How to Identify & Buy a Great Residential Contractor

March 21, 2024
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onsultant Alan Lochridge was mid-career, trying to figure out what was next, when a friend recommended...

He buy a business.

Today, Alan owns a hardscaping business in Charlotte, North Carolina, that does patios, outdoor fire places, pool decks, pergolas.

Now, you may be thinking...

Hmm, a residential construction business.

Project-based revenue.

And high ticket: the average job is $70,000.

But.

Like Monday's interview with Dan Tagliatela who bought a driveway sealing business, Alan explains why his business is a strong one, reinforcing once again that there is much more to understanding a business than whether it's recurring or project revenue.

Alan's business has a negative cash conversion cycle, meaning he receives payment before delivering service.

Alan's days sales outstanding (DSO) is very low, meaning he collects from customers quickly.

Alan's services are delivered by subcontractors, meaning his business runs lean and he avoids getting squeezed when work slows down.

All of this adds up to a business that does a great job of generating cash.

And with 18% margins on $6.5m in revenue, a significant amount of it.

Please enjoy my interview with Alan Lochridge, owner of The Stone Man.

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How to Identify & Buy a Great Residential Contractor

Alan Lochridge left a career in consulting to buy a 20-year-old $5.5m hardscaping contractor with strong fundamentals.

Key Takeaways

Introduction

Listen to the introduction from the host

onsultant Alan Lochridge was mid-career, trying to figure out what was next, when a friend recommended...

He buy a business.

Today, Alan owns a hardscaping business in Charlotte, North Carolina, that does patios, outdoor fire places, pool decks, pergolas.

Now, you may be thinking...

Hmm, a residential construction business.

Project-based revenue.

And high ticket: the average job is $70,000.

But.

Like Monday's interview with Dan Tagliatela who bought a driveway sealing business, Alan explains why his business is a strong one, reinforcing once again that there is much more to understanding a business than whether it's recurring or project revenue.

Alan's business has a negative cash conversion cycle, meaning he receives payment before delivering service.

Alan's days sales outstanding (DSO) is very low, meaning he collects from customers quickly.

Alan's services are delivered by subcontractors, meaning his business runs lean and he avoids getting squeezed when work slows down.

All of this adds up to a business that does a great job of generating cash.

And with 18% margins on $6.5m in revenue, a significant amount of it.

Please enjoy my interview with Alan Lochridge, owner of The Stone Man.

About

Alan Lochridge

Alan Lochridge
Olivia Rhye
Product Designer

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