Construction Business Valuation in NZ: The Questions That Matter

Construction businesses are often valued on more than last year's profit. Buyers need to understand the quality of the project pipeline, work in progress, equipment and the people who deliver the contracts.

Test the earnings quality

Separate completed work from unrecognised risk in work in progress. Review gross margin by project, variations, retention, warranty claims, debtor ageing and the cost of rework. A large pipeline is not the same as profitable contracted work.

Test transferability

Ask whether key contracts can be assigned, whether licences or registrations are tied to individuals, and whether customers buy the company or the owner personally. Document estimating, project management, health and safety and supplier processes.

Test asset and people risk

Review vehicle and equipment condition, finance, replacement needs, subcontractor dependence and skilled staff retention. Use a business valuation as a first framework, then ask an accountant and lawyer to review the evidence.