Municipal Engineering & Aquatic Design Firm, 47-Year Arkansas Practice

$1.8M

Revenue

$998K

SDE

4.0x

Multiple

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Full Editorial Writeup

This is a multidisciplinary engineering and architecture firm based in Little Rock, Arkansas, with nearly 50 years of operating history serving municipal clients across the state. The firm offers an integrated stack of planning, engineering, architecture, aquatics, and construction administration, positioning itself as a one-stop solution for public-sector work. Its distinctive niche is aquatic and recreation design, with an extensive portfolio of aquatic centers, community centers, sports complexes, and recreation facilities.

The business runs lean with 7 full-time employees out of a 3,500 square foot leased office at roughly $2,500 per month. On $1.8M of revenue it throws off $998K of owner cash flow, a 55% SDE margin that is exceptional for a professional services shop and speaks to strong billing rates, low overhead, and principal-level delivery. A meaningful share of revenue comes from Master Service Agreements and recurring municipal engagements, which gives the top line more predictability than a typical project-based engineering firm.

The seller frames this as a planned succession and has committed to staying actively involved for 3 to 5 years, an unusually long runway that de-risks the relationship and knowledge transfer central to any principal-led firm. At a $4M ask against $998K of cash flow, the deal prices at roughly 4x, which is defensible if the earnings survive the seller's eventual exit and the MSA relationships prove transferable.

Why we like it

Earnings quality is the headline: $998K of SDE on $1.8M of revenue is a 55% margin, which for a 7-person services firm implies premium billing rates and minimal overhead beyond a $2,500-per-month office. That kind of cash conversion is rare and gives a buyer real cushion to absorb debt service and a wage for a replacement principal.
The moat is 47 years of municipal relationships plus a specialized aquatic and recreation niche that few firms in Arkansas can match. Public agencies favor incumbents with a track record and standing Master Service Agreements, so switching costs and procurement inertia protect the revenue base.
Demand is genuinely recession resistant. Municipal infrastructure, recreation facilities, and aquatic centers are funded by public budgets and bonds rather than discretionary consumer spending, so the work does not evaporate in a downturn the way private commercial design does.
The operator advantage is a rare 3 to 5 year seller commitment. In principal-driven engineering firms the biggest risk is the relationships walking out the door; an owner willing to stay half a decade gives a buyer time to build direct client trust and license a second signing principal.

How to improve it

Map every revenue dollar to its source in the first 90 days and quantify what share sits under Master Service Agreements versus one-off project work. Renew or extend the recurring MSAs early so the recurring base is locked before the seller's eventual exit and before the next municipal budget cycle.
Formalize a succession plan for professional licensure and stamping authority. Identify or hire a licensed PE or architect who can sign work, because in a 7-person firm the seller's stamp and reputation are likely load-bearing and cannot transfer with goodwill alone.
Expand geographically into adjacent states or counties using the aquatic and recreation niche as the wedge. The specialized portfolio travels well, and municipal work in neighboring markets lets you grow revenue without diluting the high-margin core.
Build a documented business development pipeline and CRM for RFP tracking. A 47-year firm this small has likely relied on inbound relationships, so systematizing proposal generation converts a personality-driven book into a repeatable growth engine.
Raise utilization and consider modest headcount additions in the highest-margin service lines. With only 7 employees, adding one or two producers against the existing overhead and MSA demand should drop straight to the bottom line.
Cross-sell the full integrated stack (planning, architecture, aquatics, construction administration) into existing municipal accounts. Clients already trust the firm for one service; capturing more of each project's lifecycle raises revenue per account with no new client acquisition cost.

Diligence notes

Quantify the recurring revenue claim precisely. Get the actual MSA contracts, their remaining terms, renewal history, and the percentage of the $1.8M that is truly recurring versus project-based, because the entire durability thesis rests on how sticky that public-sector revenue really is.
Assess key-person risk in the SDE. A 55% margin on 7 people usually means the seller is a top producer and rainmaker, so break down how much of the $998K depends on the owner's personal billings, stamp, and relationships versus the team.
Verify professional licensure and who holds stamping authority. Confirm which licensed PEs or architects remain post-close, whether the firm retains its qualifications-based standing with agencies, and what happens to bonding or prequalification status when ownership changes.
Check client concentration across municipalities. Pull the top accounts by revenue and confirm no single city or agency dominates the book, since losing one large municipal relationship in a firm this size could materially impair cash flow.
Confirm the structure and cost of the 3 to 5 year seller commitment. Understand whether that involvement is compensated, contractual, and tied to earnouds, and model what the business looks like on the day the seller finally exits.
Reconcile the reported $998K cash flow to tax returns and add-back schedules. Request three years of financials and the CIM, and scrutinize the add-backs to confirm the margin is real and not inflated by aggressive owner adjustments.

Source

Originally listed on BizBuySell. View original listing →