Opportunities
Toronto Architecture Firm Specializing in Condominiums
Owner will stay on for 3-5 years and roll 15% equity!
Specifications
The owner of this Toronto Architecture firm would like to stay on board for 3-5 years and will roll 15% equity! With a team already in place and growth in sales since 2017, this full-service architecture firm has been serving the greater Toronto area since 2000. The firm’s portfolio primarily consists of condominiums (80%), and includes commercial, industrial, institutional, and interiors. Working out of a 2,500 square foot office, the staff of 6 includes the owner, 2 architects, 2 architectural draftsmen, and 1 intern. The team is highly educated and experienced at their craft, allowing for solid word-of-mouth referrals and a loyal, recurring client base of developers, engineers, and general contractors. Their spectacular designs are well-known throughout the Toronto area. The firm boasts a 29% profit margin and is selling at an incredibly low 3 multiple!
Priced at $985,000, a down payment of $147,750 returns $184,678 in the first year after debt payments – a 125% return on investment. The owner staying on as a partner will result in more work being sought after and more projects brought into the fold, giving great potential for increased revenue and business expansion.
Business Highlights
- Year Established: 2000
- Location: Toronto
- Service Area: Greater Toronto Area
- Services: Full-service architecture firm, primarily specializing in condominiums (80%); industrial sector, retail, mid to high-rise residential, interiors
- Clients: Developers, Engineers, General Contractors
- Lease: 2,500 sq. ft. office
- Reason for Selling: Owner wants to build up the business (will roll 15% equity if buyer allows)
- Personnel: 6; 1 owner/architect, 2 architects, 2 architectural draftsmen, 1 intern
- Seller Training Period: 3-5 years
- Growth Opportunities: Expand the business by working as a partnership and increasing number of projects
- Current Owner’s Responsibilities: Design & Execute projects, Business Development
Financial Highlights
- List Price: $985,000 CAD
Cash Flow:
2019: $326,464
2018: $197,567
- Assets Included in Purchase*
- Equipment: Computers, printers, photocopiers
- A/R: $36,979
- Intangible Assets: Loyal client base, well-established name, word-of-mouth referrals
*amounts may vary, assets may be depreciated, replacement cost, or fair market value
Cash Flow Analysis
| Description of Financial Statement | P&L Statement | P&L Statement | Notes |
| 2019 | 2018 | ||
| GROSS SALES | $1,135,674 | $1,013,304 | |
| Net Income Shown on Financial Statement | $341,944 | $244,989 | |
| ADDBACKS | |||
| Compensation to Owner | $50,000 | $27,000 | Would like to stay on board |
| 11% Tax on total W2 Salaries | $5,500 | $2,970 | |
| Depreciation | $23,620 | $17,208 | |
| Management Fees | $0 | $0 | Paid to owner |
| Life Insurance | $5,400 | $5,400 | $450/month for personal life insurance |
| Contributions/Donations | $0 | $0 | Non-onward going expense |
| Interest | $0 | $0 | |
| Salary | $-100,000 | $-100,000 | To keep owner in place |
| TOTAL ADDBACKS | $-15,480 | $-47,422 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $326,464 | $197,567 | |
| Profit Margin | 28.75 % | 19.50 % |
- 2019 Profit Margin: 29%
Clients
- Developers
- Engineers
- General Contractors
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Services
- Residential (primarily condominiums)
- Commercial
- Industrial
- Institutional
- Interiors
Personnel
- 1 owner
- 2 architects
- 2 architectural draftsmen
- 1 intern
Growth Opportunities
- Expand the business by working as a partnership and increasing the number of projects
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 3. With this information, the computation is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
With this information, the computation is as follows:
$326,464 x 3 = $979,392
Funding Example
Purchase Price: $985,000 CAD
| 15%Buyer Down Payment | $147,750 | Must be unborrowed funds |
| 15%Seller Financing or Equity | $147,750 | 5-year term at a rate of 4.50% = a monthly loan payment of $2,755 |
| 70%Bank Loan | $689,500 | 8-year term at a rate of 6% = a monthly loan payment of $9,061 |
- Cash Flow: $326,464
- Annual Payment:
- To Seller: $33,054
- To Bank: $108,732
- Net Profit (after expenses and loan payment): $184,678
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: | % |
Attachments
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