Construction company valuation
Australian construction businesses typically value at 2.0 to 3.5 times normalised EBITDA. The valuation turns on work-in-progress accounting, retentions and the quality of the forward order book rather than on the reported profit figure.
Profit in construction is an accounting position as much as a cash one. Two builders with identical bank balances can report profits that differ by hundreds of thousands depending on how progress claims, WIP and retentions were recognised — so the first job in any construction valuation is establishing what was actually earned.
Quick answer
What is a construction business worth?
Normalised, WIP-adjusted EBITDA multiplied by 2.0× to 3.5×, cross-checked against net asset backing. A signed forward order book, repeat commercial clients and QBCC capacity held in the entity support the top of the band. Project concentration, disputed variations and defect exposure pull it down — and a builder with no contracted forward work is difficult to value above asset backing at all.
What moves the number
What a construction valuation actually turns on
Reported profit is the starting point and rarely the answer. These five factors decide both the earnings figure and the multiple applied to it.
| Factor | Pushes toward the top | Pulls toward the bottom |
|---|---|---|
| Forward order book | Signed contracts extending twelve months or more, with margin visible | An empty pipeline, or a book of verbal commitments and repeat expectations |
| WIP and retentions | Consistent, documented percentage-of-completion accounting; retentions tracked and collectible | Profit recognised on claim, retentions unrecorded, WIP that moves with the tax outcome |
| Client mix | Repeat commercial and government clients, spread across projects | One project or one principal contractor carrying most of the revenue |
| Licences and capacity | QBCC licence and financial capacity held in the entity being sold | Capacity dependent on the owner’s personal net assets or guarantees |
| Defect and dispute exposure | A clean claims history with provisions supported by actual rectification cost | Live disputes, unresolved variations, or defect liability with no provision |
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Forward order book
↑ Signed contracts extending twelve months or more, with margin visible
↓ An empty pipeline, or a book of verbal commitments and repeat expectations
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WIP and retentions
↑ Consistent, documented percentage-of-completion accounting; retentions tracked and collectible
↓ Profit recognised on claim, retentions unrecorded, WIP that moves with the tax outcome
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Client mix
↑ Repeat commercial and government clients, spread across projects
↓ One project or one principal contractor carrying most of the revenue
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Licences and capacity
↑ QBCC licence and financial capacity held in the entity being sold
↓ Capacity dependent on the owner’s personal net assets or guarantees
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Defect and dispute exposure
↑ A clean claims history with provisions supported by actual rectification cost
↓ Live disputes, unresolved variations, or defect liability with no provision
Normalising the earnings
Normalising a builder’s accounts
Construction requires more restatement than any other sector we value, and most of it happens before a multiple is even discussed.
How the earnings method works →- Work in progress restatement Unbilled work and over-claiming reallocated so profit sits in the period it was earned
- Retentions Held retentions recognised, aged and assessed for collectability
- Owner remuneration Costed at market for the estimating, project management and oversight actually performed
- Plant hire versus ownership Related-party hire charges brought to market rates
- Defect and warranty provisions Reinstated where absent, based on rectification history
- Project one-offs A single exceptional or loss-making project isolated and disclosed
Worked example
Worked example: a commercial fit-out builder
Reported profit averages $780,000 over three years, but the WIP schedule shows one year materially over-claimed. Restated on a consistent percentage-of-completion basis, the three-year average falls to $640,000. Owner remuneration is $150,000 against a market cost of $230,000 for the estimating and PM roles performed.
Normalised EBITDA is $560,000. The order book carries fourteen months of signed work at documented margins and no single client exceeds 22 per cent of revenue — but defect provisions were nil against a real rectification history, so 2.8× is supportable rather than the top of the band.
$1.57m enterprise value, cross-checked against $890,000 of net tangible assets
Illustrative only. Every engagement is scoped to the specific business, its records and the purpose of the valuation.
What a buyer, a bank or an opposing expert will test first
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01
The WIP schedule
The first document any experienced reviewer asks for. Inconsistent WIP treatment across three years is the most common defect in construction accounts.
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02
Order book quality
Signed contracts with defined scope and margin are worth far more than a pipeline of likely repeat work. Only the first is valued.
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03
Personal guarantees
Where bonding, retentions or facilities rest on the owner’s personal covenant, a buyer must replace it — and that is priced.
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04
Subcontractor arrangements
Long-term subcontractors treated as employees create liability exposure that a purchaser will identify in due diligence.
Questions
Construction valuations, answered
Broader questions are on the full FAQ page.
Ask a valuerBecause turnover in construction includes a large pass-through of materials and subcontract cost. A builder turning over $12m might carry a normalised EBITDA of $500,000, and it is that figure a multiple applies to. Construction multiples are also lower than most sectors because earnings are project-dependent and stop when the book empties.
It is restated onto a consistent percentage-of-completion basis across every year in the analysis, so profit falls in the period it was earned. Where the accounts have moved between bases, the restatement is shown in full — this is usually the largest single adjustment in a construction valuation.
Not automatically. A share sale can preserve the licensed entity; an asset sale generally cannot, and the buyer must hold their own licence and satisfy the financial requirements. Where financial capacity has been supported by the owner’s personal assets, the buyer has to rebuild it — and that is reflected in the valuation.
Yes, with the dispute disclosed and its range of outcomes addressed as a specific assumption. Ignoring live litigation is how a valuation gets discredited. Where the exposure is material we present the conclusion with and without it.
Yes, by a Certified Asset Valuer within the same engagement. For civil contractors especially, the plant schedule is a significant part of the answer and market values commonly sit well above written-down book values.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
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