What distinguishes commercial service from project contracting?
Separate repairs, maintenance, urgent response, testing, and small replacements from scheduled construction. A firm may do both. Show each model's revenue and margin before describing the whole company. This prevents strong performance in one line from concealing different costs, cash needs, or dependencies in another.
Who buys and approves work? Facility manager may approve repairs but need others for replacements. One manager may control several buildings. Explain rates, authority, and seller ties. Buyer needs the actual purchasing process rather than assume each billing address or contract cover sheet represents an independent customer.
Begin with the selling hub. Use the construction guide for material project work and residential guide for consumer repairs. Keep models separate. Mixing totals can hide which customers, work, costs, and cash cycles actually support the earnings buyer intends to continue.
What contract evidence should the seller assemble?
Register customer, scope, rates, term, renewal, cancellation, response, coverage, payments, and ownership-change provisions. Keep signed contracts and amendments behind it. Summary points reviewers to real terms; it does not replace counsel. Distinguish current signed wording from old versions or proposed changes awaiting customer approval.
Separate binding maintenance duties, vendor status, and repeat buying. Rate agreements may promise no minimum volume. History supports demand review without guaranteeing future work. Buyer needs both actual terms and observed purchases before treating annual spend or expected renewal as committed receipts under new ownership.
Do terms require assignment, notice, consent, or new agreement? Counsel reviews wording and law. Time disclosures around findings and deal stage. Early broad notices may unsettle accounts; missed required approval may delay close. Protect privacy while assigning the actual step needed before contract rights continue.
How should customer concentration be measured?
Show revenue, gross profit, receivables, and backlog by customer and period. Use coded IDs early. Explain related firms and common control. An illustrative ten buildings under one manager may be one concentrated relationship despite ten invoice addresses; count alone does not settle independent demand.
Look beyond largest share. Check trends, tenure, bids, quality, and seller involvement. Old accounts can face manager turnover. New wins may add earnings before retention is proven. Keep actual observed history and current terms visible rather than use a familiar name as assurance the work will stay.
Show staff contacts, reports, rates, and escalation. If seller alone knows invoice approver, transition needs differ. A clear account register helps separate company process and personal ties. Test what team actually handles so documentation does not become assumed proof of a relationship staff cannot yet manage.
What counts as backlog in this model?
Authorized backlog is work approved for future delivery under the stated reporting method. Define signed orders and other included approvals. Keep estimates, probable work, and expected renewals separate. One total should not quietly combine confirmed jobs and forecasts with different evidence, costs, and cancellation conditions.
For material jobs, list scope, price, billing, deposits, completion cost/date, and crews. Show cancellation and approval conditions. Update completed or changed work. Buyer should not rely on an old list that includes finished jobs, omits costs, or labels a pending customer response as authorization.
| Pipeline category | Evidence | Buyer interpretation |
|---|---|---|
| Authorized repair or replacement | Signed order or documented approval | Test remaining margin and execution |
| Scheduled maintenance | Contract and service calendar | Test obligation, price, and renewal |
| Submitted estimate | Quote and customer response | Treat conversion as uncertain |
| Expected renewal | History and current discussions | Avoid calling it guaranteed work |
| Disputed change order | Correspondence and approval status | Review collection and scope risk |
Backlog is not gross-sales value. Costs remain and crews may already serve other calls. Does earnings forecast include its benefit? Reconcile before adding price. Distinct spreadsheet labels do not justify counting the same expected contribution both in business earnings and as a separate backlog asset.
How do you connect job margins with collections?
Track completion, billing, acceptance, and payment. Commercial invoices may need purchase orders and manager approvals. Explain missing orders and disputes. Reported profit can still tie up cash. Buyer needs real cycle and funding evidence before treating invoices as receipts already available for payroll or debt.
Bridge aging, ledger, and later receipts. Identify retainage where relevant, credits, write-offs, and disputes. Slow documented payment differs from unapproved amounts. Do not assume every old invoice collects fully. The decision file should show actual supporting records and unresolved sums, not only the aggregate balance.
Use monthly records and jobs to separate seasons and late accounts. Buyer may need cash for labor and materials before payment. Agree receivable treatment and working-capital target. Keep definitions consistent so parties do not unknowingly fund, exclude, or charge the same assets differently across price and closing schedules.
What staffing capabilities must continue?
Map needed response hours, credentials, site access, and equipment to team. Identify supervisors, estimators, field staff, apprentices, dispatch, and documentation roles. A roster does not alone show that every customer condition can be met. Actual people and availability need to fit the post-close service plan.
Cost overtime, on-call coverage, and urgent response. Can staff honor promised speed during vacations, departures, or simultaneous calls? Show actual coverage. Theoretical spare capacity is not necessarily available work. Include required skills, support, and timing before forecasting more profitable jobs from existing headcount.
Does seller price hard jobs or resolve every contract issue? Prove delegation and replacement cost. Review relevant licenses and company approvals for buyer. Qualified work and account continuity are different dependencies. Both need a funded plan, with actual people and permissions effective when operations require them.
Which buyer types may fit the operation?
A commercial contractor may fit approvals and crews; a regional operator may fit territory; a multi-trade group may fit facilities. These are possible strategies, not proven premiums or offers. Compare actual buyer resources and plans rather than infer terms from a label or presumed interest.
Screen management, licenses, funds, and account conflicts. Competitors need controlled information. Agree when names and customer contact are needed. Financial summaries should not automatically expose every account. Record scope, access, and approved contact so buyer review does not disrupt relationships or bypass the seller's actual disclosure plan.
The SBA 7(a) program may fit qualified borrowers and deals. Lender reviews current rules, equity, repayment, and project uses. The acquisition guide covers structure limits. Review proposed contingent price with lender before assuming it fits SBA; expected renewals are not guaranteed approved revenue.
What does a proceeds comparison need to include?
Define receivables, deposits, open-job duties, stock, and equipment included. Separate closing cash, notes, escrow, and contingent price. If an allowed earnout uses retained accounts, review buyer's pricing, work allocation, and measurement control. Funding and actual terms need to support that structure before the nominal amount becomes a proceeds assumption.
Form 8594 instructions address covered asset-purchase reporting. Coordinate allocation with tax advisers. Publication 537 covers installment rules and limits. Deferral does not mean all tax waits for payment. Actual assets, basis, structure, and exceptions need review rather than one blanket after-tax assumption.
Use the Deal Proceeds Bridge for consistent offers. In an invented $1,500,000 price, $200,000 escrow and $250,000 seller financing leave $1,050,000 initially before other deductions. Later amounts carry different payment and claim risks. This is arithmetic, not a market price or forecast that all retained sums pay in full.
What should the seller finish before approaching buyers?
- Reconcile segment earnings, job costs, receivables, and collections.
- Prepare executed-contract and authorized-backlog registers.
- Identify customer concentration and common purchasing control.
- Document crew capabilities, owner roles, and license dependencies.
- Review transfer provisions, service obligations, and communication timing.
- Define purchase scope and the treatment of open work.
Material drain work needs the specialist guide for assets and safety. Link customer approval, delivered work, profit, receipts, and remaining duties. This evidence helps buyer judge value better than contract or backlog counts alone. Keep actual findings and open conditions clear in the sale package.