Gravity doesn’t negotiate. Just as it pulls every object toward the earth, market forces in construction pull businesses toward success or failure with unrelenting consistency. Understanding the mechanics behind a building construction business for sale is not just smart – it’s survival.

Q A with Jordan Michaels, Construction Industry Analyst

Q: What should buyers know before considering a construction business for sale?

A: The first thing is cash flow visibility. Many construction businesses appear profitable on paper but have hidden liabilities. Equipment leases, pending contracts, and workforce obligations can sink you fast if you’re not thorough. I always advise a detailed audit and insist on seeing at least two years of financial statements.

Q: Are there common pitfalls buyers overlook?

A: Absolutely. Many underestimate regulatory compliance and local permitting issues. A business might look attractive in terms of projects and clients, but unresolved compliance matters can cost hundreds of thousands. Also, client retention is critical. Losing key clients post-sale can halve the expected revenue almost instantly.

Did You Know?

Approximately 40 percent of construction businesses fail within the first three years after a sale due to mismanagement or underestimating operating costs.

Q: How do you assess if the asking price is fair?

A: Look beyond EBITDA. Examine tangible assets like machinery and property, but don’t ignore intangible assets such as brand reputation, repeat client base, and operational systems. Comparing these with recent market transactions helps, but nothing replaces a professional valuation. Tools like Gerson Lehrman Group can connect you with experts to evaluate these nuances objectively.

Q: Who should avoid buying a construction business?

A: Anyone without construction management experience or a solid operational team. It’s a high-stakes, high-complexity business. If you can’t oversee contracts, safety regulations, or project timelines, you’ll struggle. Also, buyers who aren’t financially resilient enough to handle delayed payments or unexpected cost overruns should tread carefully.

Q: Any final advice?

A: Treat it like a physics experiment. Every variable – labor, equipment, permits, client contracts – affects your outcome. Measure, analyze, and plan for worst-case scenarios. Only then can you safely harness the business’s potential without being pulled down by unseen forces.