Surveying firm valuation
Considering getting a surveying firm valuation? If you own a land surveying firm or plan to acquire one, here are some interesting industry statistics. Classified under the SIC code 8713 and NAICS 54136, there are some 770 such establishments in the US alone, employing over 11,500.
While the industry as a whole generates $3.1B in annual revenues, the average land surveying company is small business, employing a staff of 14 and making around $3,980,000 in annual gross revenues. In fact, 97% of surveying practices employ fewer than 24 staff!
Business valuation of surveying firms: Market Comps
Established, profitable land surveying practices are highly desirable acquisition targets. Hence, there is considerable market evidence of selling prices for such firms. You can use these Market Comps in order to develop a good idea of what your surveying company is worth.
Valuation multiples calculated from such comparable surverying firm sales lets you related your business financial performance to its potential selling price and, therefore, the company’s fair market value. Here is a list of valuation multiples that are typical in the industry:
- Sale price to gross revenues
- Price to net sales (less returns and discounts)
- Selling price to gross profit
- Price to net income
- Business sale price to EBIT
- Price to EBITDA
- Business selling price to seller’s discretionary cash flow (SDCF)
- Price to furniture, fixtures and equipment (FF&E) assets
- Sale price to total assets
- Price to book value of owners’ equity
You can develop a very comprehensive idea of what your surveying practice is worth by using this set of valuation multiples. See an example of how valuation multiples can be used to value your practice.
Example: using valuation multiples
To show how the Market Comps and valuation multiples can be used to value a surveying company, let’s pick a hypothetical firm with these financial parameters:
- Annual gross revenue: $500,000
- Net sales: $480,000
- Gross profit: $430,000
- Net income: $40,000
- EBIT: $45,000
- EBITDA: $47,000
- SDCF: $275,000
- FF&E assets: $175,000
- Owners’ equity: $50,000
We apply a set of reasonable valuation multiples and calculate the business value across all 9 financial performance factors. Here are the results:
| Multiple | Multiple value | Business value |
|---|---|---|
| Price to gross revenue | 0.5 | $250,000 |
| Selling price to net sales | 0.6 | $288,000 |
| Sale price to gross profit | 0.61 | $262,300 |
| Price to net income | 5.5 | $220,000 |
| Business price to EBIT | 8 | $360,000 |
| Price to EBITDA | 7 | $329,000 |
| Business sale price to SDCF | 2 | $550,000 |
| Price to FF&E assets | 4.1 | $615,000 |
| Sale price to total assets | 3.5 | $612,500 |
| Price to owners equity | 6.75 | $337,500 |
| Average Business Value | $382,430 | |
Notice that the business value estimates based on the discretionary cash flow and assets are higher than the average. That’s because our example firm excels in its ability to generate positive cash flow and has a relatively high asset base.
See Valuation Tour