Due Diligence Checklist for Auto Shop Purchases
By Robert Kim
Due diligence is your opportunity to verify everything about the auto repair shop you're considering purchasing. This comprehensive checklist will help you uncover potential issues and make an informed decision about your investment.
⚠️ Important:
Never skip due diligence, even in competitive situations. The cost of professional inspections is minimal compared to potential hidden problems.
Financial Due Diligence
Financial Statements Review
- 3-5 years of profit & loss statements
- Balance sheets for the same period
- Cash flow statements
- Tax returns (business and personal if applicable)
- Monthly financial statements for current year
- Accounts receivable aging reports
- Accounts payable reports
Revenue Analysis
- Monthly revenue trends and seasonality
- Customer concentration (no single customer >10% of revenue)
- Service mix breakdown (labor vs. parts)
- Average ticket size and transaction volume
- Warranty work percentage
- Fleet/commercial vs. retail customer split
Operational Due Diligence
Equipment and Facility
- Professional equipment appraisal
- Maintenance records for major equipment
- Age and condition of lifts, diagnostic equipment
- Tool inventory and condition
- Building condition assessment
- Environmental compliance review
- Zoning compliance verification
Inventory Analysis
- Physical inventory count
- Inventory turnover rates
- Obsolete or slow-moving inventory
- Supplier relationships and terms
- Parts return policies
Legal and Compliance
Licenses and Permits
- Business license verification
- Auto repair facility license
- Environmental permits
- Fire department permits
- Workers' compensation compliance
- Sales tax permits
Legal Issues
- Pending litigation review
- Insurance claims history
- Customer complaints and BBB rating
- Employment law compliance
- Lease agreement review
- Vendor contract analysis
Human Resources
Staffing Analysis
- Employee roster with tenure and certifications
- Compensation structure and benefits
- Training programs and certifications
- Employee handbook and policies
- Turnover rates and exit interviews
- Key employee retention agreements
💡 Key Insight:
Skilled technicians are often the most valuable asset of an auto repair shop. Ensure key employees are willing to stay after the transition.
Customer and Market Analysis
Customer Base Review
- Customer database analysis
- Repeat customer percentages
- Customer satisfaction surveys
- Online review analysis
- Marketing effectiveness assessment
- Referral source tracking
Competitive Landscape
- Local competition analysis
- Market share assessment
- Pricing comparison
- Service differentiation factors
- Growth opportunities identification
Technology and Systems
Management Systems
- Point of sale system evaluation
- Customer management software
- Inventory management systems
- Accounting software and processes
- Diagnostic equipment capabilities
- Digital marketing presence
Red Flags to Watch For
- Declining revenue trends
- High customer concentration
- Deferred maintenance on equipment
- Environmental compliance issues
- High employee turnover
- Pending litigation
- Lease expiration issues
- Outdated equipment or technology
Professional Support Team
Assemble a team of professionals to help with due diligence:
- CPA: Financial analysis and tax implications
- Attorney: Legal review and contract analysis
- Equipment Appraiser: Asset valuation
- Environmental Consultant: Compliance assessment
- Insurance Agent: Coverage review and costs
- Industry Consultant: Operational assessment
Need Due Diligence Support?
Our Express Deal program includes access to experienced professionals who can help you conduct thorough due diligence efficiently.
🚖 Get Professional HelpTimeline and Process
Typical due diligence timeline for auto repair shops:
- Days 1-3: Initial document review
- Days 4-7: Financial analysis and verification
- Days 8-10: Physical inspection and equipment appraisal
- Days 11-14: Legal and compliance review
- Days 15-21: Final analysis and decision
Conclusion
Thorough due diligence is essential for a successful auto repair shop acquisition. While the process may seem overwhelming, systematic investigation of these key areas will help you make an informed decision and avoid costly surprises.
Remember that due diligence is not just about finding problems – it's about understanding the business you're buying and planning for future success. Take the time to do it right, and you'll be well-positioned for a successful acquisition.
