Diversified Business Services in Charleston – HVAC, Steel Erection, & General Contracting
Over 80% of their business is from existing clients!
With an 80% recurring client base, this multi-service business offers complete mechanical, electrical, and automation design, installation, and maintenance, as well as steel erection, concrete foundations, design build, and heavy equipment installation. The team is fully capable of running without the owner. They have over 25 active recurring clients from years of service and have a working capital of $200k. They have existing government contracts with the city and department of transportation.
See key highlights below.
- Not affected by Covid-19 and increased profit margins in 2020 due to shift in focus from general contracting to niche work (mechanical).
- 25% win rate on jobs they bid on due to repeat business
- Less than 20% of work is new construction
- No sales team because ~80% of work is from recurring clients, word of mouth and referrals
- Valuation used 2-year average cash flow making the price favorable
- Current backlog is $1.3M with historical conversion rates at almost 100%
Located in South Carolina, the company operates from a two-acre property including four buildings. Work is typically steady throughout the year and most projects are completed within a 100-mile radius of the office.
Priced at $6,025,000, this is a Southeastern company that is in a position to grow in the construction industry with room for expansion into the mechanical side, which currently accounts for only 9% of the business. A 12.5% down payment of $753,125 returns $935,322 in the first year after debt payments – a 124% return on investment.
|Year Established:||15 years|
|Location:||Charleston, South Carolina|
|Service Area:||Within 100-mile radius|
|Number of Clients:||25+ active recurring clients|
|Services:||Traffic Signals and Security, HVAC, Plumbing, Structural and Steel Erection. General contracting (50%), Electrical (41%), Mechanical (9%)|
|Building:||Four buildings on two acres includes offices, meeting rooms, warehouse, shop and storage space|
|Lease||$3,000 per month- low overhead|
|Reason for Selling:||Industry Consolidation|
|Employees||22 full time office & field employees|
|Seller Training Period:||2 years; willing to stay on as President or GM|
|Growth Opportunities||Expansion into structural and steel erection projects|
|Current Owner’s Responsibilities||Oversees office roles, but team is capable of running the business without him|
- List Price: $6,025,000
- 2019 Cash Flow: $1,769,538
- A/R: $400,000
- A/P: $200,000
- Current WIP: $4,800,000
- Work in Progress: Average $2,000,000
- Backlog: $2,00,000
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
|Tax Return||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$1,212,639||$1,760,804||$1,888,366||$448,536||$527,182|
|Meals & Entertainment||$4,680||$4,526||$5,121||$7,631||$6,041|
|Seller's Cash Flow = Total Addbacks + Net Income||$1,231,587||$1,769,538||$1,902,692||$469,665||$556,970|
|Profit Margin||29.35 %||32.29 %||43.40 %||13.15 %||15.78 %|
- Design Build
- Concrete foundations
- Steel Erection
- Electrical design, installation and maintenance
- Automation design, installation and maintenance
- Fiber Optics design, installation and maintenance
- Mechanical design, installation and maintenance
- Heavy equipment installation
- HVAC design, installation and maintenance
Assets Included in the Purchase
- Assets Included in Purchase: $1,130,000
- Heavy Equipment: $126,500 (6) forklift, excavator, scissor lift, etc.
- Vehicles: $808,720 (22) trucks, digger, crane, etc.
- Trailers: $101,350 (16)
- Included Working Capital: $200,000
- Intangibles: Stellar reputation the Carolinas with 25+ recurring clients
*See additional asset information in the attachments
The firm Business Brokerage used a cash flow Valuation methodology to determine the Purchase Price of the business.
Cash flow is the sum of business net income plus any owner perks and any non-onward expenses. For this valuation, we used the 2-year cash flow average making the business price much more favorable to the buyer.
The formula used is as follows:
2-Yr. Avg. Cash Flow x Prescribed Multiple = Fair Market Value
With this information, the computation is as follows:
$1,705,827 x 3.55 = $6,055,686
Growth opportunities include pursuing more projects in the mechanical side and especially general contracting, structural and steel erection, which currently accounts for only 9% of the business. There are also opportunities to scale business through marketing and advertising as less than 20% of their current business is new work.
Purchase Price: $6,025,000
|12.5% Buyer Down Payment||$753,125||Must be unborrowed funds|
|12.5% Seller Financing or Equity||$753,125||5-year term at a rate of 4.50% = a monthly loan payment of $14,041|
|75% Bank Loan||$4,518,750||10-year term at a rate of 6% = a monthly loan payment of $50,167|
- Cash Flow: $1,705,827
- Annual Payment:
- To Seller: $168,486
- To Bank: $602,009
Net Profit (after expenses and loan payment): $935,332
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: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
2-year average cash flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2-year average cash flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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