In this week’s Business Success Tips blog, we’re spotlighting a conversation every contractor should hear, especially right now, as tax season forces you to look closely at your numbers.
Because this is the time of year when most owners sit down with their accountant and ask:
“How do I pay less in taxes this year?”
It is a practical question, and an important one. But it is also incomplete.
Because beneath that conversation is a second question, one that carries far greater long-term consequences:
What is my business actually worth today?
And are the decisions I am making right now increasing that value or quietly diminishing it?
Our founder, Paul Sanneman, sat down with Patrick Lange to unpack what truly drives business value in the trades.
Early in the conversation, Patrick makes something clear that many contractors do not expect.
“There’s a lot of different factors that go into valuing a business… we sold companies anywhere from two times all the way up to ten times.” (01:32)
Same industry. Similar companies.
Very different outcomes.
The Reality Most Contractors Miss About Value
One of the central misconceptions in construction is that value follows a predictable formula, often expressed as a multiple of earnings.
While that framework is widely referenced, Patrick explains that it does not fully capture how buyers think.
“Buyers love consistency. They love consistency in income, consistency in employees, consistency in customers, and they like repeat revenue.” (01:50)
What buyers are evaluating is not just performance, but reliability.
A business that produces steady, predictable results over time is easier to understand and easier to transfer. It presents fewer unknowns and therefore less risk.
A business that depends on irregular revenue, shifting teams, or inconsistent processes introduces uncertainty.
And uncertainty reduces value.
The distinction is subtle, but significant.
Buyers are not simply purchasing income.
They are purchasing confidence in the continuation of that income.
Do You Own a Business or Are You the Business?
In many construction companies, the owner remains at the center of daily operations.
They estimate work, maintain client relationships, oversee projects, and step in wherever needed to keep things moving.
It is often the very reason the business succeeded in the first place.
But it also creates a limitation.
As Paul observes during the conversation:
“If you can’t take a month off and not have your business fall apart, you’re obviously on a job.” (02:55)
Patrick reinforces that idea:
“If they’re doing all the work… then chances are they don’t have a business, they have a job.” (03:12)
From a buyer’s perspective, this distinction matters.
A business that depends on its owner is difficult to transfer. The buyer must either replace the owner’s role or accept a decline in performance.
Both scenarios increase risk.
A business that can operate independently, supported by a capable team and defined processes, offers continuity.
And continuity is what drives value.
The Tax Decision That Could Cost You Hundreds of Thousands
Tax season is one of the few times each year when contractors examine their financials in detail.
It is also when many decisions are made that affect how the business appears on paper.
Patrick highlights a tradeoff that is often overlooked in that process.
“You’re being creative with your accounting to save $37,000 and it’s costing you $500,000 on the sale price.” (07:07)
The math is straightforward.
If $100,000 in income is written off as expenses:
- The immediate tax savings may be around $37,000
- But that same $100,000 is no longer reflected in earnings
When a buyer applies a multiple to those earnings, the reduction becomes significant.
At five times earnings, that decision can reduce the value of the business by $500,000.
The implication is not that tax planning is unnecessary.
It is that tax decisions should be made with an understanding of their broader impact.
The question, particularly relevant during this time of year, is whether the focus is on minimizing taxes in the present or maximizing value over time.
Why Clean Books Matter More Than You Think
Another factor that shapes valuation is financial continuity.
“Typically a buyer is going to look back three years.” (07:59)
Those three years form a narrative that buyers use to assess stability and predictability.
As Patrick explains:
“It makes it challenging to sell the story.” (08:15)
When those numbers are inconsistent.
A strong current year may indicate potential, but it does not establish a pattern.
Buyers are looking for evidence that performance is repeatable.
That consistency builds trust.
And trust increases value.
This is why the decisions made during tax season, particularly how income and expenses are reported, extend beyond the current year.
They become part of a longer record that will eventually be evaluated in detail.
The Shift From Saving Taxes to Building Wealth
At a certain point, the conversation shifts from tactics to perspective.
Paul raises a practical question.
If a contractor plans to sell in the next few years, should they continue maximizing write-offs?
Patrick’s response is direct.
“The answer is to pay taxes… especially as you’re getting close to wanting to sell.” (07:07)
This reflects a broader shift.
Moving from thinking like a business owner focused on reducing expenses…
To thinking like an investor focused on increasing the value of an asset.
That shift does not happen automatically.
It requires an understanding of how today’s decisions influence tomorrow’s outcomes.
Private Equity, AI, and the Changing Landscape
The conversation also touches on changes occurring across the construction industry.
Paul describes the growing presence of private equity:
“They’re either going to buy your business or put you out of business.” (09:23)
While the statement is strong, it reflects a real trend.
Larger organizations with greater access to capital are entering local markets, often with the ability to invest more heavily in marketing, systems, and staffing.
At the same time, Patrick offers a more balanced view.
“There are still opportunities for the mom and pops to compete.” (10:23)
That opportunity lies in differentiation.
Relationships, reputation, and service still matter.
And increasingly, technology is narrowing the gap.
As Paul notes:
“AI has allowed a guy doing $2 million a year to access the same services as a $20 million company.” (11:08)
This includes recruiting, marketing, and operational systems.
The advantage is no longer reserved for the largest companies.
But it does require intentional effort.
The First Step Most Contractors Never Take
Toward the end of the conversation, Paul asks when a contractor should begin preparing to sell.
Patrick’s answer is simple.
“Get a valuation done… we do them for free.” (13:42)
And not just once.
Many owners revisit this annually.
Because without that baseline, it is difficult to make informed decisions.
Patrick adds:
“Too often I meet with people… and when I give them the value, they’re shocked.” (14:14)
Some discover their business is worth more than expected.
Others realize it is worth less.
But in both cases, clarity changes how they approach the future.
Final Thought
At the end of the episode, Paul summarizes the broader lesson:
“Whether you’re going to sell your business or not, you should build it to sell it.” (19:08)
Because a business that is structured to be transferable is also one that is:
- More organized
- More predictable
- Less dependent on the owner
- And ultimately more valuable
Listen on Spotify
If This Got You Thinking, Now Is the Time to Act
Tax season is not just about filing returns.
It is one of the few times each year when you are forced to look closely at your financials.
That makes it the right time to understand what your business is actually worth.
If you want that clarity, reaching out to Patrick Lange is a logical next step.
He offers a free valuation and can help you understand:
- What your business is worth today
- What is increasing that value
- What may be holding it back
- And what to focus on over the next 12 to 36 months
Because the decisions you make right now will shape what your business is worth later.
At the same time, understanding your valuation is only part of the process.
If the goal is to build a business that runs without you, that delivers consistent results, and that a buyer would view as stable and transferable, then the strength of your team becomes just as important as the strength of your financials.
That is where many contractors find the real work begins.
If you are looking for help building that kind of team, you can reach out to Paul Sanneman and the team at Contractor Staffing Source.
They specialize in helping contractors:
- Find and hire the right people
- Build teams that operate independently
- Create structure that increases long-term business value
You can contact Contractor Staffing Source here:
Website:https://contractorstaffingsource.com
Schedule a call: https://recruit.contractorstaffingsource.com/widget/booking/UgwnkEr3tviQdrUGd0Ux
Because in the end, the difference between a business that depends on you and a business that is truly worth buying often comes down to one thing.
The people you trust to run it.
