DIY Due Diligence
Discussion
Whenever I'm about to spend some money (either personally or business - sole trader so same thing really), I carry out a bit in internet research.
There are a couple of useful sites that give info of the apparent health of a company, plus any good/bad reviews with are publicly available.
On the "health" aspect, seeing that a company's returns are late or any other penalties filed ring the obvious alarm bells.
But less obvious is the financials aspect.
A widening gap between assets & liabilities leaving the net worth negative could be a problem.
For example, to commit to a contract with a company that has a negative net worth equal to or greater than the value of the contract - is this obvious madness?
Thinking specifically about the Construction industry, for a contract value of say £50-80K - should a company with a negative net worth even be considered?
I would say exceeding a certain level, of course not. But I'm sure there's a bit more to it than that.
Please could those with experience/knowledge in this area share a few pointers.
Cheers
There are a couple of useful sites that give info of the apparent health of a company, plus any good/bad reviews with are publicly available.
On the "health" aspect, seeing that a company's returns are late or any other penalties filed ring the obvious alarm bells.
But less obvious is the financials aspect.
A widening gap between assets & liabilities leaving the net worth negative could be a problem.
For example, to commit to a contract with a company that has a negative net worth equal to or greater than the value of the contract - is this obvious madness?
Thinking specifically about the Construction industry, for a contract value of say £50-80K - should a company with a negative net worth even be considered?
I would say exceeding a certain level, of course not. But I'm sure there's a bit more to it than that.
Please could those with experience/knowledge in this area share a few pointers.
Cheers
You can derisk most contracts with staged payments, etc - RIBA have some standard contracts for larger work.
I hire people mostly based on local recommendations - it's a small area so word spreads quickly about dodgy tradesman. I use the local village Facebook group to check what people are saying.
I hire people mostly based on local recommendations - it's a small area so word spreads quickly about dodgy tradesman. I use the local village Facebook group to check what people are saying.
Vaud said:
You can derisk most contracts with staged payments, etc - RIBA have some standard contracts for larger work.
I hire people mostly based on local recommendations - it's a small area so word spreads quickly about dodgy tradesman. I use the local village Facebook group to check what people are saying.
Yes, ordinarily that's also the sort of thing (although I don't use Facebook any more).I hire people mostly based on local recommendations - it's a small area so word spreads quickly about dodgy tradesman. I use the local village Facebook group to check what people are saying.
But one company that used to merit a fairly prolific level of recommendations has just gone bust.
What standing would you give a trade body affiliation, like the FMB?
Smiler. said:
What standing would you give a trade body affiliation, like the FMB?
Not a lot. "The Federation of Master Builders (FMB) is a UK trade association established in 1941 to protect the interests of small and medium-sized building firms"Their insurance might be worth looking at but I don't know anything about it.
Vaud said:
Smiler. said:
What standing would you give a trade body affiliation, like the FMB?
Not a lot. "The Federation of Master Builders (FMB) is a UK trade association established in 1941 to protect the interests of small and medium-sized building firms"Their insurance might be worth looking at but I don't know anything about it.
What a load of tosh.
Bristol spark said:
I wouldn't believe a word these company check sites say.
Mine says i have £13K liabilities (i dont have any loans etc)
And i also don't have £22K of assets!
I've often wondered about this. Do you think it's affected your business influx at all?Mine says i have £13K liabilities (i dont have any loans etc)
And i also don't have £22K of assets!
I'm working on two projects at the moment, professionally advising on an 8 Billion US$ construction project, socially doing a 10 K US$ restoration on my Elan.
The risk process for both is the same, reliable contractor with a good reputation for similar work, working capital to fund the stages of the project, keep payments behind progress, know what you paid for and where it is, and have a contingency plan to take physical possession in the event of failure. Monitor progress.
So we know what to do if a supplier in China fails to deliver equipment we paid for, and I have a man with a tow truck who I could phone to get the car out of the garage within 1/2 a day.
Simple analysis of a balance sheet that can easily/legally be 18 months old is required, but it is not the only or indeed most important criterion.
The risk process for both is the same, reliable contractor with a good reputation for similar work, working capital to fund the stages of the project, keep payments behind progress, know what you paid for and where it is, and have a contingency plan to take physical possession in the event of failure. Monitor progress.
So we know what to do if a supplier in China fails to deliver equipment we paid for, and I have a man with a tow truck who I could phone to get the car out of the garage within 1/2 a day.
Simple analysis of a balance sheet that can easily/legally be 18 months old is required, but it is not the only or indeed most important criterion.
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