Market-based business valuation techniques are often used to value professional architecture firms, classified under SIC code 8712 and NAICS 541330. Many business sales in this professional services industry are brokered by skilled intermediaries. As a result, there are reliable business sale comparables data to value your architectural services company.

While you have a number of valuation multiples for business value estimation, some are more accurate than others when it comes to valuing the architecture firms.

Top valuation multiples for architecture firm appraisals

Our ranking of valuation multiples is based on the coefficient of variation that indicates the spread of business valuation multiples around the average. The smaller the coefficient, the smaller the spread of business value estimates you get.

Here is our list of valuation multiples arranged in the order of their accuracy:

  1. Business selling price to gross revenues or net sales.
  2. Price to EBITDA.
  3. Business sale price to EBIT.
  4. Business sale price to Net Income.
  5. Business sale price to total business assets.
  6. Price to the book value of equity.

The first valuation multiple is the typical one used for pricing an architectural company for sale.

The coefficient of variation for the net sales-based valuation multiple is just under 0.5 which is 2.5 times less than the equity-based number. What this means is that most architecture firm sales are actually priced using the company net sales or EBITDA as the valuation basis.

Setting the right asking price for your business can make a big difference to the successful sale outcome and the time it takes to sell the company. While the average days on market is around 470 days, it can take over 2 years to sell an architecture firm.

Example – business valuation of an architecture firm using the multiples

Let’s consider a typical firm grossing around $600,000 in net sales and generating $200,000 in EBITDA profits in the most recent year.

Using the typical valuation multiples of 0.5 times the net sales and 2 times the EBITDA, gives us the following estimates of business value for the firm:

  • Business value based on net sales: $300,000.
  • Business value based on EBITDA:    $400,000.

One way to reconcile the difference is to average the two results above. Applying the weights based on the accuracy of each value estimate, we get:

$300,000 x 0.52 + $400,000 x 0.48 =  $348,414

The business value estimate covers the tangible assets, goodwill and other valuable intangibles such as client lists. Cash, receivables and company owned real estate are usually not included.

Valuation Multiples for Architecture Firms

Recent sales of architecture firms are an excellent source of valuation multiples. You can estimate your firm’s fair market value based on its gross revenues, net sales, profits, EBITDA, cash flow and assets.

See Example »


dan says:

I am looking at a company with an EBITDA of $400k and annual growth of 8-12%. In today’s market, what is the multiple for this company — I am suggesting 3.5x. Let me know your thoughts.

Harry says:


Without knowing more about the firm, I would suggest the EBITDA multiples in the 2 – 3 times range. Firms with exceptional earnings stability have sold for over 6 times the EBITDA. However, it is unlikely that the current market would support such valuations.

Nik says:

How do newly awarded contracts affect the valuation of the business?

Business currently nets $200K/annually but has a one contract extension at $500K and a new awarded contract at $750K. Both over the next three years.

Harry says:

Such contracts will affect the future cash flows of the firm. You can capture this in your earnings projections, say over the next five years.

Then use the Discounted Cash Flow method to determine the business value.

To check the effect of the contracts on the firm’s value, repeat the valuation, this time assuming the new contracts do not exist.

Compare the two valuation results to see the difference.

Tim says:

I am a sole proprietor with, over the last 10 years, an average revenue around $200k. I also have a backlog of work of over $150k. How would I determine the value of my firm for sale to larger firm?

Harry says:

I would suggest performing a business valuation of your company to see what it is worth. Since you plan to sell the business to a larger acquirer, using the market based valuation methods is very useful. You can see an example of such valuation on our website:

Market based valuation example

In addition, it would be useful to compare your results against the well known income based valuation methods:

Discounted cash flow method

This valuation approach focuses on the ability of your company to generate earnings, given its risk profile. Combining results from several valuation methods is an excellent strategy as each method adopts a different view of business value.

You can see how a number of valuation methods are used to conclude what a business is worth in our sample appraisal report here:

Sample business valuation report created by the Report Builder tool

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