Due Diligence Checklist for Buying a Foundation Repair Business

Request all active warranty contracts and document total warranty obligations by repair type and vintage year.

Lifetime warranties on piering or wall anchor work create contingent liabilities that survive ownership transfer and can materially affect deal value.

Red flag: Seller cannot produce a complete list of active warranties or claims from the past five years.

Analyze historical warranty call-back rates segmented by service line — piering, wall stabilization, and waterproofing.

High call-back rates on specific repair types signal workmanship deficiencies or systemic installation failures that will recur post-acquisition.

Red flag: Call-back rates exceed 8–10% on any single service line without documented remediation protocols.

Verify whether a warranty reserve fund exists and assess its adequacy relative to total outstanding obligations.

Underfunded or nonexistent warranty reserves shift liability entirely to the buyer and inflate apparent EBITDA.

Red flag: No reserve exists and seller dismisses warranty liability as immaterial or unquantified.

Review all open or unresolved warranty claims and assess whether they involve structural failures or property damage.

Open claims can escalate into litigation post-close, creating unexpected cash outflows and reputational damage.

Red flag: Multiple open claims involving settlement recurrence, structural failure, or third-party property damage.

Verify all active state and county contractor licenses are current, transferable, and held at the entity level.

Licenses held personally by the seller — not the business entity — may not transfer automatically and can stall post-close operations.

Red flag: Primary contractor license is held by the owner personally with no qualified replacement in place.

Document crew certifications from national programs such as Supportworks, Basement Systems, or CFCA for all lead technicians.

Certified crews command higher close rates, support premium pricing, and satisfy franchisor licensing requirements.

Red flag: No crew members hold third-party certifications and training is entirely informal or owner-dependent.

Assess crew tenure, turnover history over the past three years, and compensation structure including any retention incentives.

High technician turnover signals cultural or compensation issues and creates real capacity risk immediately post-acquisition.

Red flag: Annual crew turnover exceeds 30% or key lead technicians have signaled intent to leave with the owner.

Identify all OSHA compliance records, safety incident reports, and active workers' compensation claims.

Foundation work involves excavation, heavy equipment, and confined spaces — unresolved violations create regulatory and insurance exposure.

Red flag: Multiple OSHA citations or unresolved workers' comp claims that were not proactively disclosed by the seller.

Build a revenue concentration analysis showing the top 10 customers and referral sources as a percentage of total revenue.

Overreliance on one realtor, inspector, or insurance adjuster creates fragile revenue that may not survive an ownership transition.

Red flag: A single referral source or customer accounts for more than 20% of annual revenue.

Map all referral partner relationships — real estate agents, home inspectors, insurance adjusters — and assess whether they are owner-dependent.

Referral relationships built on personal trust may not transfer to a new owner without an active transition plan.

Red flag: Seller has no CRM, referral agreements are entirely informal, and partners state they refer based solely on the owner.

Quantify recurring revenue from service contracts, annual inspections, or waterproofing maintenance agreements.

Recurring contract revenue improves cash flow predictability and supports higher acquisition multiples.

Red flag: Zero recurring revenue and no structured program exists to convert completed projects into maintenance contracts.

Review seasonality patterns in monthly revenue over three years to assess weather and regional soil cycle exposure.

Heavy seasonality creates cash flow gaps and complicates SBA debt service coverage calculations.

Red flag: Revenue drops more than 40% in slow months with no counter-seasonal service lines to offset volume.

Obtain three years of CPA-prepared or reviewed financial statements and reconcile to tax returns line by line.

Internally prepared financials without tax return reconciliation frequently obscure revenue underreporting or inflated add-backs.

Red flag: Significant unexplained discrepancies between P&L revenue and Schedule C or corporate tax return income.

Request gross margin analysis by service line — piering, wall stabilization, waterproofing, and crawl space encapsulation.

Blended margins mask underperforming service lines that may drag post-acquisition profitability.

Red flag: No job costing system exists and the seller cannot provide margin data by service line or project type.

Normalize EBITDA by identifying and validating all owner add-backs including compensation, personal vehicles, and non-recurring expenses.

Overstated add-backs are the most common reason foundation repair valuations collapse during third-party quality of earnings reviews.

Red flag: Add-backs exceed 25% of stated EBITDA or include items that will recur under new ownership.

Review accounts receivable aging and identify any balances over 90 days, disputed invoices, or uncollected commercial jobs.

Stale receivables in specialty trades often reflect disputed work quality and signal latent warranty or litigation risk.

Red flag: More than 15% of AR is over 90 days old with no documented collection plan or customer dispute resolution.

Obtain a full litigation history including all resolved, pending, and threatened claims related to structural failures or property damage.

Undisclosed past litigation can reopen post-close and expose buyers to indemnification gaps if reps and warranties are not properly structured.

Red flag: Seller discloses litigation only when pressed, or multiple claims involve the same repair type or crew.

Verify current general liability, errors and omissions, and completed operations insurance coverage limits and claims history.

Completed operations coverage is essential for foundation repair — it covers claims arising from finished work years after project completion.

Red flag: Completed operations coverage has lapsed, limits are below $1M per occurrence, or carrier has issued non-renewal notices.

Confirm bonding compliance across all active service geographies and verify no bond claims have been filed in the past three years.

Bond claims signal unresolved customer disputes or contractor defaults that can affect license standing and future bonding capacity.

Red flag: Active or recently filed bond claims that the seller cannot explain or that involve structural defect allegations.

Review the company's BBB profile, state contractor board complaint history, and Google review trends over three years.

Online reputation directly drives referral conversion rates — declining reviews or unresolved BBB complaints erode the brand premium built into the purchase price.

Red flag: BBB rating below A-, active unresolved complaints, or Google rating below 4.0 stars with a declining review trend.