10 things to consider if you are selling a building supplies business in Canada
If you own a building-supplies business in Canada and are considering selling, you already know it’s not a simple decision.
There are many moving parts—shareholders, family, financing, inventory, supply chain risks, government policy shifts, and valuation benchmarks—that can make or break a Transaction. The good news? With the right preparation, you can turn complexity into opportunity, maximizing your sale price and terms.
This guide highlights 10 important factors that buyers look at, so you can position your business for a smooth process and a favourable outcome.
1. Get a premium for low margin volatility
Inventory management directly affects the story of your financials and current valuation. A common issue is the timing mismatch of cost of goods sold (COGS) with revenue recognition. For example, you may purchase a large order of materials in March and expense them right away, but the revenue from using or selling those materials isn’t recognized until April. When immediately expensed to COGS, the March financials show low gross margins and bottom line while April shows unusually high gross margins and profitability. This mismatch makes it difficult for a buyer to properly assess month to month profitability.
Buyers place a premium on predictability. If your margins appear to swing up and down, buyers may assume there are deeper issues with pricing, cost control, or consumer demand. The more consistent and smoothed out your margins are, the more comfortable buyers feel about acquiring your business and possibly paying a higher price.
Implement accounting measures which properly allocate purchases to inventory and expense to cost of goods sold to match the period when the product is sold or meets other revenue recognition criteria.
2. Preparing working capital for buyers
Net working capital is the fuel of a business. Cash is used to pay suppliers and vendors, make payroll, buy inventory and materials, capital expenditures, and for other items like insurance, taxes, debts and other obligations. Buyers expect to receive a business that has enough fuel in the tank on day one to run the business and do not expect to put more cash in right away. When buyers evaluate a business, they need to understand the working capital requirements to keep the business running day to day and into the near future. In the building-supplies sector, the net working capital dollar amount can be significant. Inventory is just one aspect of working capital, and managing inventory levels and taking advantage of supplier terms is very important in the overall aspect of cash management.
Buyers want to know there's enough working capital on day one to run the business without immediate cash injections. They'll calculate this by averaging your month-end balances over the past 12 to 24 months, smoothing out seasonal peaks and one-off events to see what 'normal' looks like
Maintain healthy working capital fundamentals: current inventory, receivables under 90 days, consistent payables. Don't alter your normal payment cycles during the sale- buyers will spot it.
Lower working capital requirements = higher appeal. The ideal: customers pay quickly, suppliers extend generous terms, inventory stays lean. This level of efficiency takes discipline but directly boosts valuation
3. Secure a premium by demonstrating predictable revenue
Revenue stability is a critical factor in a buyer’s risk assessment. In the building-supplies sector, companies often generate sales through two distinct models:
Recurring revenue – for example, supplying products through retail or wholesale channels, where demand is relatively consistent over time.
Project-based revenue – for example, providing materials or custom products tied to a specific construction project, such as cabinets or doors for a condominium development.
Project-based businesses can be highly profitable, but they also present more revenue volatility. Revenue and cash flow is tied to the timing and progress of projects, causing annual results to fluctuate significantly and put stress on cash and debt facilities.
This creates additional risk for buyers: future performance depends heavily on whether new projects are secured and the health of the broader construction market.
One way to mitigate this risk is by documenting your backlog and pipeline. Buyers are more comfortable when there are signed purchase orders, contracts, or other evidence supporting a 12-24 month forecast. Demonstrating visibility into secured future work, rather than projections based on past performance, gives buyers greater confidence in the sustainability of your company’s earnings into the future. The higher the backlog, the brighter the future looks in the eyes of the buyer.
4. Don't bet your business on a handful of customers
When too much revenue depends on a few customers or a single type of project, the risk profile increases sharply. If a major customer reduces orders or project pipeline dries up, the impact on the business can be immediate and severe. For example, if 60% of your annual revenue come from just 2 large construction companies. If one of these companies reduces orders or switches suppliers, the impact on your business could be immediate and severe.
Buyers and investors see high customer concentration as a risk. A diversified customer base gives buyers confidence. When buyers review the revenue contribution of your top customers over the past several years, they will ask questions about retention, renewal terms, and the likelihood of repeat business.
Diversify your customer base so that no single customer accounts for a disproportionate share of revenue. Be prepared to show not only your biggest customers, but also the resiliency of those relationships. It’s ok to have customers come and go, however, showing how you replace those customers is valuable to buyers. Efforts to diversify customer concentration goes a long way in improving buyer interest and valuation.
5. Turn price volatility into a competitive advantage
Building-supplies businesses often rely on raw materials that are subject to global price swings. Tariffs, currency fluctuations, and trade restrictions can make gross margins unpredictable. How you manage pricing and procurement makes a significant difference. Also, being proactive with discussions and agreements with customers on how these costs are communicated and passed on through price adjustments is just good business practice.
Buyers will want to know:
- Do your contracts lock in pricing? If not, how do adjustments work and what is required to ensure these fluctuations can be passed through?
- How do you hedge against currency risk?
- Can you source locally if imports are disrupted? What are price differences or other pros/cons.
Owners who can clearly demonstrate systems for monitoring input costs and adjusting pricing proactively, not reactively, sends a strong message that the business has controls in place to manage these unforeseen risks. Document your strategies, such as indexed contracts, hedging programs, or multiple-sourcing arrangements. Showing discipline in cost management and margin protection builds buyer confidence and supports valuation.
6. Turn government policy into a selling advantage
Government policies can create both challenges and opportunities in business.
While buyers look at a business sectors history, they focus more attention on the prospects within an industry, which can be negatively or favourably affected by regulatory and government policy. Stay connected to trends and current happenings with your local building supply industry association and business groups, like Mackay CEO forums or TEC Canada.
Understanding and demonstrating government trends helps position your business as attractive to buyers.
Here are some recent Canadian legislation points to consider when positioning your company for sale:
Softwood lumber support
The federal government has introduced substantial loan guarantees and funding programs to stabilize and diversify the lumber industry. If your business involves lumber, these programs could strengthen your position.Buy-Canadian procurement
Federal and provincial projects increasingly prioritize Canadian-made materials. Businesses that source locally stand to benefit from this shift. If imports are a key part of your supply chain, now is the time to demonstrate adaptability and compliance strategies.Reducing interprovincial barriers
Enacted in June 2025, Bill C-5 aims to reduce interprovincial trade barriers and accelerate federal approvals for “national-interest” projects. This legislation is designed to make cross-province distribution easier and create more predictable demand for large-scale projects. If your growth plan includes expanding beyond your home province, this is a positive development to highlight.
7. Align with Canada's housing surge to boost valuation
Canada’s federal housing strategy is ambitious: double annual homebuilding to approximately 500,000 units over the next decade. For building-supplies businesses, this translates into opportunity.
Additional programs, such as the Regional Homebuilding Innovation Initiative and the Canada Green Buildings Strategy, focus on low-carbon materials and industrialized delivery methods. Aligning your products with these priorities through environmental product declarations (EPDs), sustainable mixes, and prefab capabilities can set you apart and increase valuation.
Analysts expect that modular construction and easing interest rates will drive activity through 2025–2026.
Buyers will look for clear evidence that you’re positioned to benefit from these trends.
If you’re part of this supply chain, quantify your production capacity, lead times, and any pre-approved catalog products. Showing readiness for this surge makes your business more attractive to buyers. If you are not directly in this market, think about proactively seeking projects that may position you in this market shift.
8. Position your business for above-market pricing
Building-supplies businesses are often asset-heavy—think real estate, trucks, yards, and machinery. As a result, valuation multiples depend on factors like:
Return on assets and asset turnover
Scale and geographic reach
Risk profile (price volatility, tariffs, cyclicality, customer concentration)
Buyers will benchmark your business against recent transactions in the building products industry and distribution space, typically gross profit margins, inventory turnover ratio, working capital, customer lifetime value and other sector metrics.
Your goal is to show why your business deserves to trade at or above the median valuation.
What drives premium valuations:
Strong consistent margins and stable financials on a monthly basis
Diversified customers and suppliers
Strong backlog and visibility into future work
Growth investments (automation, prefab capacity, sustainability initiatives) vs. maintenance spending
Alignment with housing and green-building programs
When presenting your business, highlight these strengths and benchmark against recent transactions as well as the market in general. Linking your performance to broader market trends helps buyers see the bigger picture. Showing why your risk profile is lower or your growth potential higher than the median will attract more potential buyers and justify a higher valuation and purchase price.
9. Plan your exit structure to maximize after-tax proceeds
Tax planning can make or break your net proceeds.
A poorly planned exit structure can have dire consequences on the after-tax proceeds received post transaction. Additionally, if any of the purchase price consideration is in the form of an earn-out, how it is structured can save or cost up to an additional 25% in taxes.
Decide early: share sale vs asset sale. Share sales often qualify for the Lifetime Capital Gains Exemption (LCGE), which can shelter up to $1.25M in capital gains per qualifying shareholder. Asset sales may trigger recapture and GST/HST implications. Start your planning as soon as possible. A corporate restructure typically requires a minimum of 2 years to be effective.
Other considerations:
Succession plans - clarify roles, employment agreements and non-competes. Identifying key management who can help steer the ship and potentially incentivizing them with equity (or similar) can help introduce a lot more transition stability that buyers love.
Environmental liabilities - if you store treated wood, chemicals, or operate yards, complete a Phase I Environmental Site Assessment (CSA Z768-01) before going to market. Proactive diligence reduces surprises and speeds closing.
It is important to proactively consult both tax and legal professionals to get advice specific to your situation.
10. A.B.C.- Always be selling: Keep your business buyer-ready
More than half of all businesses are sold involuntarily due to death, divorce, shareholder disagreements, or insolvency. It is difficult to time the market, so ideally you should be prepared for sale at any moment. If possible, aim to sell when your business shows its strongest trailing twelve months results, a healthy backlog of contracts, and minimal risk items.
Having a well-organized business with monthly data at your fingertips creates a sense of a strong company foundation in the eyes of a buyer. Buyers often put more weight on the last twelve months of a business’ performance when assigning value.
A.B.C - Always be selling! You never know when an opportunistic buyer might be knocking on your door. Keeping track of your company’s various data points is crucial to having a sell ready business.
Sale-ready business checklist:
Upgrade your year-end financial statements to a review or audit engagement
Review your corporate structure and tax planning
Conduct a seller-side: quality of earnings review
Clean up contracts, HR files, and compliance issues – for example, up-to-date employment contracts
Be seller ready - organize and maintain a due diligence list of items that a potential buyer would typically request
Measure margin by product, customer and region – think like an acquirer – what are the KPIs for your business
Track sales close rates, efficiency, production outputs and capacity
Hiring an M&A specialist can be instrumental in assembling and packaging this information to position your company optimally—letting you stay focused on running the business. Baker Tilly Canada Capital works with building-supplies owners to prepare sale-ready businesses, providing guidance on due diligence preparation, valuation positioning, and buyer readiness.
Conclusion
Selling your business is one of the most important decisions you will make, and preparation is everything. By addressing these 10 key areas, you will not only maximize your valuation but also attract the right buyers. At Baker Tilly Canada Capital, we specialize in helping owners navigate this process with confidence—from strategy and valuation to closing the deal. If you are considering a sale, now is the time to start planning. Let’s get a coffee and talk about your next steps and how we can work together to achieve the best outcome.
Related content
