Taking over a renovation business: how to evaluate margins?
Introduction
The renovation sector in Switzerland shows sustained activity, driven by an ageing property stock and increasingly strict energy standards. For a buyer, this market offers interesting opportunities, but the profitability of a renovation business is not always obvious at first glance.
Unlike other activities, margins in renovation depend on numerous factors: type of projects, billing method, team structure, management of unforeseen events. High turnover does not necessarily guarantee good profitability. Poorly calibrated quotes, cost overruns on projects or poor resource allocation can quickly erode margins.
Before taking over a renovation business, it is essential to analyse in detail its cost structure, profitability by type of project and the reliability of its internal processes. This guide presents the key indicators to verify in order to evaluate the real financial health of a light construction and renovation business. A rigorous analysis will enable you to identify the company's strengths and weaknesses, and anticipate the necessary adjustments after the takeover.
📌 Summary (TL;DR)
Margins in renovation vary greatly according to the type of project and billing method. An in-depth analysis of the cost structure (labour, materials, overheads) and profitability by project is essential before any takeover. Also verify the reliability of quote systems, monitoring of ongoing projects and dependence on the team in place to evaluate the company's sustainability.
📚 Table of contents
Typical margins in renovation in Switzerland
Swiss renovation businesses generally show gross margins between 25% and 40%, with net margins of 5% to 12%. These figures vary according to the type of work.
Complete renovations generate higher margins (35-40%) than one-off works (25-30%). The clientele also influences profitability: private individuals accept higher margins than professionals.
Light construction offers better margins than structural work, thanks to less volatile material costs. To compare with other construction sectors, consult our guide on taking over a plumbing business.
Analysing the cost structure
Understanding the cost breakdown is essential to evaluate the viability of a takeover. The three major items directly determine the company's margins.
A balanced structure shows: 40-50% for labour, 15-25% for materials, and 15-20% for overheads. The remainder constitutes the net margin.
Labour and payroll charges
Labour represents 40 to 50% of turnover in renovation. Swiss social charges add 20-25% to the gross salary.
Qualifications (CFC, federal certificates) impact costs. Permanent employees offer more stability than subcontractors, but generate incompressible charges.
During the takeover, carefully verify employment contracts, salaries practised and existing social commitments.
Materials and supplies
Materials weigh 15 to 25% of turnover depending on the business model. This proportion varies greatly between light construction and structural work.
Supplier conditions are decisive: payment terms (30-60 days), volume discounts, product access. Good negotiation directly improves margins.
Price volatility (wood, metals, insulation) can rapidly erode the profitability of quotes signed at fixed prices.
Overheads and structure
Fixed costs represent 15 to 20% of turnover and are incompressible in the short term. They include:
- Workshop and warehouse rent
- Vehicles and fuel
- Professional liability insurance
- Equipment and tools
- Administration and accounting
These structural costs must be covered even during quiet periods. An overly heavy structure reduces flexibility and weighs on margins.
Evaluating profitability by type of project
Not all projects generate the same profitability. A differentiated analysis reveals the most profitable activities and those that weigh on margins.
The project mix determines overall performance. A company too dependent on a single type of project presents increased financial risk.
Small projects vs large projects
Small projects (less than 20,000 CHF) offer margins of 30 to 40%, but require constant commercial effort. Customer acquisition costs are proportionally high.
Large projects (more than 100,000 CHF) show tighter margins (20-25%) but ensure stable volume and better financial visibility.
A balanced mix (60% small / 40% large) optimises profitability and stability.
Time and materials vs fixed price
Time and materials billing (hourly) generates predictable margins and limits risks. The client pays actual time and materials with a coefficient.
The fixed price commits the company to a fixed price. Margins can be better if the estimate is accurate, but any overrun directly impacts profitability.
Fixed price requires rigorous management of unforeseen events and weighs more heavily on cash flow in case of delay.
Verifying the reliability of quotes and billing
The quality of commercial and administrative processes directly impacts margins. Poorly calibrated quotes or deficient monitoring can mask loss-making projects.
Examine the tools, methods and management rigour before any takeover.
Quote calculation system
Verify whether the company uses management software adapted to construction (CRM/ERP) or manual spreadsheets. Automation reduces errors.
Analyse the multiplier coefficients applied to labour (1.8 to 2.5) and materials (1.3 to 1.5). These ratios must cover all indirect costs.
Quotes must integrate travel, project management and margin for unforeseen events (5-10%). A reliable system protects margins.
Project monitoring and cost control
A high-performing company monitors actual vs estimated hours per project. This indicator immediately reveals deviations.
Control of material purchases avoids overconsumption. Delivery notes must be systematically reconciled with quotes.
Management of amendments and additional works is crucial: they must be formalised and invoiced. The absence of rigorous monitoring can mask loss-making projects and distort the overall analysis.
Specific points of attention during the takeover
Certain risks specific to the renovation sector can affect margins after the transfer. They require particular vigilance during the evaluation.
These elements are often underestimated in classic financial analysis, but can generate significant unforeseen costs.
Dependence on the founder and technical team
Evaluate the operational involvement of the seller: is he on projects daily? Can the team function autonomously?
Verify the qualifications necessary for certain works (electricity, gas, asbestos). Their absence can limit activities post-takeover.
Strong dependence on the founder impacts quality and therefore margins after the transfer. To explore the relational dimension further, consult our article on evaluating the customer portfolio.
Ongoing projects and warranties
Carefully examine ongoing projects: forecast profitability, actual progress, risk of overrun. Request a detailed statement by project.
Warranties given (ten-year, work guarantee) can generate future costs. Verify insurance policies and their continuity after the takeover.
Identify any disputes, customer reservations or unresolved defects. These liabilities can weigh heavily on post-acquisition cash flow.
Getting support for financial analysis
Analysing the margins of a renovation business requires sector expertise. Call on qualified professionals:
- Chartered accountant or fiduciary specialising in construction to verify accounts
- M&A adviser for in-depth financial due diligence
- Lawyer for client, supplier and subcontractor contracts
Leez offers a network of qualified partners to support you. Use our valuation tool as a starting point.
Consult the renovation businesses available on Leez. To compare business models, read our article on taking over a cleaning company.
Taking over a renovation business requires rigorous analysis of margins and cost structure. Gross margins range between 25% and 40% depending on the type of project, but actual profitability depends on multiple factors: operational efficiency, cost control, quality of the quote system and project monitoring.
Financial analysis must go beyond overall figures. Examine profitability by type of project, reliability of billing processes and charge structure. Verify particularly ongoing projects, pending warranties and dependence on the team in place.
This technical evaluation often requires expert insight. Our network of specialised partners can support you in the financial and operational analysis of a renovation business. You can also consult the renovation businesses available on Leez to identify opportunities matching your criteria.
