Opportunities
Design & Architecture with Hotel and High-End Corporate Office Focus
Sold
Professional and licensed staff with 3 years in projects!
Specifications
Located in dynamic Nashville, Tennessee, this architecture and design firm has an extraordinary reputation for quality services, an impressive list of repeat clients, and a niche focus that distinguishes it from others in the region. Working in 9 states, this company has been recognized for developing and implementing a customized approach tailored to each client’s culture, style and corporate brand. Eight full-time and one part-time staff include a studio manager, interior designers, architects, and a codes specialist with operations and project management responsibilities well defined. The seller is invested in the future success of the company and will remain on board for 1-3 years as negotiated.
New construction build-outs, additions, renovations, and adaptive reuse projects have been completed on projects ranging in size from 10,000 to 400,000 square feet. An active project base of to 20+ is typical. The full-service project management services can include pre-design programming, site acquisition/feasibility consultation, architecture and interior design, space planning, systems integration, furnishings and equipment procurement management and project management services.
Presently, many projects are in the pipeline continuing through 2019, with some projected to last into 2021. In addition to the firm’s niche focus, services are also provided to the healthcare, retail and educational market segments and further expansion in these areas would provide even more growth potential. Although the firm has a strong presence in the Nashville region, services have also been provided in New York, Georgia, Florida, the Carolinas, Texas, Kansas, Colorado, Nevada, Virginia and others for clients primarily based in Nashville
Business Highlights
- Years in Business: 14
- Location: Nashville – One of the fastest growing cities
- Service Area: Primarily Nashville but will go where clients have offices. Staff maintains professional registration in 9 states.
- Concentration: Corporate office and hospitality design, and adaptive reuse
- Projects: 10,000 sq. ft. to 400,000 sq. ft. with values up to $78M. Average project is 25,000 – 50,000 sq. ft. in size.
- Employees: 9: 1 Project Architect (licensed), 1 Associate Architect (will be licensed this year), 5 Interior Designers (2 licensed), 1 PT Architect (codes and QA), 1 Office Manager
- Reason for Selling: Retirement
- Seller Training Period: 1-3 years
- Growth Opportunities: Nashville is booming, with building permits issued and the value of construction breaking records in each of the past several years, there is huge expansion potential in all areas.
- Current Owner’s Responsibilities: Will stay on board as needed.
Financial Highlights
- List Price: $3,980,000
- Gross Sales:
- 2018 - $2,884,160
- 2017 - $3,447,040
- 2016 - $3,071,777
- 2015 - $2,689,280
- Cash Flow:
- 2018 - $1,693,152
- 2017 - $1,045,383
- 2016 - $983,595
- 2015 - $954,960
- Assets Included in Purchase:
- Equipment - $140,671 in furniture, fixtures, drafting software, and more
- A/R - $401,486
- Projects – 20 upcoming projects, with some lasting into 2021
Specialties
- Architecture
- Interior Architecture
- Interior Design
- Pre-design programming and master planning
- Space Planning
- Systems Integration
- Furniture design and selection
- Project Management
Client Concentration & Projects
- Corporate office and hospitality design, and adaptive reuse
- New business primarily is generated by referrals from local hospitality developer and real estate brokers
- Clients are mostly in Nashville, but the company has completed projects wherever clients have offices:
- Florida, Texas, New York, Ohio, Colorado
- Projects range in size from 10,000 sq. ft. to 400,000 sq. ft.
- The average project is between 25,000 – 50,000 sq. ft.
- Firm focuses on 15 projects each week
- Weekly active projects are between 25 – 30
Cash Flow Analysis
| Description of Financial Statement | P&L Statement | Tax Return | Tax Return | Tax Return | Tax Return | Notes |
| 2018 | 2017 | 2016 | 2015 | 2014 | ||
| GROSS SALES | $2,884,160 | $3,447,039 | $3,071,777 | $2,689,280 | $2,041,139 | |
| Net Income Shown on Financial Statement | $-12,945 | $37,609 | $-45,758 | $51,225 | $-6,705 | |
| ADDBACKS | ||||||
| Compensation to Owner | $1,850,000 | $1,149,828 | $1,154,793 | $1,041,828 | $770,878 | |
| Depreciation | $0 | $0 | $11,906 | $15,026 | $30,864 | Non-cash item |
| Interest | $0 | $0 | $0 | $0 | $35 | Non-onward going expense |
| Non-Business Telephone | $2,027 | $2,027 | $2,027 | $2,027 | $2,027 | 2 personal lines at $168.94/mo |
| Health Insurance Premiums | $6,084 | $6,084 | $6,084 | $6,084 | $6,084 | $507/month |
| 401K for Owner | $20,244 | $24,000 | $27,925 | $12,733 | $15,386 | Paid to owner |
| Auto-Personal Use | $874 | $835 | $1,575 | $1,037 | $1,971 | 70% of auto use is personal |
| Gifts | $1,368 | $0 | $43 | $0 | $186 | Non-onward going expense |
| Wage | $-175,000 | $-175,000 | $-175,000 | $-175,000 | $-175,000 | To replace Architect |
| Contributions/Donations | $500 | $0 | $0 | $0 | $0 | |
| TOTAL ADDBACKS | $1,706,097 | $1,007,774 | $1,029,353 | $903,735 | $652,431 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $1,693,152 | $1,045,383 | $983,595 | $954,960 | $645,726 | |
| Profit Margin | 58.71 % | 30.33 % | 32.02 % | 35.50 % | 31.64 % |
- Wage addback reflects the cost for replacing the seller (Principal Architect)
- The increase in profit in 2018 are partially related to design services performed on a large airport project with a compressed schedule. Using their project approach and efficient project protocols, this team was able to accomplish the scope of services, meet the deadline under the project budget. Additionally, the majority of services provided in 2018 were completed by this business with few consultants, therefore the projects were more profitable.
Employees
- Studio Manager
- Licensed Interior Designer, NCIDQ, IIDA
- Second in command
- Internal team management and consultant coordination
- Client management
- Project Architect/Sr. Project Manager
- Licensed Architect, AIA
- Project management on large projects
- Client management
- Project Manager (architectural)
- Associate AIA
- Architectural intern (currently testing for licensure)
- Project management on a range of project sizes
- Skilled in space planning and design integration
- Client management
- Project Manager (interior designer)
- Licensed Interior Designer
- Project management on a range of interiors projects
- Client management
- 3 Interior Designers, all Associate IIDA; staff specialization includes:
- Space Planning, finish selection, project design coordination
- Furniture, signage and artwork coordination
- Revit skills and assists in compiling architectural drawing coordination with project managers
- Flexible skills and ability to work on multiple types of assignments
- Operations Manager
- Oversees office operations
- Assist with project administrative activities
- Project Manager
- Registered architect (works remotely), LEED AP
- Quality control and code research focus
Seller is the firm’s Principal Architect and handles strategy and client management.
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 3 year average cash flow was used with a prescribed multiple is 3.2. With this information, the computation is as follows:
$1,243,132 x 3.2 = $3,978,022
The fair market value found above positions the business list price at $3,980,000.
Funding Example
Purchase Price: $3,980,000
10% Buyer Down Payment: $398,000
25% Seller Financing: $995,000
65% Bank Loan: $2,587,000
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $18,550.
Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $33,997.
After business expenses and loan payments, a buyer with a 10% down payment of $398,000 would retain a profit of $1,062,592, which results in a 266% return on investment in the first year.
A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $3,980,000 with the terms listed above, the coverage ratio is 2.69.
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.
**The Firm Business Brokerage is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.**
Print, sign and send to:
210 N 78th St. 2nd FloorOmaha, NE 68114
Or fax to:
f 402.939.0857