Before you sell, merge or acquire, you better get your story—and your finances—straight.
When it’s time to sell your construction business, your financial statements become more than just spreadsheets—they are your story. And whether that story commands a premium price or scares buyers away depends on how well you’ve prepared the numbers.
Sellers often underestimate how closely buyers scrutinize financial statements. The good news is you can use this to your advantage.
Here’s what buyers really look for in financials and how to turn them into a strategic asset that drives up the value of your business.
Profit and Loss: Proving Repeatable Profitability
Purpose: Shows earnings performance over time. It’s the first place a buyer goes to evaluate whether your business is profitable and how predictable those profits are.
What Buyers Look For:
- Revenue consistency and trends (monthly/quarterly/yearly)
- Gross and net margins by business line or service type
- Customer and job mix (repair vs. replacement, residential vs. commercial)
- Normalized EBITDA (earnings before interest, taxes, depreciation and amortization) with owner-related and one-time adjustments
- Seasonality and how well it’s managed
Actionable Insights:
- Segment revenue and margin by job type or market (this shows where your profit comes from).
- Normalize EBITDA: strip out personal expenses, non-operational costs or one-time anomalies.
- Be ready to explain revenue dips or margin compression—buyers will assume the worst unless told otherwise.
Why It Matters:
A strong, clean profit and loss builds confidence that the business is healthy and transferable. If your profits are erratic, unexplained or inflated with personal perks, buyers will discount accordingly.
Balance Sheet: Revealing Financial Stability and Risk
Purpose: Offers a snapshot of the company’s financial health at a given moment—its liquidity, solvency and how much financial risk the buyer is inheriting.
What Buyers Look For:
- Working capital: Can the company meet short-term obligations?
- AR and AP aging: Are you collecting and paying on time?
- Debt levels: Especially short-term debt or high-interest liabilities
- Owner loans or unusual liabilities: These complicate transactions
- Equity composition: Does the capital structure make sense?
Actionable Insights:
- Clean up AR: write off bad debts and demonstrate collection discipline.
- Refinance or restructure any short-term or high-cost debt.
- Eliminate shareholder loans or reclassify them clearly.
- Document any major asset values (trucks, equipment, real estate) and depreciation schedules.
Why It Matters:
A messy balance sheet suggests poor financial management, even if the business is profitable. It can lead to escrows, earnouts or worse: a buyer walking away.
Cash-Flow Statement: Validating Operational Reality
Purpose: Tracks the actual movement of cash, which is crucial for construction businesses where revenue and expenses don’t always align.
What Buyers Look For:
- Cash flow from operations: Are you generating real cash from your core business?
- CapEx needs: Are you reinvesting in the business at sustainable levels?
- Debt service and distributions: Are you overleveraged or bleeding cash?
- Free cash flow: Is there excess cash to reinvest or distribute?
Actionable Insights:
- Demonstrate steady cash generation from operations—not just on paper, but in bank statements and reconciliations.
- Align CapEx and debt payments to show sustainability.
- Forecast cash flow going forward, not just retroactively.
Why It Matters:
EBITDA might be the headline number, but cash flow is what buyers care about when evaluating their real return. If your business consumes cash or relies on payment delays, it weakens trust and value.
Red Flags That Trigger Buyer Skepticism
Even great businesses can get picked apart during due diligence. Here are common red flags that you’ll want to address—and how to address them—before listing your company for sale:
Customer concentration: If more than 25% of your revenue comes from one client, diversify before going to market, or be ready to justify the relationship’s durability.
Inconsistent financials: Fluctuating revenue, irregular margins or major accounting changes raise eyebrows. Explain the “why” behind the numbers.
Poor documentation: Buyers want clean, accrual-based books with clear job costing. If your statements look like an internal cheat sheet, invest in cleanup now.
Excessive debt or legal issues: Outstanding tax liens, unresolved lawsuits or vendor disputes can torpedo a deal. Disclose and mitigate them early.
The Strategic Role of an M&A Advisor
A good mergers and acquisitions advisor, like Axia Advisors, doesn’t just “list” your business. They help you frame your story, clean up your numbers and protect your value throughout the due diligence process.
Advisors help owners:
- Normalize and defend EBITDA with clear documentation
- Frame your financials to reduce buyer-perceived risk
- Use industry comps and strategic positioning to justify a premium multiple
- Navigate tough negotiations with data, not emotion
- Avoid the “death by a thousand questions” that derails unprepared sellers
- Get you the best terms and deal structure
Final Word: The Exit Is in the Details
Your financials don’t just reflect past performance—they shape buyer confidence. And in mergers and acquisitions, confidence equals value. Make sure your books are ready before you start shopping for a buyer.
Whether you’re three months or three years from selling, it’s never too early to start preparing. Because when the numbers tell the right story, you don’t just sell your business—you maximize what it’s worth.
SEE ALSO: PRIORITIZING SUCCESS: SUCCESSION PLANNING BEYOND THE COMPANY WALLS
