The trades and construction sector is one of New Zealand's most resilient industries. From plumbers and electricians to builders, painters, and landscapers, trade businesses offer steady demand, strong cash flows, and real opportunities for buyers who understand the industry. But buying a trade business also comes with unique risks — from licensing requirements to staff retention. Here's what you need to know.
Why Buy a Trade Business in NZ?
New Zealand's construction pipeline remains robust despite economic cycles. The country's housing shortage, infrastructure investment, and growing renovation market mean skilled trades are consistently in demand. Trade businesses often generate reliable, recurring revenue through service contracts, maintenance agreements, and repeat customers.
Compared to retail or hospitality, trade businesses tend to have:
- Higher profit margins — especially in specialist trades like electrical or HVAC
- Lower foot traffic risk — income is project-based or contract-based, not dependent on passing trade
- Stronger defensibility — barriers to entry include licensing, qualifications, and established customer relationships
Types of Trade Businesses for Sale in NZ
Common types of trade businesses that come to market include plumbing and gasfitting businesses, electrical contracting businesses (Registered Electrical Contractor/REC licence required), building and construction companies, painting and decorating businesses, roofing contractors, landscaping and outdoor businesses, HVAC (heating, ventilation, air conditioning) businesses, and drainage and civil works companies.
Key Factors to Evaluate Before Buying
1. Licensing and Certifications
Many trade businesses in NZ operate under licensed or registered trades. For example:
- Electrical work requires a Registered Electrical Contractor (REC) licence issued by the Electrical Workers Registration Board
- Plumbing and gasfitting requires registration with the Plumbers, Gasfitters and Drainlayers Board
- Restricted building work requires a Licensed Building Practitioner (LBP) licence
If the current owner holds personal licences and these cannot transfer with the business, you may need to hire a qualified tradesperson or obtain your own licence before operating legally. Always clarify this with a lawyer during due diligence. A business that relies entirely on the owner's personal licence may be significantly harder — or more expensive — to take over than it first appears.
2. Staff and Subcontractors
Trade businesses are people-dependent. When evaluating any trade business for sale, ask:
- Are key staff (foremen, qualified tradespeople) on formal employment agreements?
- What is the staff turnover history over the past three years?
- Does the business rely heavily on subcontractors, and are those relationships documented?
- Are there any outstanding employment disputes or personal grievances?
Under New Zealand's Employment Relations Act, when you buy a business as a going concern, employees may have the right to transfer to the new owner on the same terms and conditions. This is a critical area — get legal advice on your obligations before signing anything.
3. Tools, Vehicles, and Equipment
Most trade businesses hold significant asset value in vehicles, tools, and equipment. During due diligence, verify:
- Are vehicles and equipment owned outright or under finance (hire purchase, chattel mortgage)?
- What is the age and condition of key assets?
- Is there a comprehensive, up-to-date asset register?
Outstanding finance on vehicles or equipment is a liability that passes to the buyer unless negotiated otherwise in the sale and purchase agreement. Always request a PPSR (Personal Property Securities Register) search to identify any security interests registered against business assets.
4. Customer Concentration Risk
A healthy trade business spreads revenue across many clients. If one large developer or commercial client accounts for more than 30–40% of revenue, losing that relationship could be devastating. Ask for a customer revenue breakdown and consider:
- Are key contracts in writing and transferable to the new owner?
- What is the relationship between the key client and the current owner — personal or business?
- Have you spoken with key clients (with the vendor's permission) about their intention to continue?
5. Work in Progress (WIP) and Retentions
Construction businesses often carry significant work in progress (partially completed jobs) and retentions (money held back by clients until defects liability periods expire). Make sure you understand:
- What WIP is included in the sale price, and how is it valued?
- Who is responsible for completing jobs started before settlement?
- What retentions are outstanding, and when are they due to be released?
- Are there any defects liability claims or disputes on completed work?
Getting a clear picture of WIP and retentions is essential — they represent both assets and potential liabilities that will fall to you as the new owner.
How to Value a Trade Business in NZ
Trade businesses are typically valued using a multiple of Seller's Discretionary Earnings (SDE) or EBITDA (earnings before interest, tax, depreciation, and amortisation). Common multiples in the New Zealand market range from 2x to 3.5x SDE, depending on:
- Strength and diversity of the customer base
- Whether the business can operate profitably without the owner on the tools
- Quality, age, and condition of vehicles and equipment
- Strength of the revenue pipeline (booked and contracted work)
- Industry and geographic niche (specialised trades often command higher multiples)
A business that is owner-operator-dependent — where the owner does most of the skilled work and holds all the key client relationships — will command a lower multiple than one with trained staff, documented processes, and a strong forward order book. This is the single biggest driver of value in trade businesses.
Red Flags to Watch Out For
When reviewing a trade business, be alert to these warning signs:
- Unlicensed or unconsented work history — building work carried out without the required consents can expose the new owner to liability, remediation costs, or enforcement action
- High owner involvement — if all key client relationships and technical knowledge sit with the vendor, the goodwill may not transfer effectively to a new owner
- Cash-heavy transactions — undeclared cash income makes financials unreliable and creates tax risk for the buyer
- Aging equipment and deferred maintenance — a fleet of old vehicles or worn tools signals imminent capital expenditure shortly after purchase
- No documented systems or processes — a business that runs entirely in the owner's head is difficult and risky to take over
Tips for a Successful Purchase
Hire a specialist lawyer familiar with business sales — ideally one with trade or construction sector experience. The purchase and sale agreement, employee transfer provisions, and licence transfer arrangements all require careful legal attention.
Get a financial review from an accountant and ensure at least three years of financial statements (including GST returns) are available for review. Ask for management accounts if year-end financials are not current.
Request a transition period where the vendor stays on for three to six months post-settlement to introduce you to key clients, staff, and suppliers. This handover period is often the difference between a smooth takeover and one that sees clients walk.
Negotiate vendor finance — many trade business sellers will carry part of the purchase price as a loan repaid over one to three years. This aligns the seller's incentive with your success and reduces your upfront capital requirement.
Check insurance requirements from day one. You will need public liability insurance, works insurance, and employer's liability cover in place from settlement. Check whether any existing insurance policies can be transferred or must be replaced.
Conclusion
Trade and construction businesses represent excellent buying opportunities in New Zealand — provided you do thorough due diligence. The combination of licensing complexity, staff considerations, work in progress, and asset-heavy balance sheets means these deals carry more moving parts than a simple service business acquisition. With the right legal and financial advisors, and a clear understanding of what drives value in the trades sector, a well-run trade business can deliver strong, sustainable returns for years to come.
Disclaimer: This article is for informational purposes only and does not constitute professional advice. Consult a licensed professional before making any business decisions.