Opportunities
Fire Protection Engineering Firm in Texas – 60% Profit Margin
Current Senior Consultant could assume role of CEO under new ownership!
Specifications
The current Senior Consultant for this fire protection engineering firm has over 20 years of experience and would be able to assume the role of CEO under new ownership! With a 60% profit margin and year-over-year growth in sales for 3 years, this Dallas company has a highly skilled team of employees already in place who run the day-to-day operations. Established for over 25 years, this firm provides a wide array of services in all phases of fire protection engineering, including building & fire code consulting & engineering, fire alarm systems, automatic sprinkler systems, smoke exhaust systems, fire modeling, plan review, and systems testing. Their diverse client base consists of design professionals (55%), contractors (25%), federal government (10%), and private owners (10%), with their service area covering primarily Texas and surrounding states. The collaborative team of 7 includes the owner, a licensed Fire Protection Engineer, along with 1 Senior Consultant, 1 Senior Designer, 3 Engineers, and 1 Administrative Assistant. The team is based out of 2,300 sq. ft. office in Dallas, with a small 200 sq. ft. satellite office in San Antonio.
Plan review customers are a portion of their ongoing client base; plan review services provide recurring monthly revenue, as it is a service in constant demand and yields steady cash flow for the company, accounting for approximately 20% of their total revenue per year. The average plan review fee ranges from $500-$1,000. Project sale sizes range anywhere from $2k-$200k, with an average sale size of around $10k. The firm uses state-of-the-art software packages such as AutoCAD, Revit, HydraCAD, AutoSPRINK, CFAST, FDS, Egress, and Intelligibility.
Priced at $5,900,000, this firm has seen year-over-year growth in sales for 3 years and a 5-year average profit margin of 47%. A solid team is already in place; they run the day-to-day operations, handle clients regularly, and complete projects successfully. Over the years, this firm has gained a reputation for providing some of the best services when it comes to fire protection and planning, giving them steady word-of-mouth referrals. Pursuing more projects in colleges & universities, school districts, and in the industrial sector would certainly lead to continued growth.
Business Highlights
Year Established: 1995
Location: Dallas, Texas; satellite office in San Antonio
Service Area: 50% local, 40% regional, 10% national
Services: Full-Service fire protection and life safety consulting & engineering, building & fire code consulting & engineering, automatic sprinkler systems, fire alarm systems, smoke control systems, smoke management systems, smoke exhaust systems, fire modeling, means of egress modeling, plan review, systems testing
Clients: Design professionals (55%), contractors (25%), federal government (10%), private owners (10%)
Lease: Dallas office: 2,300 sq. ft., $4,800/month; San Antonio office: 200 sq. ft. (this space would not be needed for a new owner)
Reason for Selling: Retirement / Age
Personnel: 7: 1 Owner + 6 FT employees, including 1 Senior Consultant, 1 Senior Designer, 3 Engineers, and 1 Admin
Seller Training Period: 6-12 months
Growth Opportunities: Pursuing more projects in college & university work, school district work, and industrial work
Current Owner’s Responsibilities: Preparation of proposals, review of engineers’ work, administrative duties
Employees
1 Owner
- Preparation of proposals, review of engineers’ work, administrative duties, billings
1 Senior Consultant
1 Senior Designer
1 Fire Protection Engineer2 Fire Protection Engineers in Training
1 Administrative
Client Breakdown
Profit Margin
- 5-year average profit margin of 47%
Financial Highlights
- List Price: $5,900,000
- 2020 Cash Flow: $1,239,860
- Working Capital: $90,000/month
*amounts may vary
Cash Flow Analysis
| Description of Financial Statement | P&L Statement Jan-March 2021 | P&L Statement | Tax Return Cash | Tax Return Cash | Tax Return Cash | Tax Return Cash | Notes |
| 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | ||
| GROSS SALES | $783,589 | $1,991,188 | $1,856,279 | $1,352,092 | $1,393,944 | $1,058,850 | |
| Annualized | $3,134,356 | ||||||
| Net Income Shown on Financial Statement | $497,245 | $843,577 | $690,818 | $273,457 | $511,855 | $193,824 | |
| ADDBACKS | |||||||
| Compensation to Owner | $48,750 | $195,000 | $195,000 | $195,000 | $195,000 | $195,000 | |
| 11% Tax on total W2 Salaries | $5,363 | $21,450 | $21,450 | $21,450 | $21,450 | $21,450 | |
| Depreciation | $0 | $347 | $23,924 | $16,501 | $0 | $0 | |
| Interest | $7,229 | $14,830 | $7,944 | $6,612 | $3,699 | $4,888 | |
| 401k | $1,950 | $7,800 | $7,800 | $7,800 | $7,800 | $7,800 | Personal Expense |
| Auto Expense | $4,030 | $12,000 | $12,000 | $12,000 | $12,000 | $12,000 | Personal Expense |
| Meals & Entertainment | $600 | $2,400 | $2,400 | $2,400 | $2,400 | $2,400 | Personal Expense |
| Cell Phone | $250 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | Personal Expense |
| Health Insurance | $1,635 | $6,540 | $6,540 | $6,540 | $6,540 | $6,540 | Personal Expense |
| Rent Adjustment | $20,142 | $82,667 | $30,600 | $30,000 | $28,200 | $19,200 | Rent for apartment in Dallas - non-onward going |
| Home Phone/Internet | $300 | $1,200 | $1,200 | $1,200 | $1,200 | $1,200 | Personal Expense |
| Replacement | $-18,750 | $-75,000 | $-75,000 | $-75,000 | $-75,000 | $-75,000 | To replace current owner |
| Moving Expense | $0 | $9,268 | $0 | $0 | $0 | $0 | One-time cost |
| Rent Adjustment | $600 | $2,400 | $2,400 | $2,400 | $2,400 | $2,400 | $200/month rent for San Antonio office space (lease ends September 2021) - this office would not be needed moving forward |
| TOTAL ADDBACKS | $72,099 | $281,902 | $237,258 | $227,903 | $206,689 | $198,878 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $569,344 | $1,125,479 | $928,076 | $501,360 | $718,544 | $392,702 | |
| Annualized | |||||||
| Profit Margin | 72.66 % | 56.52 % | 50.00 % | 37.07 % | 51.55 % | 37.09 % |
Valuation
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: | % |
Attachments
| Document Title / Description |
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