Opportunities
Civil Engineering Firm in Washington with $1.7M in Sales
High profit margins and selling at a low multiple!
Specifications
This civil engineering firm in Washington had a 36% profit margin in 2020 and is selling at a very low 2.35 multiple! There is a solid team of 11 already in place, and the owner will stay on for 3 years to ensure a smooth transition and seamless transfer of client relationships. Established 15 years ago, this firm is licensed in Washington, Oregon, and Alaska, as well as having DBE, SBE, and MBE certification. Services include civil engineering, surveying, planning, design, permitting, and construction management in the public and private sector. Along with providing all civil aspects of design and construction, the company also conducts value engineering studies, involving a team of multiple disciplines that dissect a project and provide input on how to improve the function and cost; this service has proven to be indispensable in the industry. The highly skilled team of 11 is based out of a 1,600 sq. ft. office building and includes the owner, who is a Project Engineer, 1 PT Professional Land Surveyor, 1 Engineer-in-Training, 4 Surveyors, 2 CAD Technicians, 1 PT Structural Engineer, and 1 Office Manager.
Assets are comprised of survey equipment, digital levels, total stations, scanners, high-end computers, and a multitude of top-notch engineering software including MicroStation, InRoads, Civil 3D, and Leica Geosystems.
This firm has substantial connections with several important projects. Continuing to build these relationships and engage in large projects will certainly lead to an increased client base and growth in revenue. Priced at $1,425,000, a 10% down payment of $142,500 returns $419,648 in the first year after debt payments – a 294% return on investment!
Business Highlights
- Year Established: 2006
- Location: Seattle, Washington
- Service Area: Primarily throughout Washington, Oregon, & Alaska
- Services: Civil engineering, surveying, planning, design, and permitting
- Clients: Commercial, educational, institutional, large engineering, design firms, some residential
- Certifications: DBE / SBE / MBE certified
- Lease: 1,600 sq. ft. office building
- Reason for Selling: Industry Consolidation
- Personnel: 11: 1 Owner (Project Engineer), 1 PT Professional Land Surveyor. 1 Engineer-in-Training, 4 Surveyors, 2 CAD Technicians, 1 PT Structural Engineer, 1 Office Manager
- Seller Training Period: 3 years
- Growth Opportunities: Continue to connect and engage in important projects in the area
- Current Owner’s Responsibilities: Overall firm management, public relations, some design elements
Financial Highlights
List Price: $1,425,000
- Gross Sales:
- 2020: $1,699,822
- 2019: $1,330,905
- 2018: $1,352,918
- Cash Flow:
- 2020: $609,851
- 2019: $452,632
- 2018: $394,683
*amounts may vary
Cash Flow Analysis
| Description of Financial Statement | P&L Statement Jan-Dec 2020 Cash | Tax Return Cash | Tax Return Cash | Tax Return Cash | Tax Return | Tax Return Cash | Notes |
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | ||
| GROSS SALES | $1,699,822 | $1,330,905 | $1,352,918 | $1,801,820 | $1,315,511 | $1,344,933 | |
| Net Income Shown on Financial Statement | $431,420 | $285,007 | $267,471 | $519,342 | $216,850 | $364,010 | |
| ADDBACKS | |||||||
| Compensation to Owner | $203,679 | $225,009 | $171,902 | $102,431 | $75,000 | $86,639 | |
| 11% Tax on total W2 Salaries | $22,405 | $24,751 | $18,909 | $11,267 | $8,250 | $9,530 | |
| Depreciation | $0 | $1,633 | $20,002 | $59,202 | $1,369 | $2,122 | |
| Interest | $0 | $29 | $0 | $0 | $595 | $2,718 | |
| Meals & Entertainment | $8,220 | $2,243 | $2,439 | $0 | $0 | $2,720 | |
| Cell Phone | $960 | $960 | $960 | $960 | $960 | $960 | $80/month |
| Owner's 401k | $20,000 | $20,000 | $20,000 | $20,000 | $20,000 | $20,000 | $20,000/year |
| Replacement | $-110,000 | $-110,000 | $-110,000 | $-110,000 | $-110,000 | $-110,000 | |
| Owner's Disability Insurance | $3,000 | $3,000 | $3,000 | $3,000 | $3,000 | $3,000 | $3,000/year |
| Owner's Medical Insurance | $22,742 | $0 | $ | $0 | $0 | $0 | |
| Owner's HSA | $7,425 | $0 | $ | $0 | $0 | $0 | |
| TOTAL ADDBACKS | $178,431 | $167,625 | $127,212 | $86,860 | $-826 | $17,689 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $609,851 | $452,632 | $394,683 | $606,202 | $216,024 | $381,699 | |
| Profit Margin | 35.88 % | 34.01 % | 29.17 % | 33.64 % | 16.42 % | 28.38 % |
- Profit Margin: 36%
Clients
- Residential
- Commercial
- Educational
- Institutional
- Transportation & Roadway
- Large Engineering & Design Firms
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Services
Personnel
- 1 Owner
- Project Engineer – overall firm management, public relations, design elements, marketing
- 1 PT Professional Land Surveyor
- 1 Engineer-in Training
- 4 Surveyors
- 2 CAD Technicians
- 1 PT Structural Engineer
- 1 Office Manager
Growth Opportunities
- Continue to build connections/relationships in the area
Valuation Details
The Firm Advisors used a cash flow valuation methodology to determine the purchase price of the business.
Cash flow is the sum of business net income plus any owner perks and any non-onward expenses. Then we prescribe a multiple based on 20 parameter which valuate the health of the business. For this valuation, we used the 2020 Cash Flow value making the business price much more favorable to the buyer.
The formula used is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
With this information, the computation is as follows:
$609,851 x 2.35 = $1,433,150
Funding Example
Purchase Price: $1,425,000
| 10%Buyer Down Payment | $142,500 | Must be unborrowed funds |
| 15%Seller Financing or Equity | $213,750 | 5-year term at a rate of 4.50% = a monthly loan payment of $3,985 |
| 75%Bank Loan | $1,068,750 | 10-year term at a rate of 6% = a monthly loan payment of $11,865 |
- Cash Flow: $609,851
- Annual Payment:
- To Seller: $47,819
- To Bank: $142,384
- Net Profit (after expenses and loan payment): $419,648
Funding Details
Business:
Offer Price: $
% Buyer Cash Down at Closing: $
% Seller Carry Back via Promissory Note: $
year term at a rate of %
% of Purchase Price secured by Buyer and Seller
Total Bank Loan Need: $
% of Purchase Price
Desired Loan Type:
Desired Bank Terms: year term at a rate of %
Total Business Assets, Inventory, and A/R: $
Total Undercollateralized Loan: $
Loan Payments
| Monthly Payment to Bank: | $ |
| Yearly Payment to Bank: | $ |
| Monthly Payment to Seller: | $ |
| Yearly Payment to Seller: | $ |
| Total Monthly Debt Service: | $ |
| Total Yearly Debt Service: | $ |
Conclusions
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
|
Cash Flow: 2020 Cash Flow |
$ |
| Annual Debt Service: | $ |
| RATIO: |
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
|
Cash Flow: 2020 Cash Flow |
$ |
| Annual Debt Service: | -$ |
| NOI: |
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
| Down Payment: | $ |
| NOI: | |
| ROI: | % |
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