Trades Business Buyer Assessment Checklist (Australia)

The Trades Business Buyer Assessment Checklist

Use this checklist in your first substantive conversation with the seller and their broker. Note any items you can't verify at this stage — they become priority items for confirmatory due diligence.

Mark each item: ✓ (confirmed, no issues) | ⚠ (needs follow-up) | ✗ (red flag)

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Section 1: Licensing and Regulatory Compliance

• Confirm who currently holds the contractor's licence — the individual owner, a company, or a nominated licensee
• Verify the licence is current, active, and unencumbered (check directly with the relevant state licensing board, not just the seller)
• Check whether any disciplinary actions or complaints have been lodged against the licence
• Confirm the licence type and class covers all work currently being performed by the business
• Identify whether any subcontractors perform work requiring a separate licence (and whether that licence is verified)
• For electrical businesses: confirm Registered Electrical Contractor (REC) status and who holds it
• For plumbing businesses: check whether the gas licence is held separately or included, and by whom
• For HVAC/refrigeration: confirm ARC (Australian Refrigeration Council) licence and handling authorisations
• For building/construction: confirm builder's licence class and any subcontractor registration requirements
• Identify the specific plan for who will hold or supervise the licence after settlement — in writing, before you sign the LOI

Red flag: The seller holds the only licence, has no plan for transition, and thinks "you'll sort it out after settlement." You won't sort it out easily. This is a fundamental deal risk.

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Section 2: Revenue Quality Assessment

• Calculate the commercial-to-residential revenue split for each of the last three years
• List all recurring maintenance and service contracts — who the client is, annual value, contract term, and renewal date
• Assess the top 5 clients by revenue — if they collectively represent more than 30% of total revenue, that's a concentration risk
• Check whether commercial contracts are in writing with the business entity (not just a verbal arrangement with the owner)
• Review how jobs are sourced: referrals from owner's personal network vs repeat commercial clients vs digital marketing vs broker referrals
• Check for seasonal revenue patterns — is the business exposed to one slow season that creates a cash crunch?
• Compare revenue trend over three years: growing, flat, or declining?
• For any revenue claimed as "solar" or similar growth-driven: verify whether margins on that work are comparable to core trade margins

Rule of thumb: Recurring commercial contract revenue is typically worth 1.2x–1.5x more than equivalent one-off residential revenue when applying a valuation multiple. If a business has $400K in strata maintenance contracts and $400K in residential call-out, the two halves are not equal.

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Section 3: Staff, Licences, and Workforce

• List every employee with their: trade licence type and expiry, years with the business, and role
• Identify which staff members are qualified to supervise the key licence (not just the owner)
• For each apprentice: confirm the training contract is formal, identify the year of apprenticeship, and check scheduled completion
• Review payroll records against Fair Work award classifications — are all employees classified and paid correctly?
• Check the subcontractor-to-employee ratio — a high proportion of subcontractors carries ATO sham contracting risk
• Review Workcover/workers' compensation claims history for the last three years
• Confirm whether any key staff have indicated they might leave if there's a change of ownership
• Check whether employment agreements include restraint of trade clauses (and whether they'd follow the seller if they set up again)
• For cleaning businesses: confirm that all staff hold valid Working with Children or other required clearances where applicable

Question to ask directly: "If you told the team tomorrow you were selling, who would you be most worried about leaving?" The answer tells you more than the org chart does.

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Section 4: Equipment, Vehicles, and Assets

• List all vehicles included in the sale — make, model, year, odometer, and current condition
• Run a PPSR (Personal Property Securities Register) check on all vehicle VINs — confirm no finance encumbrances
• Check service history and any outstanding mechanical issues for each vehicle
• List all major plant and equipment: what's owned outright vs financed vs leased
• Run PPSR on any plant with serial numbers (generators, compressors, specialist tools)
• Check whether specialist equipment is owned by the business or personally by the owner
• For electrical businesses: confirm test and tag equipment, thermographic cameras, and cable testing equipment are included
• For plumbing businesses: confirm CCTV drain cameras, hydro-jetting equipment, and gas detection equipment are included
• For HVAC businesses: confirm refrigerant recovery equipment, manifold gauges, and vacuum pumps are included
• Assess the upcoming equipment replacement cycle — what will need replacing in the next 24 months and at what cost?

Practical note: A vehicle fleet that "looks fine" and averages 180,000km can represent $80K–$150K in replacement costs within 24 months. Model this into your offer price or factor it into vendor finance terms.

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Section 5: Operational Systems

• Is job scheduling done in software, or via a whiteboard/spreadsheet/phone?
• Is quoting done in a system (ServiceM8, Fergus, Tradify, or similar), or manually?
• Are job completion records and compliance certificates (test reports, gas compliance certificates, etc.) filed systematically?
• Is there a customer database with contact details, job history, and service intervals — or are client contacts primarily in the owner's phone?
• Are supplier accounts held by the business entity (not the owner personally)?
• Does the business use accounting software that a new owner could access independently?
• Is there a documented process for onboarding new clients, quoting, completing, and invoicing jobs?

Gap opportunity: A trades business with documented systems that can run without the owner is worth meaningfully more than one that runs from tribal knowledge. If the business has nothing documented, that's not necessarily a dealbreaker — but it's a workplan item for your first 90 days.

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Section 6: Safety and Compliance Records

• Review WorkSafe/SafeWork incident and notice history for the last three years
• Confirm current public liability insurance ($10M+ is standard for commercial work)
• Confirm professional indemnity insurance if the business does design-and-construct or specification work
• Check whether tool and equipment insurance is adequate for the actual fleet value
• For electrical: verify that RCD testing and test-and-tag records are current and documented
• For plumbing: check that gas safety inspection and certification records are on file
• For HVAC: verify that refrigerant handling and disposal records comply with ARC requirements
• Check whether the business has current Safe Work Method Statements (SWMS) for high-risk work
• Ask whether there are any pending compliance actions, rectification orders, or unresolved client complaints

Note: Compliance gaps don't always translate to fines — but they can. More importantly, they create liability for you post-settlement. Get a clean compliance declaration from the seller and have your lawyer make it a warranty in the SPA.

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Section 7: Financial Quality

• Obtain P&L statements for the last three financial years (ATO-filed, not management prepared)
• Compare revenue reported on BAS returns to revenue reported on P&L — these should match closely
• Identify and list all owner benefits included in operating costs: vehicle, super, personal expenses, family wages
• Calculate adjusted EBITDA after removing these add-backs and substituting a market-rate management salary
• Review debtor aging — are there invoices over 90 days that are effectively uncollectable but included in working capital?
• Check creditor terms — is the business paying on time, or are there overdue amounts that need to be settled at settlement?
• Review Work In Progress (WIP) accounting — how is partially completed work recognised?
• Confirm that GST and super are current — ATO debt that isn't disclosed transfers with an entity purchase
• For asset sales: confirm no employee entitlement liabilities transfer (redundancy, annual leave, long service leave)

For an asset sale, most employee liabilities stay with the seller (except accrued leave if you retain staff). For a share/entity sale, you inherit everything — including any hidden ATO or super debt. Get your accountant to run a specific tax due diligence.

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Section 8: Owner Dependency Assessment

Complete this as a standalone scoring exercise before making an offer:

• Does the owner personally hold the primary licence required to operate?
• What percentage of client relationships exist in the owner's personal phone or email, versus a business system?
• Can jobs be quoted without the owner present or involved?
• Is there a supervisor or manager who runs the team day-to-day?
• If the owner took four weeks' leave tomorrow, would the business continue to operate? Who would cover their functions?
• How does the owner describe their daily role? (On the tools = concern. Managing and quoting = better. Building client relationships = transferable with a plan.)
• Are key commercial clients contracted to the business entity, or do they have a personal relationship with the owner that has never been formalised?

For a detailed scoring rubric, use the Owner Dependency Scorecard alongside this checklist.

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Section 9: Deal Structure and Terms

• Is this an asset sale or share/entity sale? (Most trades acquisitions under $1M are asset sales — understand why if it's different)
• What exactly is included in the sale? List: vehicles, plant, tools, goodwill, customer database, trading name, website, phone numbers
• Are there any assets used in the business that are NOT included (e.g. vehicles that are personally owned by the seller)?
• Has the seller agreed to a restraint of trade? In what geography? For how long? (Minimum 2–3 years, covering the business's actual service area)
• Is there a transition and training period agreed? Who pays for the seller's time during that period?
• Has vendor finance been discussed? If so, at what proportion of the purchase price and on what terms?
• Are there any pending insurance claims, outstanding warranties, or unresolved client disputes that need to be resolved before settlement?
• Has the business broker disclosed all known material issues with the business?

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Scoring and next steps

Count your flagged items:

Result	Recommendation
0–4 flags	Looking promising. Proceed to confirmatory due diligence with an accountant and lawyer.
5–9 flags	Addressable but investigate each one. Some may reduce price; others may be dealbreakers.
10–14 flags	Significant structural issues. Proceed only if the price reflects the risk, and only after getting external advice.
15+ flags	Walk away and find a better deal. This level of structural issues is not fixable through purchase price alone.

Important distinction: Some flags affect price (ageing vehicles, thin margins, weak systems). Others affect your ability to operate at all (no licence transition plan, key staff likely to leave, undisclosed ATO debt). The second category isn't a negotiating point — it's a condition precedent.

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Related resources

• Preliminary Business Evaluation Scorecard — use this before you get to this assessment
• Owner Dependency Scorecard — goes deeper on the management question
• Due Diligence Checklist — the full confirmatory DD checklist for after you've signed an LOI