Valuing work in progress - WIP

[Rider007]

I am looking at buying a building services company offering restoration work after fire and flood to properties. They provide strip out works themselves but use subcontractors such as electricians, plumbers, storage companies. They are not selling a physical product as such just their services. How does one value WIP in this case looking at the accounts.

[DaveA8]

I'll come about this from another angle. Every time a builder goes bust, the liquidator mentions 2 figures on WIP etc and the realized amount is often 5 to 10% of the book amount.
The problem is WIP in your context is very notional because there is not a tangible comparable product, WIP is easier to determine with manufacturing.

[2 GKC]

At cost assuming it can be recovered from the customer

[DaveA8]

2 GKC said:

At cost assuming it can be recovered from the customer

That's the problem in the building game, most won't be recoverable, partly because of customers being cute and partly legitimate.
How much is 2/3rds of a painted wall worth or a half fitted sink.
There will likely be no contracts or if contracts exist some arbitration route.
WIP and future contracts are very different, the most practical way is for one party to finish all works and the new party to start only new works, the seller won't like that as it's too clean and no room for error

[Doofus]

Is the retoration work done at cost plus?

If so, then WIP is cost committed plus profit %age.