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 runs 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 $7.8M.
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 running 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 runs the work without the owner all exist before a buyer ever asks for them.
WHERE THE VALUE LEAKS OUT.
Personal expenses sitting 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 carrying 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 SPM's 10% floor before taxes, that's $1.2M, and with owner compensation normalized at a $180K base plus distributions, EBITDA runs approximately $1.7M to $1.9M. At a 4.0x to 4.5x multiple that's $6.8M to $8.5M, with a midpoint around $7.8M. The same revenue at a 2.5x multiple is $4.3M to $4.8M, so the distance between built and unbuilt is roughly $3.3M 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 swings from year to year signals a business running 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 runs without the owner making every operational decision. PMs run jobs, estimators win work, and a general manager or operations lead carries 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. 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, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
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 rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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