Who Buys a Contracting Company
- Larger contractorWants more crews, a better license set and an existing backlog.
- Estimator or project managerKnows the work and needs a company with backlog and bonding already in place.
- Investor or holding companyLooks for steady earnings and a management team that stays.
What the Buyer Is Paying For
Contractors are priced on cash flow after one working owner is paid, then a multiple. Most Main Street businesses trade at about two to three times that figure, and bigger firms with managers in place are priced on earnings after a fair owner salary.
Backlog helps, but only if the jobs are signed and profitable.
The License Question
In Hawaii, contractor licenses are issued to a qualifying person and a business, and they generally do not pass to a buyer on their own. A buyer may need its own license or the seller's qualifying individual may have to stay on.
Ask the Contractors License Board before you list. It can change the structure of the deal.
Backlog, Bonding and Customers
Buyers read the job list line by line. They look at margins on finished jobs, what is left to bill and whether a few customers, such as a developer or a government agency, supply most of the work.
Bonding capacity and insurance history also matter, since a new owner needs both to bid.
Key People
If you are the only estimator, the buyer sees risk. Show a project manager, a superintendent and a foreman who can carry the work, and tell the buyer how long they have been with you.
Getting Ready
Prepare a current job schedule, aged receivables and three years of statements. See how buyers read your books, read the tax clearance guide and ask what your business is worth.