash payments.
Red flag: Large gaps between invoiced revenue and actual bank deposits with no clear explanation.
Audit all owner add-backs for legitimacy and one-time nature.
Inflated add-backs artificially raise SDE and push the valuation beyond what cash flow supports.
Red flag: Add-backs exceed 25% of stated SDE or include recurring operational expenses.
Analyze monthly revenue seasonality and identify any single-year revenue spikes.
One large commercial contract can inflate a single year's revenue and distort trailing earnings.
Red flag: One year shows revenue 40%+ above trend with no repeatable contract to explain it.
Assess how revenue is distributed across residential, commercial, and industrial clients and identify dependency risks.
Request a full customer revenue breakdown by client for the past 3 years.
Concentration in one or two accounts creates significant post-close revenue risk if those clients leave.
Red flag: A single client represents more than 25–30% of total annual revenue.
Identify the percentage of revenue from repeat commercial or industrial clients.
Repeat commercial accounts provide more predictable cash flow than one-off residential garage jobs.
Red flag: Less than 20% of revenue comes from repeat or contracted commercial clients.
Review any active maintenance or service agreements with commercial or industrial accounts.
Documented recurring contracts transfer value and reduce post-close revenue uncertainty.
Red flag: No written contracts exist — all commercial work is verbal or handshake agreements.
Verify referral sources and marketing channels driving new residential leads.
If new leads depend entirely on the owner's personal network, they may not transfer post-sale.
Red flag: Owner's personal relationships or phone number are the primary residential lead source.
Evaluate the condition, ownership, and replacement cost of core production equipment and confirm supply chain reliability.
Obtain a full equipment inventory with purchase dates, hours of use, and condition ratings.
Diamond grinders, shot blasters, and mixing systems are expensive and critical to production capacity.
Red flag: Core grinding or application equipment is over 8 years old with no maintenance records.
Confirm equipment ownership versus leased or financed assets included in deal.
Equipment liens or lease obligations may not transfer cleanly and affect deal structure.
Red flag: Significant equipment is under financing with balloon payments due within 12 months of close.
Review supplier relationships for epoxy resins, polyaspartic systems, and hardeners.
Exclusive or preferred supplier pricing can be a margin advantage that may not transfer to a new owner.
Red flag: The business relies on a single supplier with no backup and no written supply agreement.
Assess recent material cost trends and current inventory levels on hand.
Petrochemical-linked resin costs are volatile and can compress margins on fixed-price contracts.
Red flag: Contracts are fixed-price with no material cost escalation clause during a rising resin market.
Verify crew structure, worker classification, licensing status, and insurance coverage across all jurisdictions served.
Confirm W-2 versus 1099 classification for all crew members and subcontractors.
Misclassified workers create IRS and state labor liability that can survive the ownership change.
Red flag: Core daily crew are classified as 1099 contractors performing exclusively company-directed work.
Verify active contractor licenses, bonds, and certificates of insurance in all states served.
Operating without proper licensing can void completed contracts and expose the buyer to penalties.
Red flag: Licenses are in the seller's personal name and not transferable to a new entity or owner.
Assess key-person dependency — can the lead technician estimate and manage jobs without the owner?
If the owner is the only estimator and crew lead, revenue may drop immediately after close.
Red flag: No trained project manager or lead tech exists; owner handles all estimates and quality control.
Review employee tenure, compensation structure, and any signed non-solicitation agreements.
Crew retention post-close is essential; losing trained applicators halts production immediately.
Red flag: Top two technicians have no agreements in place and are known to be considering other opportunities.
Identify all open warranty claims, legal disputes, subcontractor liens, and post-close financial obligations.
Request a list of all active warranties issued and the callback or rework rate over 3 years.
Epoxy delamination or peeling failures can trigger costly rework obligations inherited by the buyer.
Red flag: Callback or rework rate exceeds 5% of jobs, or multiple unresolved warranty claims are open.
Review all lien waivers and confirm no mechanic's liens are filed on completed projects.
Unresolved liens on commercial projects can delay payment and create legal exposure post-close.
Red flag: Outstanding mechanic's liens or disputed payment claims exist on any commercial or industrial job.
Confirm no active litigation, OSHA violations, or environmental complaints against the business.
Chemical handling and surface prep create OSHA and environmental exposure unique to this trade.
Red flag: Any open OSHA citation, EPA complaint, or pending customer lawsuit disclosed during review.
Review all subcontractor agreements for indemnification clauses and completed job sign-offs.
Subcontractor work performed under your brand creates liability if quality standards were not enforced.
Red flag: Subcontractor work was performed with no written agreement, quality checklist, or signed completion form.
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Most epoxy flooring businesses in the $1M–$5M revenue range trade at 2.5x–4.5x SDE. Businesses at the high end have diversified client bases, trained crews, documented processes, and some recurring commercial contracts. Owner-dependent businesses with no management layer typically trade at the low end of the range, and SBA lenders will scrutinize the multiple closely when underwriting the loan.
Yes. Epoxy flooring businesses are SBA-eligible, and most acquisitions in this segment use SBA 7(a) financing. Expect to inject 10–20% equity at close, with the remainder financed over a 10-year term. Lenders will require 3 years of tax returns, a business plan, and evidence that the business can service debt without the owner in a daily production role. A seller note covering 10–15% of goodwill is common and improves loan approval odds.
Ask for a customer-level revenue report for the past 3 years and identify clients who appear in multiple years. Request copies of any signed maintenance agreements or master service agreements with commercial or industrial clients. Cross-reference repeat client revenue against total revenue to establish a true recurring percentage. In the absence of contracts, testimonials and CRM records showing repeat purchase history are secondary evidence of stickiness.
Warranties issued before close typically transfer to the buyer as part of the asset or stock purchase. This means you inherit any callback or rework obligations on prior jobs. During due diligence, request a full list of all active warranties, their remaining terms, and the historical rework rate. Negotiate a warranty escrow or seller indemnification clause in the purchase agreement to protect against pre-close defects surfacing in the 12–24 months after closing.
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