What decides what my construction company will sell for?

If you want to know what a construction company can sell for, start with earnings. BDC says earnings-based methods review forecasted earnings or cash flow and past results, and that market-based methods apply a multiple that varies with industry, size, market conditions and comparable sales. BDC’s due diligence guidance then has a buyer look behind the earnings. For a contractor, ask who the customers are, which contracts can move, and what the company owes or is owed, including holdbacks; see construction holdback.

Customers and contracts

BDC’s due diligence guidance asks whether most sales come from a small number of customers and whether customers leave when the vendor does. It also says to make sure key contracts, such as leases, regulatory agreements and customer contracts, can be assigned to the buyer if necessary. For a contractor, check which customer contracts and any licences can be assigned, and which need the other party’s consent.

WSIB status in Ontario

Workplace safety insurance is provincial, so this is the Ontario rule. The WSIB says that if you are selling or purchasing a business’s assets, you should get a purchase certificate, and that it may hold the purchaser liable for all amounts owed by the vendor up to the date of sale if you do not get a valid purchase certificate. It also says a purchase certificate is not required when shares are sold, because no new legal entity is created. The WSIB says the purchase certificate request must be made before the date of sale. If the account shows amounts owing, ask how they will be dealt with before closing. Other provinces run their own workers’ compensation boards.

Clearance certificates for your customers

The WSIB’s policy says a clearance certificate relieves a principal of liability for payment obligations to the WSIB that a contractor may incur on a contract between them during the clearance’s validity period. It is issued if requirements are met, including that the contractor has reported premiums for all past reporting periods and that all premiums and other amounts owing are paid up to date when it is requested; the policy also sets out cases where an account not in good standing can still get one. A clearance also confirms the contractor is registered and its account is in good standing. Before selling, check whether your clearances have been available when customers asked for them.