How to Sell an Engineering Consulting Firm

Licensed People Set the Limits

An engineering firm's value rests on its licensed professionals. State rules govern who must be in responsible charge of the work and how a firm may hold itself out.

Because those rules can limit who can buy, a buyer who is not an engineer may need to structure the deal carefully.

Confirm with the licensing board and your attorney who may own the firm after a sale.

Backlog and Repeat Clients

Buyers look at what is already contracted and who comes back. Public agency work can be steady, but it often moves through qualification lists and selection processes that a new owner has to keep. Private developer work is faster and more cyclical.

Utilization and Overhead

These firms are priced on how efficiently people turn into billings. A buyer studies utilization, billing rates and the overhead rate. A firm that earns healthy margins on a steady staff is worth more than one that grows by adding unprofitable hours.

Principals and Succession

If you and a partner hold most client relationships, a buyer asks who replaces you. Rising principals with their own clients are worth real money. Plan a transition where they are introduced and rewarded before closing.

• Written employment agreements for key engineers
• Equity or bonuses that tie them to the next owner
• Client introductions spread over several quarters

Insurance and Claims

Professional liability coverage matters, and so do tail coverage and any past claims. Buyers will ask. In many deals the seller buys extended coverage for work done before closing.

Next Steps

Read how buyers turn earnings into price in what your business is worth to a buyer, set your own timeline with the twelve month plan, and ask for a valuation check.