I have not completed the research necessary in order to purchase a business, but I have spoken with a reputable local surveyor whom is in his retirement years. He is interested in selling and enjoying what retirement he has left and I am interested in buying his company. I did read the previous post, but I thought it worth bringing back seeing as how there are many more well seasoned surveyors at retirement age and some younger guys like myself that could benefit from their years of records, experience, clientele, etc, etc.
My question is has anybody done this from the perspective of having your own company and buying another company? If some of you would consider selling, what would be some things you are looking for from a buyer? Would you have a problem letting go and stepping back and allowing the new owner have creative freedom or would you expect him to do things the same way for some period of time?
He has records in the county in which I practice spanning the last 50 years. How do you evaluate their worth? How do you evaluate the worth of a company? I am looking at offering 1.5 times the average revenue over the last 5 years, but I don't know if that is typical.
What sort of transition period should be expected? I am thinking 3 months full time then use him as needed as a consultant or part time.
Like I said I haven't committed to anything yet other than out of pocket for a few lunches and minimal attorney's fees. SO this is an exploration of sorts into the matter. Thanks in advance.
It is tough to make a good assessment. He wants platinum for his business and you want to pay way less than that. So many variables. "How much is it worth to you?" is the real question. The information he have even though going back 50 years worth to have? Sometimes we cherish our information, but in reality it isn't worth much because most of it can be found or recreated easily from somewhere else, i.e. courthouse. Just a few random thoughts that I can throw out. I am interested to see some other responses and your end result. Keep us posted.
Records Are Worth The Cost Of Storing And Maintaining
If they are clean well organized files.
Do not consider what you might sell individual information for, it will never cover your expenses.
If you advertise "Records of John Doe, PLS" you open yourself up to liability to John Doe's past clients or successors. In that light you cannot really acquire the value of his "Good Name".
Low ballers will want to buy copies of past surveys for $25 and take away your potential job, that soon grows tiring.
If you have to reorganize his files and do not have the time to do it yourself, I suggest you cannot afford to pay someone else to do it. You should do it so you know what you have.
It is doubtful he has any equipment you do not already have, so little value there. In fact you may have extra expenses in selling disposing of it. If he has an office and you have an office, where is the value?
If this is a recording state, where is the value?
If you cannot write the check, why borrow the cost?
Paul in PA
Records Are Worth The Cost Of Storing And Maintaining
Thanks for you input. A few clarifications.
1. I do not intend on selling copies, but rather use that base for future reference in my current business. They are well organized and most are digitized. This is not a recording state so it really does have some value.
2. I am out of the basement right now and although he doesn't have any equipment that I absolutely have to have it would be of value to have a couple of extras for additional crews when the time comes.
3. I can't 'buy' his good reputation, but working with him and earning my stripes, again, while working with him I think could go a long way as long as he understand that it is in his best interest to give me a good word as it is paying off his former endeavor. Does that sound reasonable?
If he's at retirement age it's not like your putting the competition out of business. You really need to look at this from the perspective of what does he have that you need or want. His value appears to be potentially in his records and clients.
Do you want/need his clients? You can best gauge your current and future workload.
What was his relationship with them? If he performed well for them the buy out may be extremely valuable if you need the work.
Was he a low baller? You may not find clients who bargain shop for surveys to be very valuable.
Have you seen his files? You would want to look at them first before setting a price. I must admit, I love having more files, research, etc.
Steve
I would evaluate the business as just that, a business. What was his average revenue over the last 3-5 years? what is the market value of his equipment? A good ballpark is 1.5x avg gross, but I would need to see his profits as well. If the business isn't profitable, why buy it? Also, if he is a well known surveyor in your area, unless he will be moving, I wouldn't buy his company. He could just open up a new business and you will lose all the customer base to him anyways. (I have seen that happen 3x now) Non-compete clauses have typically not been upheld in court.
I Believe You Have Described The Value In It
Now putting dollars to that value, I have no experience. I had worked in several offices that had acquired records of others, so I saw the ups and downs of it.
Paul in PA
Purchasing Surveying Company- From the seller's view
I'm now in the process of passing the torch to younger folks wanting to buy. I evaluated my firm with two distinct parts.
The first was physical assets. Office & field equipment, trucks and the like. They have an assessed value that probably depends on any number of flavors of bookkeeping. Deriving that value shouldn't be difficult. Records fall into this category also. Deriving their value has always been difficult.
If you value them by the time it took to collect them, they're worth a jillion bucks.
If you look at them as seven worn out file cabinets full of paper, they're a problem.
And I will be the first to admit that old records sometimes fall short of being useful. Things change so much that a lot of records have very little useful information.
The key to the value of records is repeat clients. When someone calls and says "you surveyed my folk's place twenty years ago...", their info is available quickly.
The value of records falls somewhere in the neighborhood of how much time they can save someone.
The second part is the "blue sky". That is the client base work load and name someone is purchasing. I am fortunate that I have continuing contracts with utility companies. These will continue and should keep the company alive well after my demise if managed properly. I can show you how much they were worth last year and how much they will probably be worth next year.
I'm selling each of the two parts separately. Hard equipment is insured and has a book value. To keep the bean counters honest, the sale of this requires cash.
The blue sky value is the ethereal quagmire that people historically argue about. In my case, I've asked for a diminishing percentage of income from the business over a five year period; gross, not net. I know how much money this place makes. A new face on the block should do just as well, probably better.
Good luck to both of you.
I didn't read the previous thread.
If you are in the same town as he is, and he doesn't have any larger contracts that will be around a while after he leaves, I'm not sure what you're getting other than some wore out equipment and old files.
I purchased my company from someone retiring. He was a long time friend, mentor and my boss.
He had a tremendous reputation and 3 generations of records dating back to the mid 1800's.
The records are hard to put a price on. Most of them are antiques and museum worthy. Others save so much time and give so much insight. The only drawback to the records: Daily calls from other surveyors looking for information. I don't mind helping at all, but it is time consuming.
The only warning I can give you:
As he was slowing down to retire, word got out and some of his clients went elsewhere to find their new surveyor.
After being in business for over 60 years, his tried and true clients, he had his entire career. What that means is, they too are getting older, slowing down and getting ready for retirement. Although I retained 90% of his clients because I had a prior relationship, they are not doing the volume of work as young/new firms may.
When placing a value on the client list, I would look into the firm(s) themselves as to their projected longevity and production.
Thanks all.
The previous post was from someone else [msg=274380]Here.[/msg]
As far as value. Some of it is somewhat of a gander into unknown territory, but the other stuff is quantifiable. The fact remains that I would likely assume a managerial role with his company name on the door and slowly transition to my company name. His reputation for good affordable work is also part of what I am after, hence I would like to retain him on at least a part time basis.
Around here the files are worth something, despite the many changes over time. I like to be right. I think all of us do. With his records and the fact that I know he set pins when corners were missing then I know the vast majority of them are worth something. What that number is I don't know.
I will post in a couple of weeks when I have had time to assess the situation further.
Purchasing Surveying Company-knowing when to let go
> The only warning I can give you:
>
> As he was slowing down to retire, word got out and some of his clients went elsewhere to find their new surveyor.
I agree, be warned. As I slowed over the last few years I saw the writing on the wall. Knowing when to sell was my biggest problem. I could go on for another ten years....but by then I would have run off every client I have.
About two years ago I started making my younger employees talk to the client's younger employees. This was after I realized that in my day-to-day interaction with clients I never spoke with anyone that was even alive when Kennedy was assassinated. I had become a dinosaur without knowing it.
Time to grab a fish pole and let the young'ns fight for the meat, my fangs are getting smooth. 😉
Purchasing Surveying Company-knowing when to let go
:good:
Here are two good resources: PSMJ Mergers and Acquisitions and Zweigg White Mergers and Acquisitions
Purchasing Surveying Company-knowing when to let go
Time to write those books.