HOW TO BUILD A CONSTRUCTION COMPANY TO SELL.
Building a commercial subcontractor business to sell takes 5 to 7 years of work across five areas: clean books with normalized owner compensation, gross margin discipline against the band for your own trade and revenue, recurring or repeatable revenue, owner independence so the business operates without the owner in daily decisions, and bonding and banking relationships that transfer cleanly to a buyer. The valuation target for a well built $12M commercial sub is approximately $8.5M.
None of the five are things you can install in the last year. Buyers underwrite against three to five years of history, so the year you decide to sell is the year the record is already written. That's why the runway gets measured in years rather than months: the discipline has to be in place long enough to produce the trailing record a buyer will diligence. The upside is that all five also make the business better to own. Owners who install them and then decide not to sell keep the margin anyway.
WHAT IT MEANS.
A sale ready construction company is one where three years of clean job costed financials, a normalized owner salary, gross margin held above the band for their own trade and revenue, and a team that manages the work without the owner all exist before a buyer ever asks for them.
WHERE THE VALUE LEAKS OUT.
Personal expenses on the company books
The truck, the boat, and the tuition charged to the business all reduce reported profit, and reported profit is what a buyer multiplies. A buyer's accountant will find every one of them in diligence, and each add back has to be argued for rather than simply read off the P&L. Clearing them out years before the sale means the trailing financials say what you want them to say without a footnote.
Owner compensation that never went on payroll
Buyers normalize owner pay before applying the multiple. An owner taking irregular draws with no salary on the P&L gets reduced by $150K to $250K of normalized compensation, and at a 4x EBITDA multiple that's $600K to $1M of valuation lost. Putting yourself on payroll years before the sale protects the multiple, and it costs nothing but the decision.
One GC holding too much of the revenue
A single GC representing more than 40% of revenue raises a flag for buyers, who assume the relationship walks when the owner exits. A $6M sub with 65% of revenue from one GC gets priced for that risk. The standard is to diversify to under 35% before going to market, ideally with no single customer above 25%, and deliberate diversification typically takes 3 to 5 years.
WHAT IT LOOKS LIKE IN DOLLARS.
At $12M of revenue with net profit held at the CFOS target of 12% before taxes, that's $1.44M, and with owner compensation normalized at a $180K base plus distributions, EBITDA is approximately $1.9M to $2.1M. At a 4.0x to 4.5x multiple that's $7.6M to $9.5M, with a midpoint around $8.5M. The same revenue at a 2.5x multiple is $4.8M to $5.3M, so the distance between built and unbuilt is roughly $3.5M of value.
A verified marine client at $13.5M wanted to sell and found the business wasn't worth what they had built it to be. Four accounting staff, no job costing, no per project reporting. A buyer doesn't pay for revenue, they pay for provable, sustainable profit. SPM built the job costing structure, tightened spending nobody had looked at for years across subscriptions, vendors, and material purchasing, and put twice monthly reporting in place on every job. Net profit went from 7% to 14% on the same revenue, recovering $917K a year of margin that was already inside the business. Valuation went from $2.3M at a 2.5x multiple to $5.5M at a 3x multiple in nine months, which is $3.2M of additional business value on the same revenue, the same crews, and the same work.
WHAT BUYERS PAY FOR.
Three years of P&L, balance sheet, cash flow, and WIP that reconcile cleanly. The owner takes a real salary on payroll rather than draws. Personal expenses are out of the business. Books close within 10 business days of month end every month, not just at year end. This is the table stakes requirement, and without it the conversation doesn't start.
The CFOS gross margin target is set per trade and per revenue band rather than as one figure for everybody, and /construction-gross-profit-margin-benchmarks publishes it alongside CFMA's 21.8% gross profit margin across all respondents. Buyers want consistency rather than one good year, so three to five years inside your own band signals operational competence. Gross margin that changes a lot from year to year signals a business that depends on luck.
Single project, one and done revenue is hard to value. Master service agreements, multi year framework contracts, repeat GC relationships, and a backlog booked out 6 to 12 months forward all signal revenue that keeps coming. Buyers pay multiples on predictable revenue, not on revenue that came in because the phone rang.
The business operates without the owner making every operational decision. PMs manage jobs, estimators win work, and a general manager or operations lead handles the day to day. The owner can be on vacation for two weeks and the business operates normally. A business that needs the owner in daily decisions is worth less, because the buyer is also buying themselves a job.
Bonding relationships that transfer to new ownership without losing capacity, bank lines that survive the change of control, and insurance arrangements that travel. SPM The Construction CFO works with bonding agents on this in the 24 months leading up to a sale, because knowing which lines transfer and which need renegotiating is cheap a year out and expensive at closing.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
Built for subs doing $1M to $12M. Above $12.5M we quote.
| Last 12 months revenue | Core | Strategic | Platinum | One-time onboarding |
|---|---|---|---|---|
| Under $1M | $1,900 | $3,100 | $3,300 | $2,500 |
| $1M to $3.5M | $2,600 | $4,100 | $5,300 | $4,500 |
| $3.5M to $6.5M | $3,800 | $5,900 | $8,300 | $6,000 |
| $6.5M to $9.5M | $5,100 | $7,600 | $11,800 | $7,500 |
| $9.5M to $12.5M | $6,100 | $8,900 | $14,900 | $9,000 |
| Above $12.5M | Quoted | Quoted | Quoted | Quoted |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers, and it moves with your revenue band. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Just want the setup? Onboarding only is the same onboarding work with no monthly service after it, one time, at the onboarding fee plus $2,000. Start a monthly engagement later and $2,000 counts toward it. It starts at $4,500, and the price for every band is on the pricing page.
The three tier columns are the whole price. Which one fits depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
- Online software only: QuickBooks, Sage, Viewpoint and similar. No VPN or hosted desktop.
- Not in any tier: payroll, pay applications, collections on receivables.
- Pricing valid through 2027.
CFO work. Your own bookkeeper keeps doing the books.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
Core, plus bookkeeping and bank reconciliations, plus job costing and WIP software set up and managed for you. Use your own online accounting software or we supply it, one price.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
Strategic, plus a controller who handles payables and receivables the way an in-house controller would. You approve every payment.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
FREQUENTLY ASKED.
