Hello from Newb

Ed, you forgot to tell everybody that Alberta, where you are working, is so flush with ca$h that every Man, Woman, and Child is getting $400 TAX FREE from the Government.

Add on Free Health Care, 1 year Paid Paternity/ Maternity leave, why would you ever leave??

[Ed_The_Gypsy]

Howard,

I know about the $400 and I think I qualify.

I am a little past getting any value from paternity benefits.

Helath care is "free" in Ontario, but not Alberta, which is probably why you can still see a doctor when you need to in Alberta. (Except Ft. McMurray. We transients are not counted in the census which the govt uses to allocate health care resources--hospitals, etc. Officiallly, Ft. Mac is about 60,000, although it looks more like 35,000 to me--but they count all the natives for hundreds of miles around--but we gypsies are another--WAG--6,000, and we are in the most hazardous occupations. "When safety is a factor, consider a contractor.")

Ed, in balmy Calgary today.

[chrisdut]

Eric:
Sorry if someone already touched on this (I skipped many of the replies), but I am a newbie and part owner of an engineering firm also. You stated that you have a few employees at your firm. Have you considered bringing on an "apprentice" type engineer and selling the company to that individual? Your firm may also be a good candidate for an acquisition. I would think either case could be feasible if you would be willing to work part-time or as a consultant during the transition phase. To put things in perspective, my firm is worth $55,000 per employee. Even if you only have two employees, you could be walking away from an investment worth over $100,000.

[Ed_The_Gypsy]

chrisdut & eric,

How do you value a [presumably small] engineering firm for the purpose of selling it?

I have seen small firms sold for the value of their books and chairs--if a willing buyer can be found. A local well-regarded electrochemical technology firm simply closed its doors and liquidated the hardware. Damn shame, too.

Only large companies can get a backlog. A good backlog is 3 to 6 months unless you are Bechtel (Bantrel in the north).

So...how DO you value a small eng co?

Ed

[chrisdut]

There are literally hundreds of ways to place a value on an engineering firm. In fact, there have been numerous books and seminars devoted specifically to valuation of engineering firms. I am aware of the details for a handful of firms that have been sold and personally involved in one (the one I bought into). One popular method is to add the book value plus some factor based on the past few years profits. Book value includes not only books, chairs and other "hard' assets, but also things like accounts receivable and work in process (work done but not yet billed). The profitibility factor may be anywhere between four to ten times the average of the past couple year's profits. Many factors can determine whether you use a four or a ten. Backlog is one of those factors....others would include the amount of business generated from repeat clients, amount of work that may be lost due to the loss of a key employee (the person selling the firm),etc. Most engineering firms have between 6 and 12 months backlog. The firms that simply close their doors are usually having serious financial problems and probably were not profitable.