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Niche Architecture w/ 35% Profit Margin

Architecture focus in apartments & senior health care!

CASH FLOW
$1,198,908

Specifications

  • Price
    $5,850,000

  • Revenue
    $3,652,089

  • Profit Margin
    35%

  • Cash Flow
    $1,198,908

  • Reason for Sale
    Strategic exit planning

  • Location
    Surrey, British Columbia area

  • Service Area
    Vancouver, British Columbia area, lower mainland British Columbia, lower Alberta, has worked in the U.S. previously

  • Equipment
    $60,000: Computer equipment, software, office furniture and fixtures

  • Lease
    2,400 sq. ft.: Open plan workspace with board rooms and a kitchen

  • Employees
    20: 11 Technicians, 1 office manager, 2 site reviewers, 4 interns, 2 owners are registered architects

  • Intangible Assets
    Profitable niche architecture projects, registered in two provinces, operates within booming Vancouver and lower mainland area

  • Valuation
    $5,823,867

This architecture firm is registered in two provinces and specializes in multi-family residential and mixed-use designs.  The team of twenty creates beautiful properties for developers and contractors who are building office buildings, residential towers, senior care facilities, and public buildings, in addition to multi-family homes and mixed-use developments.  Most work is completed in the lower mainland area of British Columbia as well as Alberta.  Projects have been completed in the U.S. and this company is willing to take on additional projects throughout the States.  The pipeline is over $3.8MM and with additional contracts in progress.  The current owners are the two registered architects within the firm, and they are willing to remain a part of the team for up to 3 years to ensure a smooth transition of projects and client relationships. 

 

The team of eighteen includes eleven technicians, one office manager, two site field reviewers, and four interns.  The owners currently focus on design duties, oversight and business development.  They both work full time, but the team is well-trained and very capable of completing high quality work for clients.  Operations are managed from a 2,800 square foot double-height office space that features an open plan workspace and a board room. A mezzanine level contains a kitchen area and second boardroom plus additional workstations.

 

Growth is nearly endless in the Vancouver area and the demand for multi-family residences as well as mixed-use properties is very high.  Future plans could include building upon this current specialty or working to build clients within the industrial or office sectors.   An additional registered architect could be added to the team to increase capacity, if desired.

Business Highlights

  • Year Established: 2000
  • Location:  Surrey, British Columbia area
  • Service Area:  Vancouver, British Columbia area, lower mainland British Columbia, Alberta, has worked in the U.S. previously
  • Services: Architecture services: wood frame, concrete, and steel designs
  • Clients: Developer/builders of multi-family residences, office buildings and residential towers, industrial spaces, mixed use properties, senior health care, and public buildings
  • Lease: 2,800 sq. ft.: Open plan workspace with board rooms and a kitchen.  Seven parking stalls are included.
  • Reason for Selling: Strategic planning, industry consolidation 
  • Personnel: 20: 11 Technicians, 1 office manager, 2 site reviewers, 4 interns, 2 owners are registered architects
  • Seller Training Period: Owners will stay on for 2-3 years to ensure a smooth transition of projects and client relationships
  • Growth Opportunities: Continue expansion into the multi-family space, add another registered architect to increase capacity, there is a great deal of work available in the area
  • Current Owners’ Responsibilities: Architects, oversight, business development

Financial Highlights

  • List Price: $5,850,000
  • Gross Sales:
    • 2019: $3,652,089
  • Cash Flow:
    • 2019: $1,203,908
  • Assets Included in Purchase*
    • Equipment: $60,000: Computer equipment, software, office furniture and fixtures
    • Pipeline: $3,800,000
    • Intangible Assets: Profitable niche architecture projects, registration in two provinces, operates within booming Vancouver and lower mainland area

*amounts may vary, assets may be depreciated, replacement cost, or fair market value 

Cash Flow Analysis

Description of Financial StatementP&L Statement
Sept 2019-Jan 2020
P&L Statement
Sept 2018-Aug 2019
P&L Statement
Sept 2017-Aug 2018
P&L Statement
Sept 2016-Aug 2017
P&L Statement
Sept 2015-Aug 2016
P&L Statement
Sept 2014-Aug 2015
Notes
202020192018201720162015
GROSS SALES$1,474,466$3,652,089$3,691,182$3,741,397$3,732,752$3,254,480
Annualized$3,538,718
Net Income Shown on Financial Statement$494,598$1,157,262$1,316,811$967,479$1,327,877$495,859
ADDBACKS
Compensation to Owner$4,323$10,374$10,374$498,774$462,320$989,248
Amortization$0$44,272$44,523$47,626$51,657$31,860
Management Fees$117,395$232,000$243,000$238,000$194,000$175,000
Retainage Salary$-104,000$-250,000$-280,000$-280,000$-280,000$-280,000
Trip$0$10,000$0$0$0$0
TOTAL ADDBACKS$17,718$46,646$17,897$504,400$427,977$916,108
Seller's Cash Flow = Total Addbacks + Net Income$512,316$1,203,908$1,334,708$1,471,879$1,755,854$1,411,967
Annualized
Profit Margin34.75 %32.96 %36.16 %39.34 %47.04 %43.39 %
Profit Margin 2019: 35%

Clients and Services

Architecture services (wood frame, steel and concrete) for developer/builders of the following properties:

  • Multi-family residences
  • Office buildings and towers
  • Industrial spaces
  • Mixed use properties
  • Health care
  • Public buildings

Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

Personnel

Total Personnel: 18

  • 11 Technicians
  • 1 Office manager
  • 2 Site reviewers
  • 4 Interns
  • The owners are the two registered architects.  The four interns will likely become registered architects as well.

Growth Opportunities

  • Continue expansion into the multi-family space
  • Add another registered architect to increase capacity
  • There is a great deal of work available in the area

Valuation Details

The Firm 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 prescribed multiple is determined 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 multiplier.

For this business, a 3-year average cash flow was used with a prescribed multiple of 4.6.  With this information, the computation is as follows:

$1,266,058      x          4.6       =          $5,823,867

The fair market value found above positions the business list price at $5,850,000.

Funding Example

Purchase Price:                               $5,850,000

15%Buyer Down Payment:          $877,500

20%Seller Financing or

         Equity Roll:                            $1,170,000

65%Bank Loan:                             $3,802,500

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $21,812.

Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $42,216.

After business expenses and loan payments, a buyer with a 15% down payment of $877,500 would retain a profit of $497,723, which results in a 56% 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 $5,850,000 with the terms listed above, the coverage ratio is 1.65. 

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 is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.

Purchase Price:

$5,850,000

$
%
OR
$
%
OR
$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

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:
3 year average cash flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
3 year average 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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210 N 78th St. 2nd Floor
Omaha, NE 68114

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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.