Construction
Selling a construction business
A construction company carries obligations a manufacturer or a retailer does not: bonded projects, licenses tied to specific people, and work that is only partly finished on the day you sign anything. None of that makes the business unsellable. It does mean the diligence looks different, and a buyer's lender will ask about things that would never come up in most other industries.
Here is what actually gets examined when a contracting business goes to market.
Bonding capacity and whether it survives ownership change
If your work requires performance and payment bonds, your bonding capacity was built over years of relationship with a surety and a track record of completed projects. That capacity does not transfer automatically to a new owner. The surety re-underwrites the buyer, their financial strength, and their construction management experience before extending comparable capacity, and a buyer who cannot get bonded at a similar level may not be able to run the business the way you built it.
Licensing and who actually holds it
Texas licensing requirements vary by trade, and in many cases the license or qualifying party status sits with an individual rather than the company itself. That affects the transaction structure and the timeline, since a buyer or their designated qualifying individual may need to sit for an exam or meet experience requirements before they can operate under their own license. This is squarely legal territory, and it is one of the places we tell owners plainly to bring in their attorney rather than rely on a broker's reading of the rule.
Work in progress, percentage of completion and retainage
Projects that are underway on the day of closing need to be accounted for with a current work in progress schedule, showing contract value, costs incurred, billings to date and estimated costs to complete, generally under a percentage of completion method. Retainage held by owners on active projects is real money that has been earned but not yet collected, and the purchase agreement needs to say clearly who is entitled to it as those projects wind down.
Contract assignability matters here too. Some project owners and general contractors require consent before a contract can be assigned to a new entity, and that consent process needs to start well before closing, not after.
Pipeline versus backlog, fleet, and subcontractor relationships
A pipeline of bids and prospective work is worth something, but a signed backlog of awarded contracts is worth considerably more to a buyer, because it is evidence of revenue that exists independent of any future sales effort. Keep the two separated clearly in whatever you hand a prospective buyer.
Your fleet and major equipment get appraised the same way manufacturing equipment does, and your subcontractor relationships get reviewed for how much of the work is self-performed versus subbed out, since that ratio affects both margin and how easily a new owner can step into the existing project management structure. If you also run or are considering a distribution side of the business, the considerations there are different again — see selling a distribution business.
A buyer financing a construction business is really financing a set of promises still being performed. The paperwork that documents those promises is what makes the deal fundable.
What is your business worth?
Find out with a Broker Opinion of Value — no fee, no obligation to list, no engagement letter. We ask for a short intake first so the number is worth having. Businesses under $100,000 in Seller's Discretionary Earnings, and businesses with less than five years of documented history, are more difficult to sell and to finance, and we will tell you that early rather than late.
Safety record, insurance experience modifier and seasonality
Your experience modification rate is a number a buyer's insurance broker will ask for without being asked, because it directly affects the cost of workers' compensation coverage going forward and reflects your safety culture over several years. A strong modifier is worth highlighting; a rising one is worth explaining before someone else brings it up.
Seasonality is common in Texas construction and is not treated as a defect, but it does affect how we time a listing and how we present trailing revenue so a buyer reads a slow quarter correctly instead of mistaking it for decline. For the broader groundwork on getting a company ready, see preparing your business for sale and, if retirement timing is part of your decision, exit planning.
Common questions
Questions owners ask us
- Does my bonding capacity transfer to a buyer?
- Not automatically. A surety underwrites the new ownership and management the same way it originally underwrote you, looking at their experience, financial strength and the company's track record. This is usually one of the first calls we make once a buyer is qualified.
- Who has to hold the contractor license after a sale?
- That depends on your license type and how the deal is structured. In some cases the license is tied to an individual qualifying party rather than the entity, which affects timing and who needs to be in place before closing. This is an area where your attorney needs to be involved directly.
- How is work in progress handled at closing?
- Projects underway at closing are typically reconciled through a work in progress schedule using percentage of completion, with retainage, billed-but-uncollected amounts and costs to complete all identified so the purchase price reflects what has actually been earned versus what remains at risk.
- Does a seasonal business make it harder to sell?
- It makes timing matter more, not less possible. We look at your revenue pattern across the year and typically plan a listing and closing window around it rather than against it.