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Fabricator & Distributor of Industrial Fasteners & Transmission Components

Owner does oversight and light administrative tasks – lives several hours away!

CASH FLOW
$404,359

Specifications

  • Price
    $1,700,000

  • Revenue
    $3,466,062

  • Cash Flow
    $404,359

  • Equipment
    $1,220,080

  • Location
    Winnebago County, Wisconsin

  • Service Area
    Statewide

  • Employees
    7: Customer service, warehouse, sales, and business development

  • Reason for Sale
    Owns a non-competing business Owns a non-competing business in another state

  • Intangible Assets
    Solid reputation, recurring client base, exceptional product offering

 

The owner of this business does oversight and light administrative tasks – lives several hours away! Supplying a wide variety of products, this company runs out of a 5,000 square foot warehouse and has over $1M in their backlog. The highly skilled team of seven includes customer service, business development, warehouse and sales representatives. They manufacture and supply power transmission components, industrial fasteners, and hardware, as well as providing maintenance, repair, and operations for their diverse client base of commercial manufacturers and warehousing companies. Their $1.2M in assets includes warehousing equipment, pallet racking, shelving, tools, delivery vehicles, a forklift, and more.  Power transmission products include belts, pulleys, gears, sprockets, roller chains, and a vast array of bearings. Fasteners and hardware, along with industrial & MRO supplies round out their exceptional product offering of essential parts needed by manufacturers throughout the region.

 

With a diverse recurring client base, this business is known for their quality of service. Their clients include small to mid-size manufacturers in the region. Upgrading their ERP software every two years ensures the company runs smoothly, and they are known for going that extra mile for each customer. Sale sizes range from $8k-$40k; 15% of sales are paid within two days, proving their high proportion of quality customers.

 

Increasing marketing efforts, updating the website, offering more products, and increasing business development staff would undoubtedly lead to sales growth and a higher customer base.


Business Highlights

  • Year Established: 2012
  • Location: Wisconsin
  • Service Area: Statewide
  • Clients: Commercial manufacturers
  • Services: Industrial distributor
  • Lease: 5,000 sq. ft. warehouse
  • Reason for Selling: New Ventures
  • Personnel:  8: 1 Owner + 6 FT, 1 PT (customer service, warehouse, sales, business development)
  • Seller Training Period: 1-2 years
  • Growth Opportunities: Increase marketing efforts, increase business development staff
  • Current Owner’s Responsibilities: Business development, sales force management, some administrative tasks

Financial Highlights

  • List Price: $1,700,000
  • Gross Sales:
    • 2020: $3,466,062
    • 2019: $3,853,037
    • 2018: $2,982,954
  • Cash Flow:
    • 2020: $404,359
    • 2019: $451,829
    • 2018: $333,002
    • 2017: $274,138
  • Assets Included in Purchase*
  • Equipment: $30,179: Warehousing equipment, pallet racking, shelving, tools, computers
  • Vehicles: $43,261: Forklift, delivery vehicles
  • Inventory: $468,044
  • Backlog: $1M+
  • Intangible Assets: Solid reputation, recurring client base, exceptional product offering

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

Cash Flow Analysis

Description of Financial StatementTax Return
Accrual
Tax Return
Accrual
Tax Return
Accrual
Tax Return
Accrual
Notes
2020201920182017
GROSS SALES$3,466,062$3,853,037$2,982,954$2,293,306
Net Income Shown on Financial Statement$90,011$90,565$51,896$39,666
ADDBACKS
Compensation to Owner$163,050$200,000$143,000$116,400Passive Ownership, no replacement needed
11% Tax on total W2 Salaries$17,936$22,000$15,730$12,804
Depreciation$5,236$25,954$7,639$6,247
Interest$40,960$36,871$36,784$24,336
Auto and Travel$45,240$35,713$37,852$35,209
Cell Phone$1,580$1,580$1,580$1,580
Insurance and Benefits$2,696$2,696$2,696$2,696
Contributions/Donations$2,450$1,250$625$0
Amortization$28,000$28,000$28,000$28,000
Equipment Lease$7,200$7,200$7,200$7,200Will be paid off at closing
TOTAL ADDBACKS$314,348$361,264$281,106$234,472
Seller's Cash Flow = Total Addbacks + Net Income$404,359$451,829$333,002$274,138
Profit Margin11.67 %11.73 %11.16 %11.95 %

Clients

  • Small to mid-size manufacturers in the region

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

Services

  • Production and supplier of power transmission components, industrial fasteners, and hardware
  • Industrial maintenance, repair, and operations equipment supplies

Products

  • Power transmission products: belts, pulleys, gears, sprockets, roller chains, bearings
  • Fasteners & hardware
  • Industrial & MRO supplies

Personnel

  • Owner
  • 6 FT
  • 1 PT

Growth Opportunities

  • Increase marketing efforts
  • Increase business development staff

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, the 2020 cash flow was used with a prescribed multiple of 4.2.  With this information, the computation is as follows:

$404,359         x          4.2       =          $1,698,308

The fair market value found above positions the business list price at $1,700,000.

Funding Example

Purchase Price:                          $1,700,000

   12.5%Buyer Down Payment:      $212,500

   12.5%Seller Financing:               $212,500

75%Bank Loan:                      $1,275,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $3,962.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $16,755.

After business expenses and loan payments, a buyer with a 12.5% down payment of $212,500 would retain a profit of $155,755, which results in a 73% return on investment in the first year.

A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $1,700,000 with the terms listed above, the coverage ratio is 1.63.

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. 

*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.

Purchase Price:

$1,700,000

$
%
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
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.