Valuing a Survey Business

Bottom line:

Regardless of whatever valuation methods you use: A business is only worth what a buyer will pay!

The worth of anything is dependent upon the demand of the product.

A former employer sold his company and the best product he sold was the phone number because that number was used and probably still in use by former clients because it is on 25yrs of paperwork. Another surveyor would not use info from most of the previous work and there was not that much office supplies or vehicles that added up to the price he got for his company.

For several years people called that number still trying to contact me.

A friend sold his company phone number (1-800-BAILOUT) for enough that he could sit back and enjoy life. He kept his business.

0.02

I think the value of records depends on the area as well. I'm in a suburban area, houses are all very close together and all our work is within the local 4 towns. (And enough work that we turn down 50% of the calls) to us, in this area, records are very valuable bc they allow us to quickly get roughly tied into control and go from there to find what we need. All jobs here start with surveys of neighbors etc.

BTW we are a non recording state.

In my office we have roughly 200,000 old surveys. Our surveys and surveys from 3 other surveyors we got dating back to the 1910s.

We have been busy scanning for the last 2 years and are through about 60% of everything. We have them logged into an electronic filing cabinet program that we can search for easily and pull up surveys really fast. If it's for field work nearby we just hit print and a copy rolls out. No need to go get the original out. Has made searching our dusty filing cabinets almost a thing of the past.

What's the program that you are using?

TXSurveyor, post: 374184, member: 6719 wrote: What's the program that you are using?

Efilecabinet. Works very good and easy to customize. We created specific input fields for indexing the surveys.

If they ever went out of business, the way it indexes is a generic system that can be imported into any other program. Which is a must to look for when choosing.

hlbennettpls, post: 370065, member: 10049 wrote: Got offered to buy a small "mom & pop" surveying firm that's been established for 30+ years. Very reputable, has done good work both public and private. Has some older equipment, which isn't of much value, but has a TON of records. How does one go about valuing the records of this business? It easily covers 10 counties and they've averaged 300 survey jobs a year (roughly) for 30+ years. I'm trying to figure out if what they are asking is a good price or not and trying to do my due diligence. Anyone ever dealt with this? Thanks.

Bump

How did this turn out?

Didn't know what to pay so we didn't buy them out. I still can't believe we can measure and survey the way we do but can't value what we do...

hlbennettpls, post: 451964, member: 10049 wrote: Didn't know what to pay so we didn't buy them out. I still can't believe we can measure and survey the way we do but can't value what we do...

I'm not sure how small the company was but i think a lot of companies wether surveying or not value their business higher than they should because of the blood sweat and time they have invested.
I know a surveyor that ran what most would consider a successful business for 15 years. 1 crew and him working 40-50 hours every week. He went thru a divorce and basically had to buy his wife out. They had a company value the business and it turns out it wasn't worth much because with only one person with a license the business was solely dependent on the licensee and would have to close without him.

hlbennettpls, post: 451964, member: 10049 wrote: Didn't know what to pay so we didn't buy them out. I still can't believe we can measure and survey the way we do but can't value what we do...

Did you see the tax returns? That's a good place to see what they actually profited.

The problem with valuing the business aside from the assets is that our businesses are consultancies. The value of the business is tied to the individuals. There may be some value to an established business name, phone number, established market, etc. but it's ephemeral.

ABC surveying may have a great reputation, an excellent working relationship with plan reviewers, and a client list as extensive as the day is long; but the wrong person can reduce that to tatters in six months. If the purchaser doesn't have the business skills of the seller, then the business has limited value; conversely if the buyer has the knowledge, skill, and personality to build a successful consultancy, then the value of an existing one is lessened.

hlbennettpls, post: 451964, member: 10049 wrote: Didn't know what to pay so we didn't buy them out. I still can't believe we can measure and survey the way we do but can't value what we do...

Interesting... Is he still in business??

As one of the rare birds that has both bought and sold a survey company, one thing that made my decision to buy was the limited competition. I didn't see any comments about that above. Since you said 'small town' I assume that means limited competition. Mine was on an island, so there was a natural barrier to companies sending crews over the bridges. Also second the good records and electronic database to search! sounds like that was set up pretty well.

Are you glad you didn't buy or are you wishing you had?

Andy

My thoughts after having done it, both selling and buying:

1. Don't buy it because you love the profession and really like the old maps and history, and the instruments.
2. If you do buy it, do not accept any liability for the work done by the vendor. Maybe get him to put it in an LLC similarly maned, and you buy that.
3. Does it amount to expanding your business, or does it set you up in your first business. If it expands your business, study the Law of Diminishing Returns.
4. If it allows you do to more with the same fixed overhead and your variable costs such as salary are covered with more profit, maybe it will work.
5. You will have to work harder and longer hours.
6. Is it in your immediate region?
7. Can you just buy a scan of the records?
8. Is there any value to his name, and will the additional business come to you? Will you lose any? (yes)...will what you have already established suffer?
9. If you don't buy it, will you still have all the work you can do at your place?
10. Employees? Will it disrupt your salary structure?
11. Insurance?
12. Once you sign to buy it, that sapsucker and all that goes with it are yours, the good, bad and ugly.
13. Expansion is often good in capitalism, but it can be a huge headache, and it can lead to otherwise needless stress for a sole proprietorship.
14. Tax implications or benefits? Would it be better just to buy better, state-of-the-art equipment, and buy his scans, and expense 100% the same year, thereby reducing your income by the amount that you paid for it? I don't think you can expense buying his business. Maybe the physical assets can be expensed the same year. That can be a huge tax benefit if it is legal in your area. Your CPA can help with those answers.

When you buy or sell a business you often run into things that you did not expect or bargain for. That said, it could be a huge gain as well.

Suggest you get his cash flow records for last 5 years (verified accurate), and apply your costs very logically, and go see a superior accountant.

No did not buy, he was bought out by somebody else. Agree w/Andy in that my main goal was reducing competition & gaining records.

Jim in AZ, post: 370260, member: 249 wrote: Having successfully bought and sold 2 engineering/surveying firms and 1 surveying firm I will say that I have found the records to be essentially worthless. I would say that possibly twice in 30 years I have found records to be of real value. As a surveyor, they have great sentimental value. As a businessman(which is what you need to be), they are more of a liability than anything. The value of a company lies in the employees, the income stream, and in the good will.

Jim is right on point. We as surveyors over value the worth of our records. They may be useful but their absence will not stop you from completing any particular project.