What is a drywall contractor worth?

A drywall contractor hangs, tapes and finishes interior board, and it earns that money one project at a time. The lifts, stilts and taping tools are only part of the picture. A buyer may be pricing the chance that next year’s projects arrive, get finished to the same standard and get paid. This guide covers the questions that move that judgment: whose relationships bring the work, whether the crew stays, how earnings are recast, and why two contractors with similar sales can be priced differently. It describes mechanism only. It does not estimate what any particular business is worth.

Whose relationships bring the work

Ask whose phone rings when a general contractor needs a crew. If the answer is only the owner, the relationships are personal to the owner, so a buyer may ask whether they would survive a sale. That is the idea behind owner dependence. A contractor whose estimators, project managers or lead hands also hold the accounts looks different. Ask also whether the company works across both new construction and renovation, and how demand in each has held up. Ask whether any written agreement exists beyond project-by-project awards, and whether the work arrives by invitation to bid or by direct call. The answer shows how much the relationship is worth to someone who was not in the room when it was built. Ask also how long each of the largest accounts has stayed, and whether any has ever been lost, and why. Ask whether a lost account left over a pricing dispute or because the builder closed, since the two raise different questions.

Whether the crew stays

Ask how long the lead hands have worked for the company, whether they are employees or loosely committed subcontractors, and whether any have said what they plan to do after a sale. Ask whether a crew hired job by job could leave for a competing offer, and whether a retained crew shows on the payroll. Ask also who trains new hands, who does the final finishing pass, and who decides when a wall is ready to hand over. If one person holds all of that, the company has key person risk even if the owner is replaceable. Ask whether the crew has worked together for years or was assembled for the last big job. If workers are called subcontractors, a buyer may also check whether the Canada Revenue Agency would see an employment relationship, because the CRA says an employee generally works under the direction and control of the person who hired them.

Documentation of past work

If past jobs included fire-rated wall assemblies, ask which jobs they were, who inspected them and what the drawings called for. Records that answer those questions give a buyer something to read; without them the buyer has to guess. The same applies to any history of moisture or mould callbacks. Ask a qualified professional in your province what records apply to the kind of buildings you work on, rather than assuming a standard. Ask to read the files for a difficult job as well as an ordinary one, so you can see how the company records its work.

How earnings get recast

BDC says an accountant helps prepare the year-end and interim financial statements, projections and other documents that buyers typically ask to see during due diligence. For a drywall contractor, recasting can mean separating the owner’s own pay and personal expenses from the operating picture, then testing the margin. Review add-backs before you rely on any adjusted figure. Look at whether job costing is recorded by project, whether warranty work was booked or absorbed, and whether all labour was reported to the workers’ compensation board. Unreported labour is not an add-back. Ask whether it exists, because it is a question to be ready for. Also ask how the owner’s time is counted: if the owner works on the tools or runs every estimate, a buyer may need to replace that work with a paid employee, which would change the recast earnings.

Why similar contractors price differently

Two contractors with similar sales can look very different to a buyer for reasons that may not show on the income statement. These are points of difference to ask about:

• Who holds the general-contractor accounts, the owner alone or a team that a new owner inherits
• How much of the year’s revenue comes from a handful of general contractors, which is customer concentration
• Whether the crew is retained staff or a loose pool of subcontractors
• Whether past fire-rated and multi-unit work is documented well enough to defend
• Whether the workers’ compensation account is in good standing, since in Ontario the WSIB says a buyer of a business’s assets should get a purchase certificate and that it may hold the purchaser liable for amounts the vendor owes up to the date of sale without a valid one