Leaders in the A/E/P and environmental consulting industry need to know their firm’s value.
Many architecture, engineering, planning, and environmental consulting firm leaders don’t have a solid grasp on their firm’s value. But, if you’re a firm owner, you can’t risk not knowing this information, because the firm’s value factors into several situations, including:
- Establishing a price for transactions under shareholder or buy/sell agreements
- Establishing a price for a merger, acquisition, or sale
- Developing a plan for ownership transition and/or management buyouts
- Establishing share prices for employee stock ownership plans
- Determining the fair-market value for gift and estate tax issues
- Preparing for an initial public offering
- Supporting litigation efforts, such as partnership dissolutions, disputes, and marital divorce
- Other corporate purposes, such as division spin-offs or divestitures
The Valuation Survey is broken down into three parts: Business Valuation Considerations,
2016 Survey Results, and Case Studies. That’s right, in addition to presenting readers with
the overall survey data – broken down by firm type, size, region, growth rate, and more – Zweig Group provides actual valuation information for each of the 141 firms (43 percent of which are multidiscipline engineering firms) that have participated in the survey since 2013. That’s real- world information on real-world firms that you can’t access anywhere else.
Zweig Group also provides the actual formulas that survey respondents’ firms use – if they opt against employing an external appraiser – in addition to its own Z-values, which measure total invested capital and equity values.
Among the statistics that readers will find most interesting are comparisons of the TIC value per employee. Because A/E/P and environmental consulting firms sell staffers’ time, it is generally accepted that people are firms’ most valuable assets. Just as some firms generate more revenue per employee than others, some are more valuable than others in proportion to their staff sizes.
The median TIC value per employee for firms overall has steadily increased since 2006 to an all-time high of $65,498 in 2016. But the Valuation Survey goes even farther, breaking this statistic – and all of the statistics it presents – out by firms’ types; staff sizes; years founded; headquarters’ region; growth rates; reasons for valuation; who conducted the valuation, when, and by what
means; net service revenue, profit, EBITDA, and backlog projections; and minority versus controlling interests.
For example, the 2016 Valuation Survey shows the highest average TIC values per employee for:
- Single-discipline engineering firms
- Firms with less than 25 employees
- Firms founded in the past 16 years
- Firms based in the South Central United States
- Firms with moderate growth rates
- Firms that performed the valuation for the purposes of a sale/merger
- Firms that employed a consultant or accountant to perform the valuation, which was conducted via an appraisal in 2014
- Firms that project at net service revenues; profits; and expenses before interest, taxes, depreciation, and amortization for the next fiscal year
- Firms that project a growing backlog in the next fiscal year
- Firms with a controlling interest
This article is from issue 1139 of The Zweig Letter. Click here for to get a free trial.
For more information about valuation consulting, email jkiser@zweiggroup.com or check out an excerpt from the 2016 Valuation Survey.
