Trades and construction business valuations | IBV™

Prepare job costing, signed contracts, approved variations, claims, retentions, debtor ageing and subcontractor commitments. Which variations remain disputed? Have expected completion costs been updated? Identify warranties, defects obligations and any performance security. Where jobs are recorded at different stages, explain how their reported margins reconcile to the financial statements rather than relying only on the latest management summary.

The key deliverable is a contract completion and working capital reconciliation. It should show how recoverable work, remaining costs and obligations inform the earnings assessment and explain the boundary between operating assets and business goodwill. The report should also distinguish committed work from tenders so unawarded projects do not silently become part of established earnings.

Contracting models create different risks. Maintenance work may depend on technician utilisation, travel and callout density; projects may commit labour and materials months before collection. Separate these activities before interpreting consolidated margins. A strong service division can conceal fixed-price installation losses, while a major project may temporarily inflate turnover without proving repeat demand.

For field services, examine productive versus paid hours, first-time completion and return visits. For installations, compare labour allowances with site hours, mobilisation and waiting. Higher charge-out rates mean little if access delays or scheduling erode capacity. Sustainable forecasts should reflect deliverable work rather than desired sales. Identify whether additional revenue requires more supervisors, vehicles, quoting resources or specialist labour and reflect these costs consistently instead of applying growth to the current cost base unchanged.

Review completed jobs alongside current work for systematic estimating errors. Compare allowances with material usage, subcontract packages, productivity and site overhead. Separate unusual events from recurring omissions such as supervision, waste disposal, accommodation or commissioning. Repeated reliance on optimistic variations to recover estimating shortfalls can indicate weaker economics than headline margins suggest.

Examine approval limits, supplier quote validity and the process for updating rates. Fixed-price commitments can lock in exposure before procurement. Where forecasts assume better buying terms or productivity, seek implementation evidence before applying an immediate uplift. Support margin expectations through particular contracts and proven operating changes, not an unexplained industry adjustment. Record which procurement commitments are fixed and which remain exposed, linking uncertainties to the relevant jobs rather than assume one generic cost increase affects every contract equally.

Physical completion may not end economic exposure. Review defects, repeat call-backs, disputed deductions, insurance notifications and remedial spending. Distinguish a known repair from ordinary expected rectification across the portfolio. Consider who performs the work, site access and realistic subcontractor recovery.

Obtain a register of bank guarantees, collateral, expiry conditions and release requests. Face value is not automatically an expected loss, but collateral may restrict cash and renewals may consume borrowing capacity. Legal and insurance advisers assess enforceability and coverage. Reflect supported costs and funding restrictions, specifying whether they affect earnings, net assets or equity reconciliation. Do not assume insurance covers every exposure or deduct a full security amount simply because it remains outstanding. Review whether recorded provisions and forecasts already capture the issue before adding another adjustment.

Map who coordinates access, solves technical problems and secures repeat work, beyond job titles. Customer relationships may sit with an estimator, supervisor or coordinator. Check whether drawings, price histories and maintenance records are available to the wider team.

Measure concentration by contribution and unpaid exposure as well as revenue. One principal may represent modest annual sales but dominate claims and future work. Specialist components create dependencies where lead times are long or substitutions require approval. Assess realistic delegation, documentation and transition arrangements. Licences, prequalification, contract consents and credit facilities may need adviser or counterparty confirmation; do not presume transferability. Review the cost of replacing an owner's quoting, supervision and relationship duties while considering whether those responsibilities can reasonably be covered by current personnel.

This illustration is not a client case or dispute-recovery prediction. A contractor prices a project on forecast material and labour costs. Revised procurement reveals additional expenses, reducing expected margin. An unapproved variation should not automatically restore the original profit expectation: investigate its basis and recoverability separately.

Customer receipts are also delayed while wages and suppliers remain payable. That creates a funding requirement distinct from margin erosion. Payment procedures differ by jurisdiction; Queensland guidance illustrates its own claims, schedules and adjudication framework, not a universal national outcome. Advisers assess the actual recovery pathway. The valuation should reconcile revised earnings, recoverable balances and finance without double counting a loss. Sensitivities should distinguish a temporary timing gap, an unrecoverable receivable and further completion costs because each affects the business differently.