Architecture Firm with Professional Team
Located in Houston and also serving Dallas, projects are 80% K-12 and 10% municipal, with the remaining 10% comprised of retail, healthcare, transit and more. Projects range in size from 6 months in length to 2+ years, with staff continuously working on 14 projects each month. Beyond architectural design, this firm also offers project and construction management, cost estimation, interiors, specifications and more.
Staff includes 1 Architect who mostly handles QA, 1 Office Manager, 3 Project Managers and 2 Interns.
- Years in Business: 33
- Location: Houston
- Service Area: Houston & Dallas
- Projects: 80% K-12 / 10% Municipal / 10% Other
- 14 projects/month
- Services: Architectural design, 3D imaging, project management, cost estimates, construction management, interiors, specifications and more
- Lease: $2,900/month in office space
- Reason for Selling: Retirement
- Employees: 1 Licensed Architect, 1 Office Manager, 3 Project Managers, 2 Interns
- Seller Training Period: 2-3 years
- Growth Opportunities: $1B worth of Texas school projects coming up. Task order contracts.
- Current Owner’s Responsibilities: Architect
- List Price: $1,450,000
- Gross Sales:
- 2017 - $1,668,433
- 2016 - $1,335,528
- Cash Flow:
- 2017 - $422,150*
- 2016 - $314,478
- *Cash flow reflects retaining the owner for one year or replacing with another principle at $150,000 per year.
- YOY Growth: 20% increase in sales since 2006
- Profit Margin: 25%
Cash Flow Analysis
|Description of Financial Statement||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$308,812||$3,120|
|Compensation to Owner||$160,000||$134,700|
|11% Tax on total W2 Salaries||$32,780||$14,817|
|Contributions/Donations||$34,312||$1,945||Non-onward going expense|
|Meals & Entertainment||$6,512||$3,044||Personal expenses run through the business|
|Personal Auto||$14,539||$20,400||$1,700/mo in lease payments|
|Health Insurance||$2,999||$3,000||$250/mo for owner's premiums|
|Cell Phone||$1,500||$1,500||2 lines at $125/mo|
|Personal Expenses||$0||$76,620||Non-onward going expense|
|Credit Cards||$0||$38,815||One-time, non-onward going expense|
|Owner Salary||$-150,000||$0||Salary to keep owner for 1 year or replace with new principle|
|Seller's Cash Flow = Total Addbacks + Net Income||$422,150||$314,478|
|Profit Margin||25.30 %||23.55 %|
- Sales have jumped by over 90% over a 2-year period
- Between 2015 and 2016, the seller made internal changes to improve the firm’s profitability
- Office space was cut to reduce rent and a partner was removed
***2017 cash flow reflects retaining the owner for one year or replacing with another principle at $150,000 per year.
|Architectural Design||Construction Documents||Programming|
|BIM Technology||Virtual Tours||Graphics|
|Project Management||Cost Estimating and Control||Construction Management|
|Bond / Pre-Bond Assistance||Facility Assessments||Master Planning|
|Program Management||Ed Specs / Standards||Code Analysis|
Clients & Projects
|Texas laws regarding public work:|
- 1 Architect
- Handles most QA needs
- Analyzes constructability and reviews plans
- Has been with the firm for 5 years
- 1 Office Manager
- Handles all administrative duties and schedules
- Project assistant
- 4 Project Managers
- 2 Interns
- Production process
- Not yet licensed architects, but still billable
- Have been with the firm for between 6 months and 4 years
- $1B of upcoming K-12 & higher education work coming
- Plenty of work on which to bid
- Task order contracts
- Not much of this is currently being done by the firm but could be a growth opportunity if desired
The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business.
The formula used is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
Cash Flow is the sum of business net income plus any owner perks and any non-onward going expenses.
A multiple is prescribed by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiple.
For this business, a 2017 Cash Flow was used with a prescribed multiple is 3.3. With this information, the computation is as follows:
$422,150 x 3.3 = $1,459,095
The Fair Market Value found above positions the business List Price at $1,450,000.
Purchase Price: $1,450,000
10%Buyer Down Payment: $145,000
45%Bank Loan: $655,000
Seller Earn Out: $650,000
Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $13,339.
Seller earn out is performance-based.
Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.
|Document Title / Description|
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