Starfish Coaching · Selling Your Business
A buyer's checklist for design and construction owners, anywhere
A buyer is not paying for what you built. They are paying for what will keep earning after you have gone, and they will spend their checking period trying to prove it will not. This page is the list they work from, with a number you can pull from your own business for each item before they ask.
Every item on a buyer's list is a way of asking one thing: will these earnings still arrive when the owner is gone? The buyer checks in a process called due diligence, by asking for documents, comparing them with what you have said and speaking to the people who hold the business together. Anything they cannot verify, they price against you.
That is why a gap costs more than it appears to. What a buyer finds, they price for, and usually more harshly than the gap deserves, because uncertainty gets discounted. Each gap reads as risk in due diligence, and risk comes off the multiple. How the multiple is built is explained in how to value a construction company. This page covers what the buyer looks at to decide it.
Buyers don't pay for what you built. They pay for what runs without you.
The Exit Readiness Scorecard reads the eight components of a business the way a buyer does, as eight value drivers. They are set out below starting with the numbers, because everything else is checked against them. For each one you will find what the buyer is asking, what they ask to see, and a number you can pull now.
They ask to see: financial statements and tax returns for each of the last several years and the year to date, job cost reports with margin by project, and the aging of receivables and payables. The test is whether your books are clean enough to survive due diligence tomorrow, and whether your reporting is timely and consistent from month to month.
Your number: the margin on each of your last several jobs, taken from your own job cost records. The overhead and profit calculator shows what a company keeps after job costs and overhead.
They ask to see: revenue by client, repeat work against one-off work, the schedule of signed work and the pipeline, with how each job was won. The test is whether new work arrives through a repeatable system and not through your personal relationships, and whether any single client is more than 15% of revenue.
Your number: your largest client's share of revenue, and your repeat work as a share of the total.
They ask to see: an organization chart, who holds each client relationship, the pay and tenure of key people, and any agreements that keep them. The test is whether a manager could run day-to-day operations without you, and whether your key people would stay through and after a sale. See how a construction company organization chart should grow.
Your number: the decisions that reached you last week that someone else could have made.
They ask to see: written processes, contracts, licences and key agreements, with any terms that stop them passing to a new owner, and a list of equipment and who owns it. The test is whether a new owner could follow your documented processes without you explaining them, and whether quality depends on you reviewing the work.
Your number: how many of your core processes are written down, out of the total.
They ask to see: warranty claims and callbacks, disputes, insurance claims history, the safety record and any issues still open. The test is whether the business would run normally if you were unreachable for a month, and whether there is anything a buyer would discover and discount for.
Your number: the problems that reached you last month, and how many were closed without you.
They ask to see: goals set and met over the last several years, and the trend in the financial statements. The test is whether your performance shows a trend and not just activity, and whether you can show that improvements here happen deliberately.
Your number: one measure that you set a target for and then hit, with the years side by side.
They ask to see: plans that extend past your own involvement, your market position and what a new owner could add. The test is whether a buyer could see a clear path to growth, and whether your market position would hold up to scrutiny from an outsider.
Your number: whether those plans are written down, and whether they still make sense with you gone.
They ask to see: nothing in writing. A buyer reads it from how you behave, in slow answers, second thoughts and an owner who cannot let go. Plenty of owners get the business ready and then find that they are not.
Your answer: what you will do the day after the sale, written down.
Buyers send a request list early in their checking. Having these ready, in a form a stranger can follow, removes the questions they would otherwise price. Each item you cannot produce is a question left open.
Names and rules differ by country, so ask your lawyer and your broker what a buyer where you are will expect.
Buyers are not alike, and the same business can look different to each of them. Whoever it is, the same eight tests apply. What changes is which ones they press hardest.
If the buyer is your partner or a key employee, the tests are the same but the price is set differently. That is covered in selling to a partner or on the market.
You can run the buyer's check on yourself, in three steps, before anyone else does.
Take the eight tests and the six groups of documents. Mark each as ready, partly ready or missing. Your number: how many are missing.
A gap with no owner and no date is a wish. Decide who closes each one and by when, starting with the ones that need a trend, because those need time. When to start planning your exit shows how to count the time you have.
The free Exit Readiness Scorecard scores the same eight tests. The Exit Readiness Assessment goes through all eight in writing, estimates what each gap is costing you in multiple and sequences the work against your exit date.
This page is general information for owners of design and construction businesses. It is not legal, tax or financial advice. Rules differ by country and by how a sale is structured, so take advice from your own lawyer and accountant before you act.
Earnings that will continue after the owner leaves. That breaks down into eight tests: clean financials, predictable revenue, a management team that runs the business, work that can be handed over, resilience when problems arise, a record of deliberate improvement, a credible future and an owner who is ready to go. The more of them a buyer can verify, the less risk they price in.
It is the buyer's checking period after an offer has been agreed in principle. They ask for documents, test them against what you told them, speak to key people and look for liabilities. A price can move during due diligence if something is found, which is why it helps to find it first.
At a minimum: several years of financial statements and tax returns, job cost reports, a schedule of work in progress and signed work, revenue by client, key contracts, licences and insurance, an employee list with agreements, equipment and debt schedules, and your written processes. The full list is on this page. Ask your lawyer what a buyer where you are will expect.
Busy is not the same as sellable. A buyer cares whether the work is signed, whether it earns a known margin and whether it would continue without you. A full order book that depends on your personal relationships is read as a risk and not as an asset.
Often yes, because the people are a large part of what a buyer is buying, and a buyer will look at whether your key people would stay through and after a sale. Find out what would keep them, and talk to your lawyer about how and when to approach them, because timing and confidentiality matter.
Individuals who want to run a business of their own, competitors and larger companies looking to add clients, crews or capacity, and investors who buy earnings that run under management. Which of them is likely to be interested depends on your size, your trade and your region.
Yes, it changes who is interested and how they value the business. A firm with a management team is read differently from one that is a single owner's job. Size, trade, region and owner dependence all move the number, so the useful question is how your business compares with others like it, and a broker in your market can tell you.
The Exit Readiness Assessment is $2,500, credited in full against your first monthly payment if you join the Master Plan Program within one month. It reads your business against these eight tests, shows what each gap is costing you in multiple, and sets out what to fix first. If you would rather talk first, talk it through with Eric.
Eric Lee · Starfish Coaching · 1937 Triumph St, Vancouver BC V5L 1K6
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