Every roof you’ve installed in the last ten years is still on your books.
Not on the balance sheet. Nowhere an accountant would find it. But a buyer will find it, and they’ll put a number on it before the first LOI goes out.
Let’s take a situation where a West Chester roofing company does $2.4 million a year in revenue and $480,000 in SDE (seller’s discretionary earnings, meaning what the business throws off for one owner-operator once you add back the owner’s pay and one-time items). The owner figures 3.5x to 4x is fair. That’s $1.7 to $1.9 million. He’s not crazy, either.
Then the buyer’s diligence list arrives, and the first thing on it is a list of every job with an active workmanship warranty.
Why Chester County Roofers Get Looked at Harder
The county is a good place to run a roofing company, and buyers know it. The Census Bureau puts the population at 557,116 as of mid-2025, with about 217,000 housing units, 75.1% of them owner-occupied, and a median home value of $485,600. Median household income runs $127,208.
Read that as a roofer would. Three out of four homes are owned by the people living in them, at values where a $22,000 re-roof is a rounding error against the asset. Those homeowners call the company back when something leaks, and they expect it fixed for free.
That’s the good news, and it’s also the liability. A buyer looking at a Chester County roofing book sees a lot of well-insured, well-informed homeowners with long memories and 10- or 25-year shingle warranties in the drawer. Whoever owns the company owns the phone call.
The Warranty Math Buyers Actually Run
Back to the West Chester company. Over eight years it has installed roughly 900 roofs, most with a 10-year workmanship warranty on top of the manufacturer’s shingle warranty. Callbacks (a flashing that let go, a valley that leaked in the first ice storm) have averaged about $38,000 a year in labor and materials, and the owner has been absorbing them without thinking of them as a cost.
A buyer thinks of them as a cost. In an asset sale, the buyer doesn’t inherit your liabilities by default, but customers don’t care who owns the entity. They call the company name on the truck. So the buyer will do one of three things:
- Ask you to keep responsibility for every pre-closing job and hold back $60,000 to $90,000 of the price in escrow to cover it.
- Assume the warranties and cut the price by the present value of the tail.
- Do both, and negotiate which claims fall on which side of the line.
None of these is unreasonable. But if you’ve never put a number on your callback cost, you’ll be negotiating against the buyer’s number, and theirs will be conservative.
It’s also worth knowing where roofers land on multiples once the warranty question is settled. One published guide to buying roofing businesses cites 3.0x to 4.5x for re-roof and replacement work, versus 4.0x to 6.0x for repair and maintenance revenue, because repair work recurs and re-roofs don’t. Treat those as illustrative, not gospel. But the direction is right: a company where callbacks are tracked, capped, and small reads as a business. A company where they’re a mystery reads as a risk.
The Paperwork That Doesn’t Come With the Truck
There’s a second item on the list that catches Chester County owners off guard, and it’s a boring one.
Pennsylvania requires home improvement contractors to register with the Attorney General’s office, carry at least $50,000 in personal injury coverage and $50,000 in property damage coverage, and renew every two years. Any job over $500 needs a written contract with the state’s required cancellation notice.
Here’s the rub. That registration belongs to your company. A buyer purchasing the assets through a new entity should expect to get their own registration and their own insurance in place, and they’ll want to know how long that takes before they schedule a closing. Your attorney can tell you how it applies to the structure of your deal. But if a buyer is planning to close on a Friday and start signing contracts under a new name on Monday, someone needs to have started that paperwork weeks earlier.
Buyers who get surprised by that stop trusting the rest of the timeline.
What to Do Before You List
Start with the callback number. Pull three years of warranty and callback work, cost it out, and know the annual figure. If it’s $38,000, you should know that before a buyer tells you it’s $38,000.
Then build the list a buyer will ask for anyway: every job with an active warranty, the install date, the warranty terms, and any open claims. A clean list turns a $90,000 escrow request into a conversation about $50,000.
Finally, ask your attorney and your insurance broker early how registration and coverage would work for a buyer’s entity. Two phone calls now save a slipped closing later.
The warranty tail is going to get priced whether you prepare for it or not. The only choice you have is whether it’s priced off your numbers or theirs.
Curious what your roofing company is worth? Let’s talk. At The Turn Business Advisors, we help Philadelphia-area owners understand how a buyer will actually value their business, warranty tail included, before they ever go to market. Reach out to Steve at [email protected]