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Structural Engineering Firm with Educational Focus

With a high profit margin of 35% and low multiple of 2.8!

CASH FLOW
$327,086

Specifications

  • Price
    $890,000

  • Revenue
    $924,208

  • Reason for Sale
    Strategic exit planning

  • Location
    Oklahoma City area, Oklahoma

  • Service Area
    95% of clients are located in Oklahoma, but projects are completed in 27+ states

  • Equipment
    $73,000: Office equipment, furniture, large format printers, drafting and other software

  • Lease
    2,600 sq. ft.: Private offices, open work area, conference room, room for expansion, if desired

  • Employees
    4: 3 Engineers, 1 CAD technician; 5-6 drafters at contracted firm

  • Intangible Assets
    Long-term client base, wide variety of client projects, experienced employees with long tenures, extended partnership with contracted firm that is positive for high-quality work and bottom line

 

With a high profit margin of 35% and low multiple of 2.8, this Oklahoma City structural engineering firm has three engineers and one CAD technician on staff, and the owner is willing to stay on for 2 years! They also work in partnership with a contracted firm that has five to six drafters and five to six engineers at any one time.  This remote team is wholly dedicated to the work of the primary company. Their customer base is comprised of commercial clients including offices, industrial spaces, retail & shopping centers, and convenience stores, as well as educational and residential facilities. Well-established for nearly 15 years, the firm had a 35% profit margin in 2019 and has $200,000 in their pipeline. A 12% down payment of $106,800 returns $212,275 in the first year after debt payments, resulting in a 199% return on investment in the first year.

Most of this company’s clients are in Oklahoma (95%), but those companies have multiple locations throughout the United States and due to their long-term relationships, the firm handles work for many of those projects.  The owner manages the partnership with the contracted firm, as well as client relationships, general oversight, and has final approval for all plans before they are submitted to the customer.  The company utilizes 2,600 square feet of space in a local office building.  This space features private offices, an open work area, and a conference room.  There is room within the building for expansion, if desired.  Assets include office equipment, standard office furniture, and drafting and technical software. 

Expansion may be found in expanding the local customer base, building clients who need an engineering firm with experience working on projects through the US.  Additionally, one could maximize the utilization of the contracted firm to increase capacity and improve margins.

 

Business Highlights

  • Year Established: 2006
  • Location:  Oklahoma City area, Oklahoma
  • Service Area: 95% of clients are located in Oklahoma, but projects are completed in 27+ states
  • Services: Structural engineering
  • Clients: Commercial clients including offices, industrial spaces, educational facilities, convenience stores
  • Lease: 2,600 sq. ft.: Private offices, open work area, conference room, room for expansion, if desired
  • Reason for Selling: Strategic exit planning
  • Personnel: 4: 3 Engineers, 1 CAD technician; 5-6 drafters at contracted firm
  • Seller Training Period: 1-2 years
  • Growth Opportunities: Maximize utilization of sister firm to increase capacity while maintaining positive margins, build client base in the OKC area, expand to additional states
  • Current Owner’s Responsibilities: Oversight and final approval of plans

Financial Highlights

  • List Price: $890,000
  • Gross Sales:
    • 2019: $924,208
    • 2018: $849,634
  • Cash Flow:
    • 2019: $327,086
  • Assets Included in Purchase*
    • Equipment: $73,000: Office equipment, furniture, large format printers, drafting and other software
    • Pipeline: $200,000
    • Intangible Assets: Long-term client base, wide variety of client projects, experienced employees with long tenures, extended partnership with sister firm that is positive for high-quality work and the bottom line

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

Cash Flow Analysis

Description of Financial StatementP&L Statement
January-July 2020
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
20202019201820172016
GROSS SALES$497,836$924,208$849,634$768,211$906,260
Net Income Shown on Financial Statement$175,314$281,009$166,436$-42,590$187,796
ADDBACKS
Depreciation$0$136$4,018$6,885$16,010
Interest$47$17,407$0$20,743$2,251
Amortization$0$6,666$6,666$6,666$6,666
Meals & Entertainment$0$1,093$838$697$0
Contributions/Donations$0$0$0$0$0
Owner's Life Insurance$414$829$829$829$0
Cell Phone$576$1,152$1,152$1,152$1,152$96/month
Travel$446$2,896$1,178$2,176$3,51215% PErsonal
Owner's Simple IRA$2,935$4,910$2,184$3,276$0
TOTAL ADDBACKS$4,418$35,089$16,865$42,424$29,591
Seller's Cash Flow = Total Addbacks + Net Income$179,732$316,098$183,301$-166$217,387
Profit Margin36.10 %34.20 %21.57 %-0.02 %23.99 %

  • Profit margin 2019: 35%

Clients

Providing structural engineering services for general contractors, architects, and property owners on commercial projects such as:

  • Office buildings
  • Industrial spaces and warehouses
  • Educational facilities
  • Convenience stores
  • And more

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

Personnel

Personnel: 4 Aside from the owner

  • 3 Engineers
  • 1 CAD technician
  • Contracted firm:
    • 5-6 Drafters

Growth Opportunities

  • Maximize utilization of sister firm to increase capacity while maintaining positive margins
  • Grow the client base in the OKC area
  • Expand to additional states
  • Build client base who have locations in multiple states

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, the 2019 cash flow was used with a prescribed multiple of 2.8.  With this information, the computation is as follows:

$327,086         x          2.8       =          $915,841

The fair market value found above positions the business list price at $890,000.

Funding Example

Purchase Price:                             $890,000

12%Buyer Down Payment:      $106,800

13%Seller Financing:                $115,700

75%Bank Loan:                         $667,500

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $2,157.

Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $7,411.

After business expenses and loan payments, a buyer with a 12% down payment of $106,800 would retain a profit of $212,275, which results in a 199% return on investment in the first year.

A lender is required to have a minimum 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $890,000 with the terms listed above, the coverage ratio is 2.85.

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:

$890,000

$
%
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:
2019 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2019 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
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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.