Buying a framing contractor in Canada

Someone evaluating a framing company is not buying a shop with a customer list. They are buying a set of working relationships with builders and a crew that has to turn up on site. A good one still has both after the person who built them is gone. This guide looks at what such a business looks like, what a seller may not volunteer, and what the buyer has to qualify for personally. Valuation is covered in the guide on what a framing contractor is worth, and the document-by-document review is in the due diligence guide.

What a good one looks like

Look for a spread of builders rather than one dominant account, and for relationships that run through a site manager or office as well as the owner. Look for crews that have worked together and a record of finishing on schedule. Ask what happens when a crew lead is away, and who then fills the role. Ask to see how work is quoted, and whether jobs are priced from real cost records or from the owner’s own judgment. The glossary entry on owner dependence describes the problem you are trying to avoid. Ask for the last few years of financial statements and compare them to the job list, so you can see which jobs produced the profit and whether the same kind of job is still being won.

What the seller may not volunteer

A seller’s description may leave out points that matter. Ask directly which accounts exist because of the owner’s friendship with a builder, and which crew leads would follow the owner if he or she left. Ask for any job where the structure was found deficient and what it cost to fix. Ask what the best crews are paid compared with the rest, and whether anyone has said they might leave. Ask what work is booked, and who signed it.

Employees or subcontractors

The CRA says a worker’s status turns on all the facts, including the actual terms and conditions, not only what the parties intended, and that either the worker or the payer can request a ruling. If the crews are engaged as independent subcontractors, ask how the seller reached that view and whether a ruling was ever requested. Their continuity after closing depends on whether they want to work for you, since a subcontractor is a separate business. Ask to meet the main crew leads before you commit.

Insurance and compensation coverage

Workers’ compensation is run by each province. In Ontario, WSIB says that, apart from some exempt home renovation work, a principal who directly retains a contractor for construction work must obtain a clearance certificate, and that without one the principal may be liable for the contractor’s payment obligations up to the labour portion of the contract. That affects the builders who hire your target, and you may be asked to show them yours after closing. WorkplaceNL in Newfoundland and Labrador says a clearance letter confirms a contractor has its own coverage and is in good standing, and that if the contractor has coverage the letter clears you of responsibility for the contractor’s unpaid assessments. Ask the board in each other province where the company works what it requires. Ask the seller for the current account status, and ask your own board what you must register.

What you must qualify for yourself

Do not assume the seller’s licences and cards move to you. Ask the province and any municipality what is required of the owner of a framing company, and what is required of the people who supervise on site. If any work is in Quebec, ask the provincial construction authorities what applies, because the requirements there may differ. Ask each major builder whether it must approve a new owner or add you to a supplier list. Treat each answer as a condition of closing.

Reading the schedule record

Ask how a late finish would affect the trades that follow framing. Ask for the schedule on recent jobs against the dates actually finished, and for the reasons for any slippage, whether weather, material delivery, labour or the builder’s own changes. Ask who absorbed the cost. Ask how quickly each builder pays and whether any has disputed an invoice. Weigh these answers against what the owner personally does to hold the schedule, and decide whether a poor record is something to price or to walk away from.

Who else might be buying

Ask the seller whether anyone else is looking, such as a builder wanting to bring framing in house or another framing contractor wanting the crews and accounts. Decide in advance what you are willing to rely on and what you will verify before committing, so that pace does not decide it for you.

• The share of revenue from each builder, and whether the relationships survive the owner’s departure
• Which crew leads and framers would stay, and on what arrangements
• Any structural deficiency or remediation, with documents
• Workers’ compensation and insurance status, and what you must register as the new owner
• Which licences, certifications or builder approvals you must hold yourself before closing