Opportunities
Architecture Firm with Professional Team
Specifications
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.
This is a great chance for an architectural firm to add a K-12 arm, or to expand into the Houston and Dallas markets. Priced at $1,450,000 with 6-figure profits, a buyer could see a great first year's cash flow! Seller earnout is based on performance.
Business Highlights
- 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
Financial Highlights
- 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 | P&L Statement Jan-May | Tax Return | Tax Return | Notes |
| 2018 | 2017 | 2016 | ||
| GROSS SALES | $861,001 | $1,668,433 | $1,335,528 | |
| Annualized | $2,066,402 | |||
| Net Income Shown on Financial Statement | $134,411 | $308,812 | $3,120 | |
| ADDBACKS | ||||
| Compensation to Owner | $76,250 | $160,000 | $134,700 | |
| 11% Tax on total W2 Salaries | $8,388 | $32,780 | $14,817 | |
| Depreciation | $0 | $2,370 | $11,650 | Non-cash item |
| Contributions/Donations | $2,000 | $34,312 | $1,945 | Non-onward going expense |
| Meals & Entertainment | $6,022 | $6,512 | $3,044 | Personal expenses run through the business |
| Personal Auto | $17,175 | $14,539 | $20,400 | $1,700/mo in lease payments |
| Health Insurance | $1,250 | $2,999 | $3,000 | $250/mo for owner's premiums |
| Travel | $5,124 | $8,326 | $4,867 | 40% personal |
| Cell Phone | $625 | $1,500 | $1,500 | 2 lines at $125/mo |
| Personal Expenses | $0 | $0 | $76,620 | Non-onward going expense |
| Credit Cards | $0 | $0 | $38,815 | One-time, non-onward going expense |
| Owner Salary | $-62,500 | $-150,000 | $0 | Salary to keep owner for 1 year or replace with new principle |
| TOTAL ADDBACKS | $54,334 | $113,338 | $311,358 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $188,745 | $422,150 | $314,478 | |
| Annualized | $188,745 | |||
| Profit Margin | 21.92 % | 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.
Services
| Architectural Design | Construction Documents | Programming |
| Interiors | Specifications | 3D Imaging |
| 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
| Concentration | Duration |
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| Texas laws regarding public work: | |
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| Fees | |
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Employees
- 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
Project Hierarchy
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Growth Opportunities
- $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
Valuation Details
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.
Funding Example
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.
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