Illustrative composite. Hypothetical illustration. This is not a completed transaction, client case, appraisal, lender approval or market comparable. All job balances, costs, financial inputs, pricing factors, terms, and tax allowances below are explicitly chosen assumptions.
What does the repipe snapshot assume?
Use the valuation hub for the broader earnings framework. This example follows a assumed contractor with three unfinished completion jobs and one separately cancelled job.
Assume twelve-month revenue of $3,600,000 ending September 30, 2026. Book EBITDA is $390,000 after $145,000 owner pay. A supported nonrecurring expense is assumed to be $35,000.
Recurring replacement duties cost an assumed $190,000. These are annual company inputs; they do not prove the accounting treatment of every unfinished job.
| Snapshot input | Hypothetical amount | Defined scope |
|---|---|---|
| Annual revenue | $3,600,000 | Stated twelve-month period |
| Book EBITDA | $390,000 | Owner pay already expensed |
| Owner compensation | $145,000 | Added back once |
| Nonrecurring expense | $35,000 | Assumed support and recurrence |
| Replacement duties | $190,000 | Necessary annual cost |
| Historical deposits on completion jobs | $95,000 | Different from transferred cash |
No real contracts, customer identities, project locations, or completed repipes are represented. The ledger is an example of review choices.
How does the completion ledger define available resources?
For each completion job, identify remaining supported cost, transferred available cash, and collectible remaining customer balance. Keep earned revenue and deposit accounting in a separate reconciliation.
Assume $75,000 of the $95,000 historical deposits transfers and is available. The other $20,000 does not fund this buyer model.
The IRS recordkeeping publication supports retaining underlying records and expense evidence. It does not prescribe or approve the example’s acquisition worksheet.
| Completion job | Remaining cost | Transferred available cash | Collectible remaining balance |
|---|---|---|---|
| A | $100,000 | $20,000 | $50,000 |
| B | $60,000 | $45,000 | $30,000 |
| C | $80,000 | $10,000 | $60,000 |
| Total | $240,000 | $75,000 | $140,000 |
The collection amounts are assumptions, not customer confirmations. A signed contract and a receivable schedule still need evidence of rights, timing, completion conditions, and collectibility.
The quality-of-earnings guide connects reported balances to real records. A workbook total does not prove that funds have transferred or are usable.
Why do job-level and pooled gaps differ?
Under restricted job funding, calculate each gap as the greater of zero or remaining cost minus transferred cash minus collectible balance.
Job A has $100,000 − $20,000 − $50,000 = $30,000 gap. Job B has a $15,000 modeled surplus, so its positive gap is zero. Job C has $80,000 − $10,000 − $60,000 = $10,000 gap.
The restricted positive gaps total $40,000. This view does not use Job B’s surplus to fund other work.
If pooling is clearly permitted and timing is adequate, calculate the aggregate gap: $240,000 − $75,000 − $140,000 = $25,000.
| Funding view | Hypothetical gap | Difference in assumptions |
|---|---|---|
| Restricted completion jobs | $40,000 | Positive shortfalls summed separately |
| Permitted pooled completion jobs | $25,000 | Job B surplus offsets other shortfalls |
| Difference | $15,000 | Exactly the modeled Job B surplus |
Neither result measures the buyer’s peak cash need. If all remaining costs occur before the assumed customer collections, available transferred cash alone leaves $165,000 to fund initially.
That timing stress is $240,000 − $75,000. Later collection of $140,000 would reduce the modeled cumulative gap to $25,000, provided the stated receipts actually occur.
Do not call a timing gap a permanent loss. Keep cash availability, collection risk, and job margin separate.
How does the cancelled job follow a different path?
Assume Job D has a documented $25,000 refundable obligation and $10,000 transferred funding assigned to that refund. Its chosen refund funding gap is $15,000.
Job D is excluded from the three completion jobs. Including its full completion budget and full refund in one scenario would count incompatible assumptions together.
| Separate refund input | Hypothetical amount | Treatment |
|---|---|---|
| Refund obligation for Job D | $25,000 | Chosen refund path |
| Transferred refund funding | $10,000 | Available under the assumption |
| Refund funding gap | $15,000 | Separate from completion gaps |
Combining the pooled completion gap and this refund gap gives $40,000. Combining the restricted completion gaps and refund gap gives $55,000.
Those are alternative funding views. They are not two cumulative deductions from price.
California’s 2026 law book contains covered home-improvement contract and change-order requirements with their conditions. It is a jurisdiction-specific source, not a national refund or deposit rule.
Actual contract rights, assignment, permits, disputes, and relevant consumer requirements control the real treatment. Counsel should review open alternatives before closing assumptions rely on them.
How does annual normalization remain independent?
Start with $390,000 book EBITDA. Add $145,000 owner pay and $35,000 nonrecurring cost, then deduct $190,000 replacement duties.
The result is $380,000 normalized annual earnings: $390,000 + $145,000 + $35,000 − $190,000.
The add-back guide addresses support for those changes. Do not add the $140,000 remaining customer balances as extra earnings merely because they appear in the completion ledger.
Completed work, revenue recognition, future costs, and the stated annual period need reconciliation. The model does not remove a job cost from annual earnings and also treat its entire funding requirement as another earnings adjustment.
FASB staff implementation material discusses real promises and payment timing. This educational material does not supply a universal accounting conclusion for every repipe contract.
IRS accounting-method guidance addresses tax timing separately. Deposit cash, financial revenue, tax income, and cost to complete are not interchangeable worksheet labels.
What price range follows from the stated factors?
Choose factors of 2.7, 3.2, and 3.7 solely for this example. They are not observed market multiples, appraisal support, or a recommendation.
| Arbitrary factor | Normalized earnings | Illustrative business price |
|---|---|---|
| 2.7 | $380,000 | $1,026,000 |
| 3.2 | $380,000 | $1,216,000 |
| 3.7 | $380,000 | $1,406,000 |
The midpoint business price is $1,216,000, assumed debt-free and cash-free with defined working capital and no real estate.
The completion gaps remain separate from that convention. Actual negotiations must state which cash and obligations transfer and how they interact with the delivered working-capital target.
The working-capital guide develops those definitions. Do not subtract the same deposit or funding amount again through an unrelated adjustment.
How does the structure translate into seller proceeds?
Allocate the midpoint into $916,000 gross closing cash, $200,000 seller-note principal, and $100,000 held funds. Together they total $1,216,000.
Assume seller debt of $210,000, transaction expenses of $56,000, and a $200,000 tax placeholder. The allowance is chosen rather than a math of real liability.
| Seller component | Hypothetical amount |
|---|---|
| Gross closing cash | $916,000 |
| Debt payoff | −$210,000 |
| Transaction expenses | −$56,000 |
| Tax placeholder | −$200,000 |
| Immediate modeled net cash | $450,000 |
Immediate proceeds are $916,000 − $210,000 − $56,000 − $200,000 = $450,000. Note collections and held-fund release remain separate and uncertain.
Where SBA financing is proposed, the October 2026 SOP update uses defined purchase-price and category conditions for required independent lender QoE. This seller worksheet does not replace that review.
What is the transferable lesson from the funding bridge?
Backlog can include future obligations as well as future receipts. The seller’s historical deposit collection does not identify cash delivered to the buyer.
Work through the ledger in order:
- Assign each job a supported completion, cancellation, or unresolved path.
- Verify cash actually transferred and collectible remaining balances.
- Calculate restricted and permitted pooled gaps separately.
- Test payment timing before relying on later collections.
- Reconcile accounting, contract rights, and negotiated liability treatment.
- Keep annual earnings, price, and seller proceeds on their stated bases.
In this composite, restricted and pooled completion gaps differ by $15,000. Clear definitions reveal that difference without inventing a client result or an automatic price deduction.