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32% Profit Margin - Commercial Surveillance Systems Installation

Low buy in for ownership that just requires general oversight!

CASH FLOW
$184,994

Specifications

  • Price
    $448,000

  • Revenue
    $564,886

  • Cash Flow
    $184,994

  • Location
    San Francisco Bay Area, California

  • Service Area
    San Francisco Bay Area (80%), Regional (15%) and National (5%)

  • Profit Margin
    32%

  • Employees
    5FT: 1 Owner, 1 Operations Manager, 2 cable installers, 1 IT staff + 1 PT bookkeeper

  • Equipment
    Drills, drivers, hammer drills, ladders, crimpers, wire cutters, pliers, screwdrivers, stapling equipment, conduit benders, cable testers, camera testers, laptops

  • Intangible Assets
    Well-known in the area, word-of-mouth referrals, well-established relationship with local law enforcement

 

This surveillance system installation company serves primarily commercial clients – apartment complexes, HOA’s, hotels, strip malls, restaurants, and hospitals! At a down payment of only 10%, a new owner would only be responsible for general oversight as the current owner lives out of the country 4 months of the year. Demand for surveillance systems is high in San Francisco – 51% of retail storefronts are currently unoccupied due to the pandemic, which means they want and need security and surveillance. With many opportunities for growth, a new owner could increase installation of temperature scanning cameras and video monitoring, expand to vertical markets (fire alarm installation, smart home systems, etc.), and add government & municipal contracts to further sales growth. Recently, this business has expanded services to add thermal monitoring for COVID. The company is focusing on recurring monthly revenue, which currently covers payroll expenses, prompting them to look for more service-based contracts, making sure each system has proper maintenance.

 

They are increasing installation of temperature scanning cameras and video monitoring, expanding to vertical markets (fire alarm installation, smart home systems, etc.) and adding government and municipal contracts would be perfect opportunities for revenue growth.

  • Boasting a 32% profit margin already in 2021, they are well-known in Northern California
  • 80% of sales is in the San Francisco Bay area, 15% regionally, and 5% of their business is nationwide.
  • Highly experienced team with everyone on the team having a 4+ year tenure
  • Uses advanced tech like secure wireless camera networks, license plate capturing cameras and Point of Sale surveillance systems

The owner currently handles general oversight of the business and lives out of the country 4 months out of the year. The team is standardizing their service contracts to include both remote support and hands-on support, with an obvious preference for services they can provide remotely. Their camera systems offer real-time surveillance and video monitoring to ensure real-time protection.

Business Highlights

  • Year Established: 2008
  • Location:  San Francisco Bay Area, California
  • Service Area:  San Francisco Bay Area (80%), Regional (15%) and National (5%)
  • Services: Installation of surveillance systems
  • Clients: Primarily commercial: apartment complexes, HOA’s, hotels, strip malls, restaurants, hospitals, etc.
  • Building: 500 sq. ft. office space – low overhead
  • Reason for Selling: Semi-retiring – lives out of the country part-time
  • Personnel: 5FT: 1 Owner, 1 Operations Manager, 2 cable installers, 1 IT staff + 1 PT bookkeeper
  • Seller Training Period: 6-12 months
  • Growth Opportunities: Increase installation of temperature scanning cameras and video monitoring, expand to vertical markets (fire alarm installation, smart home systems, etc.), add government & municipal contracts
  • Current Owner’s Responsibilities: Oversight; lives out of the country 4 months out of the year

Financial Highlights

  • List Price: $448,000
  • Gross Sales:
    • 2019: $564,886
    • 2018: $423,204
  • Cash Flow:
    • 2019: $184,994
  • Assets Included in Purchase*
  • Equipment: Drills, drivers, hammer drills, ladders, crimpers, wire cutters, pliers, screwdrivers, stapling equipment, conduit benders, cable testers, camera testers, laptops
      • Vehicles: 2013 Ford Transit
      • Intangible Assets: Well-known in the area, word-of-mouth referrals, well-established relationship with local law enforcement

      *amounts may vary, assets may be depreciated, replacement cost, or fair market value 

      Cash Flow Analysis

      Description of Financial StatementP&L Statement
      Q1
      P&L StatementTax ReturnTax ReturnTax ReturnNotes
      20212020201920182017
      GROSS SALES$97,208$320,272$564,886$423,204$429,302
      Annualized$388,832
      Net Income Shown on Financial Statement$12,958$-14,813$38,793$20,823$11,127
      ADDBACKS
      Compensation to Owner$15,000$60,000$60,000$60,000$60,000Business can run without a replacement
      11% Tax on total W2 Salaries$1,650$6,600$6,600$6,600$6,600
      Depreciation$0$0$20,591$3,108$4,862
      Interest$0$2,371$890$92$3,274
      Dues/Subscriptions$0$119$120$120$2,400$200/month for gym membership
      Cell Phone$380$4,694$3,267$3,208$2,631$200/month
      Meals & Entertainment$7$200$486$151$257
      Auto Expense$243$7,184$12,928$12,182$11,29350% personal $6,050 Tesla lease, fuel for the Subaru (paid off), Auto Insurance
      Health Insurance$500$3,924$3,924$3,889$3,938
      Simple IRA$0$0$15,000$0$0
      Miscellaneous$0$0$20,000$1,096$20,000Money paid to self
      Home Remodel$0$0$0$20,000$0In COGS - one-time expense
      Travel$0$1,766$2,395$841$867
      Personal Coaching$0$4,402$0$0$0
      Taxes$0$4,037$0$$0
      TOTAL ADDBACKS$17,780$95,297$146,201$111,287$116,122
      Seller's Cash Flow = Total Addbacks + Net Income$30,738$80,484$184,994$132,110$127,249
      Annualized
      Profit Margin31.62 %25.12 %32.75 %31.22 %29.64 %
      • Profit Margin 2019: 33%

      Clients

      • Apartments/HOA’s
      • Retail/restaurants
      • Healthcare offices
      • Grocery stores
      • Warehouses & Industrial Parks

      A/R is automated, allowing customers to make payments on a recurring basis.

      Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

      Services

      • Installation and Maintenance of Surveillance Systems

       

      • Recently added cameras that are powered by solar-charged batteries and communicate with 4G cellular. This incorporates the cell service into the plan which is a necessary expense that they mark up and pass through the customer. Solar batteries need little attention and they would come onsite to do that work, but since they are charged with solar, the team does not need to do much maintenance. It is monitored remotely.

       

      • Partnering with an IT firm that provides high-definition video monitoring and costs $1k/month; that IT firm then monitors the clients’ videos.

      Personnel

      • 1 Owner
        • Oversight*
      • 1 Operations Manager/Estimator
      • 1 full-time IT Technician
      • 2 Cable Installers
      • 1 PT Bookkeeper
      • Subcontractors as needed

      *This company is being set to run remotely. The owner currently has little-to-no customer contact. His Operations Manager writes bids which he will look over only if required.

      Growth Opportunities

      • Increase service contract sales
      • Expand into vertical markets (fire alarm installation, smart home systems, etc.)
      • Video monitoring
      • Temperature scanning cameras (COVID-19)
      • Adding government and municipal contracts

      Valuation Details

      The Firm used a cash flow valuation methodology to determine the purchase price of the business. 

      The formula used is as follows:

      Cash Flow       x          Prescribed Multiple     =          Fair Market Value

      Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.

      A prescribed multiple is determined by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiplier.

      For this business, a 3 Year Average (2018-2020) Cash Flow was used with a prescribed multiple of 3.4.  With this information, the computation is as follows:

      $132,529           x                3.4                =    $450,599

      The fair market value found above positions the business list price at $448,000.

      Funding Example

      Purchase Price:   $448,000

       

          10%Buyer Down Payment    $44,800 Must be unborrowed funds
          15%Seller Financing or Equity $67,200 5-year term at a rate of 4.50% = a monthly loan payment of $1,253
          75%Bank Loan $336,000 10-year term at a rate of 6% = a monthly loan payment of $3,730

       

       

       

      • Annual Payment: $59,797

         

        • To Seller: $15,034
        • To Bank: $44,763

           

      • Net Profit (after expenses and loan payment): $72,732

      Numbers above result in a 162% return on investment in the first year.

      A lender is required to have a 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $448,000 with the terms listed above, the coverage ratio is 2.22.

       

      *Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.

       

      Purchase Price:

      $448,000

      $
      %
      OR
      $
      %
      OR
      $
      Years
      %

      Bank Loan Needed: $

      Years
      %
      $
      $
      $
      $
      $

      Funding Details

      Business:

      Offer Price: $

      % Buyer Cash Down at Closing: $

      % Seller Carry Back via Promissory Note: $

      year term at a rate of %

      % of Purchase Price secured by Buyer and Seller

      Total Bank Loan Need: $

      % of Purchase Price

      Desired Loan Type:

      Desired Bank Terms: year term at a rate of %

      Total Business Assets, Inventory, and A/R: $

      Total Undercollateralized Loan: $

      Loan Payments

      Monthly Payment to Bank: $
      Yearly Payment to Bank: $
      Monthly Payment to Seller: $
      Yearly Payment to Seller: $
      Total Monthly Debt Service: $
      Total Yearly Debt Service: $

      Conclusions

      Fixed Charge Coverage Ratio

      The bank will require a minimum ratio of 1.5 to be lendable.

      Cash Flow:
      3 year average (18-20)
      $
      Annual Debt Service: $
      RATIO:

      Buyer's Net Operating Income (NOI)

      The amount of money the Buyer will retain as profit.

      Cash Flow:
      3 year average (18-20)
      $
      Annual Debt Service: -$
      NOI:

      Buyer's Return on Investment (ROI)

      The rate of return on the Buyer's down payment.

      Down Payment: $
      NOI:
      ROI: %

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      210 N 78th St. 2nd Floor
      Omaha, NE 68114

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      The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.