you get approached with a vague offer for your small (10 employee/2-3 crew) operation to be... "absorbed" into a much larger firm that needs to establish in-house survey. all other things aside (cost benefit of autonomy vs. employee, etc): entire staff is retained, and component part of the offer is a regional management position, with the expectation (and promise of $ backing) to open and oversee offices in 4-5 existing civil offices state-wide.
i know the general idea for standard valuation of a company.?ÿ but any thoughts on why one might be flexible on that, either way??ÿ any horror stories or "watch outs"?
TIA.
Instead of vaguely being absorbed, seeing how the survey industry seems to need more survey and less absorbing into another engineering architecture planning outfit, maybe vaguely suggest a wholly owned subsidiary instead with the same expansion and support ideas. Being absorbed seems like a great way to eventually be phased out, minimizing their risk. I've not worked long enough in survey to understand that model, but in the multibillion dollar companies I've worked in they always absorbed and then disappeared the smaller for the good of the bigger.
That would force them to add skin in the game and if the economy doesn't expand as they believe it will then the extra offices and other promises won't be so painful if they don't ever occur.
IMHO.
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Personally, I would not be very keen on being an add-on survey department to an existing civil engineering-only firm. Most of my career I've worked for blended civil-survey companies, and the ones that worked best in my opinion were the ones that had a surveying department from the get-go. It seemed to me that the ones that added a survey department later on tended to treat the surveyors as of lesser importance than the engineers. There's a lot of positive that comes from having engineers used to working with surveyors on a daily basis, especially when some of the engineers would work on survey field crews for a time.
My strongest "watch out" warning would be to think about when the next recession hits. Who do you think will be the first to be laid off?
In my mind a reason someone would want to absorb your org. for their "in-house" surveying might be just to have your services less the profit you would have generated doing the work yourself.?ÿ In similar cases I've seen the surveyor's clients pushed to the back burner and replaced with a hierarchy designed for the buyer's needs.?ÿ If your clientele isn't worth much to you this might be a good opportunity.
I personally might approach the prospective buyer with an offer to provide crews and services at a negotiated rate that would benefit both parties.?ÿ If things worked out and the additional work did pan out to be a healthy cash flow then an acquisition might be in order.
I did this a few times for engineering firms that took on larger projects that needed a daily crew presence.?ÿ The billing rate was adjusted to where the cost was beneficial to both myself and the client.?ÿ There's a lot to be said for filling out a time sheet by just writing down eight hours every day.
I guess you need to figure out if your existing business is anywhere near what you want or need.?ÿ I'm of the opinion if your org. gets absorbed into a larger outfit your business and professional desires might take a back seat to the wishes of your employer.?ÿ You might become just another employee.?ÿ That might be great if that's what you're after.
As for the retention of all of your staff, I'd be wary if I were you.?ÿ I've seen this happen several times and the employees that "went along" with the transition were soon gone.?ÿ The old saying "a new broom sweeps clean" comes to mind.
Think hard before you act.?ÿ The devil will be in the details.
An outfit I was once a principal of sold itself to an engineering firm which had been one of its best clients in just such a circumstance.?ÿ The owner of the survey firm stayed with the new company for about a year, then took a position with one of the big dog firms in this area.?ÿ The last of the staff hung around only a short while longer.?ÿ My son was one of those staff.?ÿ Apparently the office politic-ing for control over survey scoping and budgeting, etc., was heavy handed and brutal. In other words, the engineering company staff was not on board with the acquisition, and the survey company staff didn't care for the new situation either. The survey company owner saw a chance to cash out, and grabbed it.
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The only way this would sound attractive to me is if they paid a stupid (as in very imprudent) amount of money for your firm up front or over the first year, and you had a very limited time period of non-compete.?ÿ?ÿ
Another way to frame the question is "Would you close your business for an offer of a Regional Manager position with some other multidisciplinary, multi-site firm?".?ÿ Pretty soon you're just another employee unless you are offered an equity position immediately.?ÿ IMHO Regional Manager is basically the worst job in surveying.
If the value of the offer is good, do it.
Reasons:
- Cash now is better than "hoped for" future cash.
- Exit strategy. Selling out to a larger firm (or possibly internal employees) should be the ultimate exit strategy for you to leave the business. Whether you have years until retirement or not long, you will eventually leave the business.
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I regret not accepting a similar offer about 15 years ago. I surmise the cash I would have received, if I had invested it the way think I would have, would have a much larger value now than the current value of my company.
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Edit: On the other hand, back then I probably would have spent it all on vacations and toys, so there's that too.
If the terms of the buyout are good for both parties.?ÿ We were approached by a large 600 employee firm who placed an offer on the table.?ÿ I offered to buy their firm using the same offer.?ÿ I'm happy being a small town surveyor.?ÿ Devil in details as others have said.
just fyi, I'm in office this week doing admin stuff (payroll, year end stuff, billing, insurance), something I am not fond of and something a larger firm provides.
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As for the retention of all of your staff, I'd be wary if I were you.?ÿ I've seen this happen several times and the employees that "went along" with the transition were soon gone.?ÿ The old saying "a new broom sweeps clean" comes to mind.
As Norman Oklahoma indicated, It can work the other way, too:?ÿ the acquisition is made primarily to acquire a talented staff, but the culture of the acquiring firm is so onerous that the acquired staff soon hit the road.
I have a cousin-in-law in the tech industry who saw this happen in the late 90s.?ÿ His small but very successful ISP was bought by a national corporation for tens of millions, bringing about 25 software engineers into the big firm.?ÿ Within 1 year all 25 had quit, as they all missed the freewheeling atmosphere they had become accustomed to at the local company.
I have my own business I started in 2008 and ran it successfully until 2013 and the ACA requirements forcing a huge financial burden on me.?ÿ I ended up shutting it down and running a Survey Department for a small Municipal Engineering firm and frankly, it was boring, mind numbing work where the President of the company called all the shots for my department.
I was in that job for three years and was approached by an investor who just bought a small Civil Engineering company but was also a developer and could not get any kind of quality Engineering or Surveying done in a timely manner.?ÿ The guy was a programmer on Wall Street befor the market crashed in 2008.?ÿ He was a smart guy with a vision and wanted me to start and run survey for his new business venture.
We had several hours long conversations, one on one, where I had plenty of time to lay out what I wanted and how I wanted to get things done with complete control of the department.?ÿ After 3 months of negotiating and reducing our agreements to a signed and countersigned notarized document, I agreed to take a leap of faith.
When I strarted with the company, I was the 11th employee.?ÿ March 2022 will be six years and it's been a huge success.?ÿ I immediately started reaching out to field talent that I had worked with in the past, managed to get two crews running with new Leica equipment in the first few months and built the department the way I wanted to and continue to run it the way I want to.?ÿ I now have six crews and 12 devoted support people to handle everything from Survey drafting to scheduling and billing.
In almost six years, we have had to move twice to bigger office spaces and are out of room again so we are in the process of building our own pretty elaborate 5 story office building, keeping two stories for ourselves and leasing the other three.?ÿ We currently have 67 employees and can't fit more into our current space.
If you are interested in taking this offer, think hard and get things in writing.?ÿ My pay capped out at a certain level, based on reaching certain milestones, all of which were met in the first two years but the increases have continued to come, I get stock and profit sharing as well.?ÿ My personal business still remains alive on paper but I highly doubt that I will ever use it again.
The one point of caution that I have is to be cautious about merging into a corporate situation where the people running the show are nothing more than figure heads looking at spreadsheets and expecting every job to be a winner.?ÿ I've been in that situation before where you have to squeeze a buffal nickle hard to pass a penny when you need to buy something.?ÿ
thanks everyone for the input.?ÿ i'm not terribly concerned about the culture aspect, but that will definitely be part of any ongoing conversations- hell, i've turned down more management jobs in the last 5 years than i can count.?ÿ to be clear, the company in question is not some monolith.?ÿ yes it's quite a bit larger than we are, but privately held and run by the same people who started it decades ago.?ÿ these guys are talking to me because they know who i am and what i've done around here in the past 12-15 years.?ÿ i figure if i'm ever gonna "cash in" on that reputation and those connections, now is probably as good a time to do it as there's gonna be.?ÿ i don't know if it will happen or not- i certainly haven't been planning on it (this is a bit of a shot out of the blue), but if the conditions are right i'm probably game.?ÿ?ÿ
and yes- i understand how this often plays out in regard to staff.?ÿ but 1. i suspect i'd maintain a pretty hefty amount of control over procedural and cultural norms and 2. even if not- it's not my job to hold adults hands through their entire lives.?ÿ i love my staff, i think the sentiment is mostly mutual, and i think they all trust me at this point to do what's right by both/all of us.
guess my main question at this point has to do with... well, $.?ÿ my situation has changed dramatically in the past year, and i'm trying to figure out where to set my asking price.?ÿ facing the very real possibility that i could sign a deal that would pay for my two kids' college, leave me completely debt free owning 5 properties... all for, say, a 3-5 year contract and a pretty good salary (and that's worst case scenario- it could work out great and be the last thing i ever do), at worst in 5 years i quit and just start all over again...?ÿ reckon i just need to see what that number is.
it's not an engineering only firm- just so happens this particular branch of the firm family doesn't have in-house survey.?ÿ yet...
guess my main question at this point has to do with... well, $
Watching with morbid curiosity. ?ÿI always landed around one years gross sales, when I daydreamed about this stuff 15+ years ago.
Get yo paper.
You are an owner now and should remain an owner going forward.?ÿ Whether it be stock options or a seat on the board with profit sharing, I would want a portion of the deal to include a stake in the new company.?ÿ?ÿ
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@murphy?ÿ
Yes. The only meaningful title in any company is Owner.
guess my main question at this point has to do with... well, $.?ÿ
I can't suggest a dollar value, but I will advise that it's better to get the $ up front, not spread out over time. I have seen a number of buy out situations where the payoff was scheduled out over time, and the seller lost out when the economy tanked a couple years later and the buying company went into bankruptcy. I would take a smaller purchase price for cash in hand, rather than risk being somebody else's banker in exchange for the chance of a larger, later payoff.
Never heard of valuing a business that way, only ever heard of a multiple of net profit (if owner not paying themself a good salary need to deduct that from profit too). Usually between 3-5x depending on quality of business/location (natural monopoly etc.) and how keen the buyer is to acquire.
@lukenz?ÿ
Multiple of net profit or multiple of gross are both short hand ways to calc value. Analogous to pricing a boundary survey by the amount of lineal feet around the boundary. Useful shorthand but not always accurate enough.
Lots of varied financial accounting methods can be used and compared to come up with a fair value to both the seller and buyer.
Edited to remove financial jargon I don't feel like defining 😉
vague offer
I sold my business 2 years ago and could possibly provide some advice, but "vague" is a "wish" until in writing. ????
I would argue they are plenty accurate enough for any survey business (excluding the 50+ staff firms here). There are such a wide range of opinions as to what sellers and buyers think the value is so at end of day the multiple of profit is just a starting point for negotiation from what I've seen.
