What buyers check first when they price a construction company

Construction companies that bid each job typically sell for 2.5 to 4.0 times adjusted earnings in Canada, which puts a contractor earning $800,000 at about $2.0 million to $3.2 million. A team that runs the jobs and a spread of clients move it up the range, and the backlog and WIP schedule are the first documents a buyer reads.

The multiple for a construction company

Owners who want to sell a construction company in Canada usually ask first what it is worth. Project based contractors, from general contractors and roofers to the civil and specialty trades that bid each job, typically sell for 2.5 to 4.0 times adjusted earnings. That is the construction row of the table of multiples by industry our own valuation runs on.

Adjusted earnings are the profit with your own salary and personal costs added back, the figure explained in SDE or EBITDA. Recurring home services sit higher at 3.0 to 5.5 times, and the piece on HVAC and plumbing companies explains how a renewing maintenance agreement earns that gap. A contractor wins each job once, so a buyer pays for the work already signed and for the people who will win the next job.

One contractor at four sizes

Size moves the multiple in steps, because each band brings in a different group of buyers. Our engine takes half a turn off below $500,000 of adjusted earnings, where most buyers are individuals, and adds 0.3 above $1 million, the level most private equity buyers screen for. Take, as an illustration, one contractor at four levels of earnings, with every other factor at the setting that leaves the multiple where it is.

The factors then move each row. On the $800,000 contractor, work that is mostly one-off projects costs 0.15, and a developer sending over 30 percent of the work costs 0.35, which takes the range down to $1.6 million to $2.8 million. A management team that already runs the jobs adds 0.4 and a largest client under 10 percent of revenue adds 0.15, which lifts the same company to $2.32 million to $3.52 million with the one-off work still counted against it.

Both levers have pieces of their own, on customer concentration and on a business that depends on you. For a contractor the large client is usually one builder or one public owner.

Backlog and the work in progress schedule

Backlog is the value of signed work still to be done. A buyer reads it as the start of next year’s revenue and asks what margin the signed jobs carry.

The work in progress schedule, usually called the WIP, is the document that proves it. It sets each open job’s contract value against the cost spent and the cost still expected, and shows how much has been billed so far.

Two lines on it shape the conversation. The first is margin fade, where a job’s expected profit shrinks from one schedule to the next, which tells a buyer your estimates run high. The second is billing ahead of the work. That cash was collected for work the company still owes, so a buyer counts it against the working capital target set for closing day.

Keep the schedule monthly in the year before a sale and tie each one to the financial statements. Twelve schedules that agree with the books give a buyer fewer reasons to hold back part of the price.

Bonds and licences follow people

Public owners require bonds. In Ontario, a contractor on a public contract of $500,000 or more must give the owner a performance bond and a labour and material payment bond under section 85.1 of the Construction Act, each covering at least 50 percent of the contract price under its regulation. The surety that issues them decides whether to keep backing the company once it changes hands. Speak to yours before you go to market, and if you signed a personal indemnity for the company’s bonds, ask how it is released at closing.

In Quebec, a construction licence names a guarantor, the person the Régie du bâtiment du Québec recognises as qualified to manage the company in its field. A company has 90 days to replace a guarantor who leaves, after which it loses the licence or that subclass. The RBQ also treats a change in the company’s enterprise number as a change of legal status that needs a new licence application, so a buyer of the assets applies under its own number.

BC Housing licenses residential builders. A change in the persons in control of a licensed company is an amendment with a $100 fee, while moving to a different company takes a new application. Ontario’s Home Construction Regulatory Authority wants notice within 30 days of an issue or transfer of equity shares, and it says a builder’s competencies attach to the individuals who hold them.

Holdbacks, clearances and equipment at closing

Every contractor has money held back on its open jobs. Ontario’s Construction Act has each payer retain 10 percent of the price until the lien period has run, and since January 1, 2026 the owner must also release accrued holdback after each anniversary of the contract, with a later first date for contracts signed before then. British Columbia’s Builders Lien Act also sets 10 percent, with a holdback period that ends 55 days after a certificate of completion.

At closing that receivable needs a line in the agreement. In a share sale it stays in the company, so agree whether the working capital count takes it at full value, since it arrives months later. In an asset sale it usually stays with you to collect. The holdback you owe your own subcontractors is trust money for them under section 8 of the Ontario Act.

General contractors check workers’ compensation before your crew goes on site. In Ontario, a principal who hires a contractor for construction work must obtain a WSIB clearance certificate, valid for up to 90 days, before the work starts. WorkSafeBC advises a buyer of a firm’s assets to contact it first, since those assets may carry a lien for unpaid premiums, and a clearance letter protects the buyer against it.

Equipment sets a floor under the price. Where an appraisal of the machines comes out above the earnings multiple, a buyer prices the assets first, the same arithmetic the trucking piece works through for a fleet. In an asset sale, the proposed Productivity Mega Deduction gives a buyer reason to put more of the price on equipment, which raises your recapture.

For a contractor, a share sale keeps the licences and the bonding record inside the same company. That continuity is often what persuades a buyer to accept one.

What a buyer of a contractor asks for

Gather these before a buyer asks, and file them at the front of the due diligence file.

Most of this takes a year to put in order, which is why preparing a business for sale starts well before the sale does. Owners with a long-serving crew sometimes weigh a sale to their employees, and an employee ownership trust or a third party sale sets the two side by side. To see where your company sits today, the Quick AI valuation gives an early range in a few minutes, before you give anyone your name.

The buyers, due diligence priorities and sector requirements are set out on InvestDeal’s construction M&A advisory page.

Questions owners ask

How much is my construction company worth?

Typically 2.5 to 4.0 times adjusted earnings, which is profit with the owner’s salary and personal costs added back. Below $500,000 of earnings the range drops by half a turn, and above $1 million it rises by 0.3, because each size band brings in a different group of buyers.

Does a contractor licence transfer when I sell the company?

It depends on the province and the structure of the sale. In Quebec a new enterprise number needs a new RBQ licence, and a departing guarantor must be replaced within 90 days. BC Housing amends a licence for new persons in control and asks a different company to apply for its own.

What happens to holdback receivables when a construction company is sold?

In a share sale they stay in the company, so the purchase agreement should say whether working capital counts them at full value. In an asset sale they usually stay with the seller to collect. Ontario and British Columbia both set the holdback at 10 percent of the price.

Should I sell my construction company as shares or assets?

A share sale can let you claim the lifetime capital gains exemption, and buyers often prefer assets for the tax deductions. For a contractor, a share sale also keeps the licences and the bonding record inside the same company, which often makes it easier for a buyer to accept.