Service-based businesses come with their own set of challenges and rewards. Last time, Laura talked about buying asset-heavy businesses. In this episode, Laura DiFrancesco explains what makes buying a service-based business different. She covers how things like recurring revenue, contract structure, customer retention, and employee talent affect deal terms and valuation. Laura also explains the risks, like financial fluctuations and scaling limitations, and shares how to approach due diligence when client experience is hard to measure. It’s a clear look at what buyers need to understand before making a deal.
What You’ll Learn
Evaluating Service-Based Business Models
// Understand how the business model, customer base, and revenue structure impact deal terms and valuation.
Conducting Due Diligence Without Customer Access
// Learn how to assess customer experience, retention, and satisfaction using public tools when direct communication isn’t possible.
Managing Working Capital and Cash Flow
// See how different billing practices and seasonal trends affect working capital needs and cash flow risks.
Handling Work-in-Progress and Project Profitability
// Explore how to assess in-progress work and align profit allocation fairly based on project stages at closing.
The Role of Key Employment Agreements
// Discover why retaining talent matters most in service-based businesses and how to structure agreements for post-sale continuity.
Episode Highlights:
[00:00] Introduction to Dealmaking with Laura DiFrancesco
[01:27] Book preview
[03:00] Defining service-based businesses
[08:09] Deal Street Law ad
[09:07] How to diligence customer experience
[11:15] Working capital vs. work-in-progress explained
[15:20] Key employment agreements and post-sale continuity
[17:19] Outro
Resources Mentioned
Entrepreneurship Through Acquisition waitlist // https://lauradifrancesco.co/eta-landing-page
Ep 23 Negotiating the Purchase Price and Seller Notes // https://open.spotify.com/episode/5qktKA5RsiZiKcqd1v4gpa?si=H46hklPmQ16ef48knWPURQ
For free legal guides and resources click HERE.
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Credits
Host // Laura DiFrancesco
Executive Producer // Teagan Rowland
Editor // Jules Bernardo
Associate Producer // Jules Bernardo
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