Buying a general contracting company in Florida

A general contractor manages construction projects from start to finish: it signs the contract with the owner, hires and schedules subcontractors, buys some materials, pulls permits, runs the site and answers for the result. In Florida, small general contractors usually specialize in custom homes, remodels and additions, commercial build-outs for tenants, storm restoration, or light commercial buildings. Some build homes on their own lots to sell.

Customers are homeowners, businesses, developers, landlords and, for some, public agencies. Payments come in installments (draws) as work advances, minus retainage (a share held back until completion). Profit is what's left after subcontractors, suppliers and overhead, so estimates and change orders decide whether a job makes money. Nearly every job is a one-off. Repeat business comes from developers, property owners and referrals. The team is usually a few project managers and superintendents, an estimator, an office manager who handles bills and lien paperwork, and an owner who often holds the license and the main relationships.

• Steady profit across projects, not one great year, with costs tracked by job, showing which kinds of work make money.
• Repeat customers and referral sources (architects, developers, property managers) whose loyalty isn't to the owner alone.
• Superintendents and project managers who run jobs without the owner on site.
• Plenty of subcontractors who answer its calls because it pays on time.
• Change orders written and signed before extra work starts, not argued over at the end.
• A clean history of claims, lawsuits and liens.
• Bonding capacity (how much a surety will guarantee), if it does public or larger commercial work.
• A backlog (signed work not yet done) at sensible margins, not jobs won by bidding low to stay busy.

The Construction Industry Licensing Board at the Florida Department of Business and Professional Regulation licenses general contracting at three levels: general contractor (unlimited), building contractor (commercial and residential buildings, generally up to three stories) and residential contractor (one- to three-family homes, generally up to two habitable stories). Certified licenses (numbers starting CGC, CBC or CRC) are good statewide; registered ones only where the holder has a local license. Electrical, plumbing, air conditioning, roofing and other trade work must be subcontracted to licensed contractors unless the company holds that license too.

You don't need a license to own the company. It contracts through a licensed qualifier whose license stays with them. If the only qualifier leaves, the company has 60 days to hire another. Meanwhile it can't contract, except to finish existing jobs with the board's permission. If the company signs a contract with no qualifier in place, it can't enforce it and loses lien rights on that job (section 489.128). Bidding on Florida Department of Transportation construction contracts over $250,000 also requires the department's prequalification.

• Backlog: each signed job, its contract value, cost to finish, expected margin and payment status.
• The work-in-progress schedule: whether the company has billed ahead of or behind the work done. If it's ahead, some of its cash is really owed to subcontractors.
• Margins on completed jobs over the last three years.
• Warranty claims and defect lawsuits. Florida generally allows construction defect suits up to seven years after completion, so past work stays a risk. Your attorney can help keep the seller responsible.
• Liens filed by subcontractors or suppliers, and unpaid bills.
• Deposits: Florida contractors who take more than 10% of a residential contract up front must apply for permits within 30 days and start within 90 days after permits issue.
• Insurance, bonding, and how the surety views a new owner.

• Whose license does the company work under, and would they stay after the sale?
• What kinds of projects make you the most money, and which have lost money?
• Who are your repeat customers, and who's their contact here?
• How do you estimate, and how often do jobs run over budget?
• How much signed work do you have lined up?
• Have you had any defect claims, lawsuits or liens in the last five years?
• Which superintendents and project managers would stay through a sale?