Self-Delivery Versus Subcontracting: What Buyers Pay More For

The PremiumWhy directly delivered work is priced above managed work

Margin is the obvious reason and the least interesting one. Work passed to a subcontractor at a handling margin of a few points contributes less profit per pound of revenue than the same work performed by your own operatives, so a subcontract-heavy book converts turnover into EBITDA less efficiently. That shows up in the valuation before the multiple is even discussed.

Control is the more important reason. When your own people deliver the service, you decide how a failure is fixed, at what speed, and at what cost. When a subcontractor delivers it, you are managing a performance problem through a commercial relationship, and your client is watching you do it. Buyers who have integrated acquisitions before understand exactly how that plays out at renewal.

The third reason is that self-delivered work comes with an asset attached. A directly employed workforce transfers with the business, carries the site knowledge, and is the thing the client is used to seeing. A subcontractor relationship transfers a contract to which the subcontractor is also a party, and that party has its own view about what happens next.

Compliance evidence follows the same line. Where the work is yours, the training records, competence documentation and completion evidence sit in your system and can be shown. Where it is subcontracted, you are producing somebody else's paperwork on request, and a buyer testing an unfamiliar supply chain moves slowly through it.

A directly employed workforce transfers with the business. A subcontractor relationship transfers a contract to which somebody else is also a party.

The BalanceWhere subcontracting is right, and how buyers read it

Nobody self-delivers everything, and a buyer would be suspicious of a business claiming to. Lifts, fire systems, specialist water treatment, high voltage work and anything requiring accreditation you would use twice a year are properly bought in, and doing so is a sign of judgement rather than weakness.

What buyers distinguish is a managed supply chain from a list of numbers. A managed supply chain has written agreements, back-to-back terms that pass your client obligations down, insurance and competence checks on file, agreed rates, and a record of performance. The alternative is three trusted contacts whom you call personally, which is a dependency on you as much as on them.

The proportion matters too, and it matters differently by service line. A hard FM business subcontracting the statutory specialisms is normal. A hard FM business subcontracting its routine planned maintenance is a broker, and will be valued as one however good the client relationships are.

The ShiftWhat a subcontract-heavy business can change in a year

Take the highest-frequency service in-house first. The one you buy in every week across most sites is where the margin leak is largest and where the recruitment case is easiest to make, and bringing it inside usually pays for itself before the valuation benefit is even counted. Doing it twelve months before a process also means the buyer sees a settled arrangement rather than a plan.

Formalise everything you keep outside. Written agreements with back-to-back service levels, current insurance and competence records, agreed rate cards, and performance data. This is a few weeks of administrative work and it converts an undocumented dependency into a documented supply chain, which is a different item on a buyer's risk register.

Then present the position honestly rather than optimistically. A business that says plainly which services it self-delivers, which it buys in and why, with the agreements to back it up, is easier to price than one that lets the buyer discover the answer in week five of diligence. The discovery version always costs more than the disclosure version.