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Putting a Valuing On a Survey Business
Posted by mccracker on March 16, 2021 at 10:35 amThere was a thread here years ago about putting a value on a survey business and ways to approximate the value of a business, but with current technology and accessibility to public information I am wondering if opinions have changed. I am looking two to five years into the future and am contemplating the idea of taking over a smaller firm in town who is looking to retire in about that time span, or perhaps starting from scratch with a few pieces of equipment and freshly incorporated business name.
In your opinion what are the factors that ultimately determine the net worth of a land surveying company?
ars-mine-surveyor replied 3 years, 1 month ago 10 Members · 10 Replies- 10 Replies
Look at it from the perspective that you’re purchasing a cash flow. What were their gross fees each of the last 5 years? Was it steady and sustainable? How many of their clients were there for all 5 years?
And then of course the things that might be controllable through proper management, like what did the firm do with those gross fees? Was there a profit? How much does it actually cost to generate those fees?
Lots of things to look at. I’d start first with their accounting for the last 5 years.
- Posted by: @paden-cash
I’d start first with their accounting for the last 5 years.
Paden’s is correct, first on the list is ALWAYS accounting. All the high tech junk we use in our profession and everything else is secondary. When I sold my business (12/30/2019) to my VP the first item asked for was the previous 5 years of tax returns.
Good luck with your future endeavor! ????
Assets include: records only if a non-recording state, client list & contracted projects, name/phone number & good reputation, equipment, software licences, vehicles, real estate, good employees and work flow.
Liabilities: responsibility for past work errors, poor employees, bad reputation, property with deferred maintenance, unprofitable projects contracted.
Can the company close, buy tail insurance for the liability, and you get the desirable assets without the baggage? Would software transfer?
.The main thing you get with certainty is the telephone number. Some existing clients may use this as an excuse to look elsewhere because they trusted “Good Ol’ Bob and the crew” but you may or may not operate the same way and you don’t have Bob’s specific knowledge and experience. Sometimes Bob had not adjusted his prices for several years because he enjoyed the work more than what he would do with the extra income. Existing clients do not like sudden increases.
- Posted by: @bill93
Assets include: records only if a non-recording state….
Records are certainly more valuable in a non-recording state, but I wouldn’t say that they are without value in a recording state.
I attended a seminar given by Michael Pallomary some time back – he has, over time, run a control network through his hometown of LaJolla, CA and tied out most of the monuments. So he has a database of monuments including a great many that are now destroyed. He has the ability to produce valid coordinates (or at least tight search coords) for just about any property corner in the city without going to the field. That sort of data certainly has value.
One of the survey companies here in Portland has survey records from a series of organizations that goes back into the 1800’s, long before recording became law. That sort of data certainly has value.
Of course, not many businesses have such a databases to sell.
There are people that value businesses for a living. I’d start there. You and the seller may be surprised at how low the value actually is.
Certainly the primary consideration is the profit the company is generating and will generate in the future. We’ve had several small survey shops simply close business around here in the past 5 years after being for sale for many years. Each was ‘from the outside in’ very well established and been in the area for decades. If the owner is retiring and their client pool is low you aren’t buying much. Each firm is different, certainly, but it may be more fruitful to let them retire.
There was a period for me where two active surveyors were sending people to me. One because he had relocated and had no interest in driving that far to take jobs. The other only worked fieldwork on Saturdays so could not possibly do every job that came his way. This was very beneficial. There were also two different periods where I was subbing jobs under different firms that had more calls coming in than they had staff to handle. Again, this was very beneficial. I made my money and they kept their good clients happy, plus still making a little profit on the markup.
Having good relations with fellow surveyors can be a win/win situation that can pay off better than buying a dying business.
you never mentioned employees/personnel. healthy books, a good name/reputation & valuable, tangible assets are all great only if you have the personnel to keep up that workload to support the company. I was offered the opportunity to do such with a firm a few years ago. Things just never felt quite right & I kept making excuses in favor of the owners while I was employed there even though my gut was telling me differently. I eventually walked to start my own small business. I saw the majority of the licensed or highly skilled individuals that they had employed either choosing to retire very early despite their need for a steady paycheck or them choosing to leave for either a lesser competitor or a local government position. Many of these individuals had almost a decade to 3 decades of experience & did not want to leave the industry but rather leave the employer. Just something to consider if you’re buying the business & will those employees be cool with a new employer/managing style? I truly hate to see small businesses fade away but some times you can’t fix somebody’s business when they just don’t want to change
Not to be the cynic in the group. If possible, I would purchase only the assets without any liabilities. Include the company name, web, and phone. I would also get a no compete agreement so that first clients cannot stay with the previous owner and second so that the previous owner does not decide retirement is not for him and opens up a business. If the owner is reluctant ask yourself why?
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