Selling a Defense business
Based on hundreds of real buyer-seller diligence conversations we’ve helped happen on Rejigg, these are the GovCon questions that move price, stretch timelines, or stall a deal, and what prepared owners show instead.
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What buyers evaluate, and how to prepare
Which contracts require novation or customer consent, and what does that do to the close timeline?
Deal-criticalContract Transfer
What buyers determine
Buyers are trying to confirm you can keep performing and invoicing while ownership changes. They also want to spot contracts where a formal novation process could add months. On subcontracts, they want to know whether the prime can block assignment of the subcontract and leave your biggest programs in limbo after close.
How to prepare
- Pull assignment and change-of-control clauses for your top contracts and key subcontracts
- Classify each material contract as notice-only, consent required, or novation likely, and note why
- Write a plan to keep invoicing and delivery running while novation is in process
Great answer
Across our top eight contracts, five are notice-only, two require prime consent on the subcontract, and one is likely novation based on the contract language and agency practice. We have a contract-by-contract action list with owners and expected timing. We can also walk you through how we keep delivery and invoicing steady while the paperwork runs. We’ll share the relevant clauses under an NDA.
Good answer
We know a few contracts may need novation or consent. We’re pulling the clauses now, but we haven’t categorized everything yet.
Red flag
We assume the contracts just transfer with the sale. We’ll deal with novation if it comes up.
How Rejigg helps:Rejigg’s built-in data room lets you share contract files and assignment clauses under signed NDAs, with no email attachments.
What facility clearance level do you have, who runs security day to day, and what changes when ownership changes?
Deal-criticalClearance Continuity
What buyers determine
A facility clearance can be a hard gate because without it, you cannot staff or bid certain work. Buyers want to see that your security program runs on process, not on one person. They also want to understand whether the buyer’s ownership and governance will trigger extra review or a pause in access.
How to prepare
- Summarize your facility clearance status and name the security lead and trained backup
- Break down cleared headcount by clearance level and role, and flag thin coverage areas
- Document where controlled information lives and how access is granted, removed, and audited
Great answer
We operate at our current clearance level, and security is run by our named security lead with a trained backup who handles coverage and onboarding. We track cleared staff by level and by program, and we can show which roles truly require access versus roles that can be structured as uncleared. We also have a day-one checklist for ownership change reporting and internal approvals, so program work keeps moving.
Good answer
We have the facility clearance and a strong security lead. We have not documented backup coverage or a day-one ownership-change plan yet.
Red flag
One person handles clearance and security. We’re not sure what changes during an ownership change, but it’s never been a problem.
How Rejigg helps:Rejigg lets you control when sensitive clearance and staffing details are shared by gating access through buyer vetting and digital NDAs.
When you say “backlog,” how much is actually funded task orders versus IDIQ (Indefinite Delivery/Indefinite Quantity) ceiling and unexercised options?
Deal-criticalFunded Backlog
What buyers determine
Buyers are underwriting what revenue is still real 60 to 90 days after close. In GovCon, contract ceilings and awarded values can look huge on paper while the funded work is much smaller. They want a task-order view that shows what is funded today and how often options and funding actually show up in your world.
How to prepare
- Split backlog into funded task orders, awarded-but-not-yet-funded work, unexercised options, and qualified pipeline
- Show backlog by task order with period of performance and funded dollars
- Summarize option exercise history and typical award-to-funding timing
Great answer
We track backlog in four buckets, and funded task orders are the portion we can perform and invoice immediately. For each top program, we show the active task order, funded dollars, period of performance, and the next decision date that matters. We also track option exercise history and typical funding timing around the budget cycle, so you can model conservatively.
Good answer
We can separate funded versus unfunded. We have not built a clean task-order schedule yet.
Red flag
Our backlog is the contract ceiling. We do not break out what is funded.
How Rejigg helps:Rejigg’s data room makes it easy to share a clean backlog schedule and supporting task order documents with qualified buyers under NDA.
What’s your recompete and option-year calendar for the next 24–36 months, and who owns each capture effort?
Deal-criticalRecompete Calendar
What buyers determine
In GovCon, recompetes and option-year decisions are dated events that can change next year’s revenue fast. Buyers want to see the cliffs early, not learn about them halfway through diligence. They also want confidence you run capture with owners, budget, and a plan, not just hope that incumbency carries you.
How to prepare
- Build a calendar with option exercise dates, expected solicitation windows, and end-of-performance dates
- Assign a capture owner for each major recompete and document plan, cadence, and budget
- Summarize likely competitors and your vehicle strategy for each pursuit
Great answer
We keep a 36-month calendar showing option exercise dates and expected recompete release windows for every material contract. Each pursuit has a named lead, a weekly cadence, and a win theme tied to what the customer is changing in the next requirement. We can also show recent recompete win rate and what we changed after losses.
Good answer
We know which major contracts are coming up for recompete. The plan and ownership are not fully documented yet.
Red flag
We are the incumbent, so we expect to keep it. We’ll deal with recompete when it shows up.
How Rejigg helps:Rejigg lets you share the calendar in one place and track buyer follow-ups in the deal dashboard, so dates do not get lost in email.
Can you walk through your margin by contract type, like a program manager would?
Deal-criticalContract Economics
What buyers determine
Buyers want to understand how profit is created and protected on time-and-materials, firm-fixed-price, and cost-type work. They are looking for where overruns tend to happen and whether your pricing assumptions match reality. Repeatable margin usually shows up as tight staffing control, clean timekeeping, and fast change control when scope moves.
How to prepare
- Break revenue and gross margin out by contract type and major program
- Document utilization, bill rate versus pay rate spread, and subcontract mix on key programs
- Summarize material overruns and what operational change prevented a repeat
Great answer
We show margin by contract type and by program, with the drivers the program team manages: utilization, bill-to-pay spread, staffing mix, and subcontract usage. On fixed-price work, we track scope and change control and can point to where overruns happened and what we changed. On cost-type work, we follow documented timekeeping and expense support, so audits do not turn into a scramble.
Good answer
We know which programs are higher margin and why. We have not separated results cleanly by contract type and program yet.
Red flag
Our blended margin is in the high teens. We do not really break it down by contract mechanics.
How Rejigg helps:Rejigg’s QuickBooks integration helps you get to cleaner program-level financials faster, so buyers are not rebuilding your P&L by hand.
How do you set indirect rates, how often do you true-up, and have you ever been surprised by actuals?
Deal-criticalIndirect Rates
What buyers determine
Indirect rates shape both competitiveness and profitability in GovCon. Buyers are testing whether you price with discipline and adjust fast when actuals move. Surprises here can show up as margin compression, pricing that stops winning, or compliance exposure if unallowable costs get mixed into billings.
How to prepare
- Document your indirect rate model and who owns updates
- Show budget versus actual indirects over time and how often you reforecast
- Separate direct and indirect costs and document how you exclude unallowable costs
Great answer
We set rates with a documented model and review budget-to-actual monthly. We reforecast on a set cadence, and we can show recent periods of budgeted versus actual overhead and fringe with plain-language explanations for variances. We also have a defined process to keep unallowable costs out of billings and proposals.
Good answer
We monitor indirects and have a general method. We do not have a clean variance package ready for diligence yet.
Red flag
We adjust indirects when it feels off. We have not had issues.
How Rejigg helps:Rejigg’s secure data room gives buyers one place to review indirect rate support and forecasts without version-control problems.
What compliance issues could shut off revenue, and how do you control access to controlled information and controlled technology?
ImportantCompliance Risk
What buyers determine
Buyers are hunting for compliance problems that could stop performance, limit eligibility, or create post-close liability. They also want to see that controls match day-to-day behavior, especially around controlled data, system access, and any foreign national touchpoints. A clean answer usually includes proof, not just policy documents.
How to prepare
- List which programs involve controlled data and document access controls and audit logs
- Summarize reportable incidents, investigations, disputes, or corrective actions and outcomes
- Document boundaries for any offshore work or non-U.S. person involvement, even on commercial tasks
Great answer
We can show which programs involve controlled data and how we control access, storage, and handling in daily work. We have had issues come up, documented them, and can explain what changed operationally so those issues do not repeat. When we use non-U.S. persons or offshore resources, the boundary is written down and enforced.
Good answer
We have policies and no major problems. Our controls and boundaries are not packaged in a diligence-friendly way yet.
Red flag
We have never had a problem. We cannot clearly explain how we prevent one.
How Rejigg helps:Rejigg lets you stage sensitive compliance documents after buyer vetting and an NDA, and then expand access as the buyer gets serious.
How do you avoid performance surprises on programs, and what happens if key subs or key cleared staff leave?
ImportantDelivery Stability
What buyers determine
Delivery problems turn into deal problems fast in defense services because customer trust drives renewals, options, and recompetes. Buyers want to see real program governance and early warning signals on burn and staffing. They also want to understand how exposed you are to a single subcontractor or a few cleared individuals.
How to prepare
- Document your program cadence and escalation path for staffing, burn, and customer issues
- List key subcontractors by program with contract terms and a realistic replacement plan
- Track cleared hiring time-to-fill and retention for critical roles
Great answer
Program managers run a consistent cadence on staffing, burn, and customer feedback, with a clear escalation path when metrics drift. We can show where we rely on subs versus employees, what the agreements allow, and how quickly we have replaced key roles in the past. For cleared roles, we track time-to-fill and have redundancy plans for customer-approved positions.
Good answer
We manage delivery closely. We have not summarized staffing and subcontract dependencies cleanly yet.
Red flag
We scramble when a key role opens up. Sub and staffing risk is handled case by case.
How Rejigg helps:Rejigg’s deal workspace keeps delivery-risk questions, staffing plans, and subcontract documents organized across buyers, so you stop repeating yourself.
Is capture and customer access a process, or is it the founder’s relationship network?
ImportantOwner Dependence
What buyers determine
Buyers worry about losing the relationships that keep pipeline and recompetes alive. They want to see that capture decisions, pricing approvals, and proposal execution live with a team, not one founder. The transition period matters here because customers can feel uncertainty quickly if access changes overnight.
How to prepare
- Name leaders who own capture, proposals, and delivery, and document responsibilities
- Document your bid qualification process and show a win not led by the founder relationship
- Build a customer handoff plan with introductions, authority changes, and escalation paths
Great answer
Capture and proposals are owned by named leaders, with a consistent bid qualification process and a defined review cadence. We can point to recent wins where the founder was not the primary relationship holder, and the program team owned day-to-day customer touchpoints. We also have a transition plan for introductions and escalation, so customers know exactly who to call after close.
Good answer
We have strong people, but the founder still drives capture and key customer relationships.
Red flag
Most opportunities come through the founder. There is not a defined capture process outside of that.
How Rejigg helps:Rejigg’s direct messaging and scheduling make it easy to bring your next-layer leaders into buyer calls so transferability is visible early.
Which vehicles and primes actually drive your growth, and where is your bottleneck: cleared hiring, proposal bandwidth, or vehicle access?
Good to haveWin Engine
What buyers determine
Buyers want a growth story that matches how federal work is actually won. They look for pipeline tied to vehicles you can use today, prime partners you win with repeatedly, and the internal capacity to propose and staff without breaking current delivery. They also want to understand what constraint slows you down most in your specific labor market.
How to prepare
- List the contract vehicles you can sell through and map recent wins to each one
- Break pipeline into qualified pursuits with owners, dates, and staffing requirements
- Identify the limiting constraint and show what you have done to relieve it
Great answer
Growth comes through specific vehicles and prime relationships, and we can show recent wins that match that pattern. Our pipeline is tied to dated pursuits with assigned owners and a staffing plan, not a list of interesting opportunities. Our main bottleneck is clear, and the plan to relieve it matches our cleared labor market and proposal bandwidth.
Good answer
We have a pipeline and a sense of which vehicles matter. We have not tied it to staffing and proposal capacity yet.
Red flag
We have a lot of opportunities and expect growth. It is not connected to vehicles, capacity, or dates.
How Rejigg helps:Rejigg puts you in front of vetted GovCon buyers and keeps early conversations focused on real vehicles, staffing, and recompete math.
Straight from buyer evaluations
“Almost all of their employees had security clearances, and nearly half had the highest level. You can't build that kind of team overnight. I'd be getting years worth of recruiting and vetting work on day one.”
Skilled TeamBuyer impressed by the cleared workforce at a defense contractor
“They're one of only three companies that can do this type of communications security work for international defense programs. That kind of specialized position with repeat contracts across multiple countries gave me real confidence in the revenue.”
Unique SpecialtyBuyer reviewing a defense company with a unique specialty
“The president and finance director have been running things for over a decade, project leads own the client relationships, and the owner isn't the one everyone depends on. That's a business I can step into without anything falling apart.”
Strong TeamBuyer seeing a strong leadership team at a defense services firm
“Ten years of clean financials, modern accounting software, quality certifications in place, and they were already working on the newest compliance standards. For a company this size, that level of organization is genuinely rare.”
Well-OrganizedBuyer impressed by how well-organized a defense contractor was
“The pipeline of signed work was real. They walked me through every contract showing what's funded, what's committed, and when things come up for renewal. I could actually see the revenue ahead with confidence.”
Solid PipelineBuyer reviewing a government contractor's solid work pipeline
How buyers value this type of business
Where you land in that range depends on the strength of your contracts, how deep your team is, and whether the business keeps running when you're not in the office.
3x–8x
annual profit
Depending on contracts, team depth, and how much runs without you
What drives a premium
- A team with security clearancesEmployees with clearances are incredibly hard to replace. It takes years to get them, so buyers see your cleared team as one of the most valuable parts of the deal.
- Signed contracts with years of work aheadContracts that are already funded and have a history of being renewed give buyers confidence they're buying steady, reliable revenue.
- Direct relationships with government agenciesBeing the main point of contact on contracts rather than working through another company gives the buyer control over client relationships after the sale.
- Certifications and compliance already in placeQuality certifications, approved accounting systems, and compliance programs took you years to build. Buyers would rather acquire that than start from scratch.
Common add-backs
Your salary above what you'd pay a general manager to do your jobPersonal vehicles or real estate expenses that run through the companyCosts you spent winning contracts that are now producing ongoing revenueFamily members on payroll in roles that won't continue after the sale
What the process looks like
5–8 months from listing to closemedian 201 days across closed deals
- 1ListingThe day your business goes live on Rejigg.
- 2First messageMedian: 4 days laterA buyer requests a conversation by sending a first pitch.
- 3First callMedian: 7 days laterYour first completed call with a buyer to answer questions about your business.
- 4Letter of intentMedian: 59 days laterA buyer submits an LOI and you choose to accept, decline, or negotiate.
- 5Deal closeMedian: 89 days laterAssuming all is well in due diligence, you close the deal.
Typical buyer types
Mid-size defense contractors looking to add your capabilities or agency relationshipsTechnology companies that want to break into government work with your track record and clearancesCompanies from related fields looking to expand into defense servicesExperienced operators looking for a well-organized business with steady government revenue
Common questions about selling a Defense business
Most defense services contractors are priced off cash flow, plus the risk profile of the contract book. Value usually improves when revenue is tied to funded task orders, recompete timing is spread out, clearances are stable, and capture can run without the founder. To sanity-check a range, use the <a href="/valuation" style="color: #1d4d05; font-weight: 600;">free valuation calculator</a>, then pressure-test the inputs against your funded backlog and recompete calendar.
No. Brokers often charge 5–10% of the sale price for packaging and outreach you can run yourself with the right tools. Rejigg is built for broker-free sales: buyers are pre-vetted, NDAs are signed digitally, diligence runs through a secure data room, and you can compare offers side-by-side without a middleman. Start with the <a href="/owners/owners-guide/prepare-to-sell-your-business" style="color: #1d4d05; font-weight: 600;">prep guide</a>.
Defense deals can run longer than typical services deals because the timeline gets driven by novation, customer consent, and security and governance updates. You can still move fast if your contract schedule, funded backlog, and compliance materials are organized. Expect extra time when novation is likely or when clearance posture needs review. Rejigg speeds up the controllable parts by organizing documents in a data room and keeping buyer Q&As in one place through <a href="/owners/owners-guide/due-diligence-and-closing" style="color: #1d4d05; font-weight: 600;">due diligence and closing</a>.
Start with a sanitized package that explains contract reality: a contract and task order schedule, backlog split into funded and unfunded buckets, and a 24–36-month calendar of option and recompete decision dates. Add a high-level clearance overview and an org view that shows who owns delivery and capture. On Rejigg, you can stage this safely using buyer vetting, digital NDAs, and permissioned folders in the built-in data room. See the <a href="/owners/owners-guide/prepare-to-sell-your-business" style="color: #1d4d05; font-weight: 600;">preparation guide</a>.
Sometimes. An SBA loan can be harder in GovCon when revenue is concentrated in one customer, contracts are short-dated, margins depend on aggressive indirect rates, or compliance obligations raise lender concern. Buyers still model SBA when the contractor has stable service revenue, clean books, and transferable management. Use the <a href="/sba-calculator" style="color: #1d4d05; font-weight: 600;">SBA loan calculator</a> to test payments, then line the model up with funded backlog and recompete timing so the financing matches reality.
Contract ceiling is the maximum the government is allowed to buy under a vehicle. Awarded value is what has been awarded in the contract documents, and it can include options and unfunded pieces. Funded value is what is obligated today and can be performed and invoiced right now. Buyers weight funded value most, then look at your history of options being exercised and funding arriving on time.
Buyers want to know whether your programs can ride out a funding pause without losing cleared staff or missing deliverables. They will ask what happened during the last continuing resolution you lived through, how incremental funding hits your contracts, and how fast invoices get accepted and paid. A specific story beats a forecast. If you have a staffing and subcontractor playbook for delays, buyers usually get more comfortable.
Add-backs are owner or one-time expenses a buyer may treat as non-recurring, so they do not reduce the cash flow expected after the sale. In defense services, buyers push hard on add-backs tied to compliance, recruiting, and proposal work because those costs often come back every year. The clean way to handle it is to itemize each add-back, attach backup like invoices, and explain what changes so it truly will not repeat.
Working capital is the cash tied up in running the business, mainly receivables, payables, and accrued payroll. In GovCon, payment timing can hinge on invoice acceptance, and payroll for cleared labor does not wait. Buyers often set a target working capital level at close so the company can operate without an immediate cash squeeze. Clean receivables aging and a clear invoicing cadence usually make this negotiation easier.
Earnouts tie part of the price to future results. In GovCon, they often get tied to recompete wins, option exercises, or revenue retention, which can be workable if the definitions are tight. It helps when the seller still has real influence over the outcome and when the buyer cannot change staffing, pricing, or bid decisions in ways that quietly make targets unreachable. Rejigg’s deal dashboard lets you compare earnout terms side-by-side using <a href="/owners/owners-guide/negotiate-a-deal" style="color: #1d4d05; font-weight: 600;">deal negotiation guidance</a>.
Seller financing means you take part of the price over time as a note, which is essentially a loan to the buyer. It can expand the buyer pool, but it also ties your risk to their ability to manage staffing churn and recompetes after close. In GovCon, buyers ask for it more often when lenders are nervous about customer concentration or short periods of performance. If you do it, focus on clear repayment terms and protections.
A non-compete is a promise that you will not start or join a competing business for a certain period and within a defined scope. In GovCon, scope needs to be specific because “competition” can mean an agency, a contract vehicle, a prime relationship, or a service line like cleared engineering support. Buyers usually want enough protection to keep you from taking the same relationships and team right after close. Keep it tied to what they are buying.
The biggest risk is sharing contract details, staffing lists, or compliance materials too broadly before you know who the buyer is and how they handle controlled information. Use an NDA, stage what you share, and keep a record of who received what. Rejigg reduces leakage by pre-vetting buyers, using digital NDAs, and letting you control document permissions in the built-in data room. For sequencing, start at <a href="/owners/owners-guide/find-your-dream-buyer" style="color: #1d4d05; font-weight: 600;">finding buyers</a>.
Taxes depend on your entity type and the deal structure, including whether the buyer buys assets or equity. In GovCon, structure can also be constrained by contract transfer and clearance realities, so tax planning needs to match what is actually workable. A practical approach is to model after-tax proceeds early, then sanity-check the structure against your contract portfolio. Keep diligence organized so your tax and legal advisors can move faster with <a href="/owners/owners-guide/negotiate-a-deal" style="color: #1d4d05; font-weight: 600;">negotiation steps</a>.
In defense services, key employees are often the product because performance depends on cleared staff and trusted program leaders. Buyers usually ask for a retention plan for customer-facing roles, hard-to-fill cleared roles, and positions required by the contract. Expect diligence on comp, bonuses, and whether critical labor sits with employees or subcontractors. A clear transition plan reduces churn risk and helps protect recompetes. Rejigg supports the handoff with <a href="/owners/owners-guide/transitioning-after-the-sale" style="color: #1d4d05; font-weight: 600;">transition guidance</a> and organized buyer requests.
Compare who is holding the risk and when you get paid. Look at cash at close, any earnout tied to recompetes or options, requested seller financing, and assumptions about funded backlog and indirect rates. Also, evaluate whether the buyer has a credible plan for clearance continuity and keeping cleared staff. Rejigg’s offer comparison dashboard shows terms side-by-side so you can pressure-test value, contingencies, and timelines. Use <a href="/owners/owners-guide/negotiate-a-deal" style="color: #1d4d05; font-weight: 600;">negotiation guidance</a> to dig in.
Start earlier than you think because the value lift comes from clarity, not pitch decks. Get your contract schedule, funded backlog breakdown, and 24–36-month recompete calendar tight. Then document who owns security, capture, and delivery beyond the founder so buyers can see continuity. Rejigg’s <a href="/owners/owners-guide/prepare-to-sell-your-business" style="color: #1d4d05; font-weight: 600;">prepare-to-sell guide</a> walks you through the sequence and keeps everything organized.
Yes. Most sellers start with a sanitized summary, then share deeper documents after buyer vetting and an NDA. You can describe contract type, period of performance, prime versus sub position, funded backlog buckets, and upcoming option and recompete dates without sending full contract files on day one. Rejigg supports staged diligence with pre-vetted buyers, digital NDAs, and permission controls in the secure data room as conversations progress.
Start by organizing your contract list, your team's clearances, and your financial records. List on <a href="/" style="color: #1d4d05; font-weight: 600;">Rejigg</a> where buyers are actively looking for defense contractors. You'll talk directly with qualified buyers, share documents securely, and negotiate on your timeline. No broker required.
Most defense contractors sell for 3 to 8 times their annual profit. Where you land depends on your team's clearances, how much work you have under contract, and whether the business operates without you managing everything. Try <a href="/" style="color: #1d4d05; font-weight: 600;">Rejigg</a>'s <a href="/valuation" style="color: #1d4d05; font-weight: 600;">free valuation calculator</a> for a starting estimate.
Four to nine months is typical. Defense deals can take a bit longer than other industries because of clearance transfers and government contract paperwork. Having your contracts organized and a strong leadership team in place helps things move faster.
No. Brokers charge 5 to 10 percent of the sale price. <a href="/" style="color: #1d4d05; font-weight: 600;">Rejigg</a> gives you buyer vetting, secure document sharing, and direct messaging with qualified buyers. <a href="/owners/schedule-consultation-call" style="color: #1d4d05; font-weight: 600;">Schedule a free consultation</a> to see how the process works for defense contractors.
Buyers care most about what stays after you leave. They want a cleared team that sticks around, contracts that keep renewing, direct relationships with government agencies, and a management team that handles operations without you. The more the business runs on its own, the more buyers will pay.
Facility clearances need to go through a government process when ownership changes, which can take a few months. Individual employee clearances generally stay active as long as they're still sponsored. The key is having multiple cleared leaders on your team so everything doesn't depend on one person. Having a plan for this before you go to market keeps buyers confident.
These special designations are tied to ownership requirements, so a standard sale often changes your eligibility. The first step is figuring out how much of your revenue actually depends on the designation versus work you'd win regardless. Some deals can be structured to preserve the designation, while others just account for the change. <a href="/owners/schedule-consultation-call" style="color: #1d4d05; font-weight: 600;">Talk to Rejigg</a> about your options.
Be straightforward about what's funded and confirmed versus what's committed but not yet funded. Show how often your contracts have been renewed in the past so buyers can see the pattern. Buyers in this space understand the difference between a big contract ceiling and what's actually flowing through today. Being honest with your numbers builds more trust than headline figures that don't hold up.
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