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Commercial Tile Contractor with 30% Profit Margin

Little to no overhead – all labor is outsourced!

CASH FLOW
$213,702

Specifications

  • Price
    $720,000

  • Revenue
    $715,741

  • Location
    Houston, Texas

  • Cash Flow
    $213,702

  • Service Area
    Statewide

  • Lease
    Home office, low overhead

  • Profit Margin
    30%

  • Intangible Assets
    Great reputation for customer service, low overhead allowing for competitive pricing, long-standing relationships with GC’s

  • Reason for Sale
    Retirement

All labor is outsourced for this commercial tile installation company, keeping fixed cost on labor and overhead incredibly low! Clients include General Contractors and Construction Managers, and currently the work is primarily for service stations throughout Texas. There is one part-time W2 employee (the owner’s spouse), who works approximately 10 hours/week from a home office doing estimates, purchasing, coordinating deliveries, scheduling installations with the labor force, and bookkeeping; all labor is subcontracted out. Sales could easily climb into the $2M-$3M range by actively submitting more bids, expanding the product line to include other types of flooring, pursuing work in schools, grocery stores, retail stores, and entertainment/restaurants, and by tapping into the residential market. Service station tile contracts generally run anywhere from $20k-$120k. The company currently has 10 projects on the books worth approximately $238k; the average project takes 7 days to complete.

 

This business is not consumer-based, so there was no COVID impact on sales – clients did not put a moratorium on construction projects. The company does advertise in the Blue Book, which gives them requests for bids via email – they currently have nearly 20 open bids, along with the 8 projects in progress.

 

Priced at $720,000, a 10% down payment of $72,000 returns $120,857 in the first year after debt payments – a 168% return on investment! With long-standing relationships already in place with General Contractors in the area, a new owner could take this business to the next level.  The current owner bought the business in 2015, when sales were $250k and grew revenue to $3.5M by 2018, with at least 5 bids per day and a much larger client base, proving that this business is capable of tremendous growth. They intentionally downsized the business in early 2019 (semi-retirement) and chose to keep sales in the $600k-$700k range. The company has seen sales in $3M range in the past and could easily reach those heights again under new ownership.

Business Highlights

Year Established: 1950

Location: Houston, Texas

Service Area: Statewide

Services: Commercial tile supply and installation

Clients: General Contractors & Construction Managers

Lease: Home office; low overhead

Reason for Selling: Retirement

Personnel: 1 PT W2 employee (10 hours/week; estimates, purchasing, scheduling installations with labor force, bookkeeping) + 1 primary subcontractor

Seller Training Period: 6 months

Growth Opportunities: Bid more work, expand the product line,  implement marketing strategy, create n internet presence, tap into residential market, pursue retail, schools, grocery stores, etc.

Current Owner’s Responsibilities: Owner is absentee; spouse is PT employee

Financial Highlights

  • List Price: $720,000
    • 2020 Cash Flow: $213,702
    • 2020 Profit Margin: 30%
    • A/R: $91,202
    • Work in Progress: $238k
    • Intangible Assets: Great reputation for customer service, low overhead allowing for competitive pricing, long-standing relationships with GC’s

    *amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
Accrual
Tax Return
Accrual
Tax Return
Accrual
Tax Return
Accrual
Notes
2020201920182017
GROSS SALES$715,741$607,293$3,485,410$2,280,876
Net Income Shown on Financial Statement$187,690$-10,195$-13,267$155,208
ADDBACKS
Compensation to Owner$0$0$0$31,000
11% Tax on total W2 Salaries$0$0$0$3,410
Amortization$0$10,667$10,667$10,667
Meals & Entertainment$877$734$187$1,399
Insurance Premiums for Owners: Health, Life, Auto$2,434$2,434$2,434$0
Management Fee$0$68,500$629,076$422,000Paid to owner
Loan Fee$0$0$23,946$0
Contributions$118$0$1,900$0
Travel$4,997$0$0$0
Employee Benefit Program$17,586$0$0$0Benefits to Owner
TOTAL ADDBACKS$26,012$82,335$668,210$468,476
Seller's Cash Flow = Total Addbacks + Net Income$213,702$72,140$654,943$623,684
Profit Margin29.86 %11.88 %18.78 %27.34 %
  • Owner bought the business in 2015, when sales were $250k (previous owner had intentionally downsized) and grew the business to $3.5M by 2018.

     

  • In 2019, owner made the conscious decision to downsize the business and transition into semi-retirement. They slowed their bidding activity down and are currently working with 3-4 of their clients.

 

Growth Opportunities

  • Expand the product line to include more types of flooring

     

  • Implement marketing strategy

     

  • Create an internet presence

     

  • Tap into residential market

     

  • Pursue work in different sectors – retail, schools, grocery stores, restaurants, etc.

Valuation

Funding Example

Purchase Price:

$720,000

$
%
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:
2020 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2020 Cash Flow
$
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
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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.