Read this if you are buying a construction company.

April 14, 2025

by a professional in New York, NY, USA

Buying a construction company?
Look at WIP schedules Get a good understanding of:
Total project values
How much has been billed and collected
What percentage of each project is complete
Whether you are overbilled or underbilled
How accurate your past estimates have been
Why? Because construction revenue is lumpy, and cash collected does not always mean revenue earned.
I help buyers clean up and analyze these reports before they acquire.
If you are buying a construction business, make sure you understand WIP. It can make or break the deal. Email me redacted for help.

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Reply by an intermediary
from Harvard University in Boston, MA, USA

^Luke Tatone‌ 100000%. I got started in M&A after selling my construction co 18 years ago (time flies), but we had to first move our QB accounting all over to ERP (my first such implementation!), then Sage Masterbuilder, now Contractor 100, to truly nail WIP and job-costing. This becomes critically important for commercial, heavy, or other work spanning longer periods. On one biz we are assisting now, our team is valuing based on multi-year averages to help with lumpiness while we finalize latest WIP details with our accounting team. In a smaller co, one big deposit or invoice on a project changes everything. You can't just hit 'Accrual' or 'Cash' in QuickBooks (as someone suggested).

Reply by a searcher
from Rollins College in Orlando, FL, USA

Great points! Very crucial part of any construction deal! A comprehensive understanding of revenue recognition is also very important. For long-term projects, some contractors will delay revenue recognition in order to record lower profits close to year-end to delay taxable income then when the project is completed, there is a big jump in revenue. So smoothing that out in a more accurate project accounting method helps understand earnings.

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