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Market value of an architecture office?

Rim Joist

Anyone aware of any guidelines or rules of thumb in evaluating the approximate market value of an existing architectural practice?


 
Oct 24, 06 1:01 pm
treekiller

selling or buying???

Oct 24, 06 1:12 pm  · 
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Rim Joist

Either or neither. Really wondering more about current market value assessment, which starts off the same regardless. Doesn't mean you can sell it for that or buy it for that necessarily. I realize that one can buy some pretty elaborate business software to more accurately evaluate any business, and that a true assessment is a fairly complicated process.

All things being fairly equal with fairly normal revenue expectations, what is a 6-person firm with two registered architects worth?

Or a 12-person firm with three registered architects?

24-person with six registered architects?


Oct 24, 06 2:34 pm  · 
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treekiller

two aspects to consider- physical assets and work backlog/reputation.

Often professional firms are sold at a multiple on their annual profit/gross. There are some great consultants out there just to help with this sort of thing.

So are you looking to buy into being a principal?

Oct 24, 06 3:09 pm  · 
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freq_arch

There are a few books out there that deal with valuation of professional firms.
The easy stuff to quantify are the physical assets.
The harder stuff is the value of the reputation (and whether the reputation is transferring in the form of senior staff remaining), and the big one - what's on the books as far as contracted work (and what percentage is anticipated profit).
I've seen firms actively looking for partners or successors who tried hard to come to terms with these things only to give up, because so many architects consider value of 'their' firm an intensely personal thing.

Oct 24, 06 4:35 pm  · 
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Rim Joist

Treekiller -- those multiples really sort of add up to a staggering number, don't they? Can those estimates be accurate at all, I mean, even in the ballpark?

Freq-arch -- you've mentioned a couple points that get right to it... that is, when the "old man" leaves, what's left to buy? Physical assets, a bunch of people expecting a salary, and a highly unpredicitable remnant of the previous owner's business reputation. Like any business venture, the big guess is what, exactly, can be duplicated once the transfer is made? Every case is different, but I'm just seeing the kind of value that the "multiples" treekiller mentions would indicate. Seems to me that an office minus it's original owner -- now the seller -- would then seem to have a value barely beyond the physical assets.

Doesn't sound like my ultimate gig.

Oct 24, 06 4:56 pm  · 
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Rim Joist

Well thanks for the offer Old Fogey, and I may just need to take you up on it -- in any case, a very generous offer, especially considering the survey you posted on the link goes for 445 dollars. Ouch!


Oct 25, 06 11:42 am  · 
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