Opportunities
HVAC, Steel Erection & Site Prep with 80% Recurring Client Base
Seller will stay on as President or GM for 2 years!
Specifications
The seller is willing to stay on as President or GM for 2 years! 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 seeing increasing 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 repeating 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 3-year average cash flow making the price favorable
- Current backlog is $1.3M with historical conversion rates at almost 100%
Business Highlights
| 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: | Retirement planning |
| 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 |
Financial Highlights
- List Price: $5,950,000
- 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 Jan-Sept 2020 | Tax Return | Tax Return | Tax Return | Tax Return | Notes |
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| GROSS SALES | $4,196,157 | $5,478,368 | $4,384,111 | $3,571,594 | $3,526,518 | |
| Annualized | $5,594,876 | |||||
| Net Income Shown on Financial Statement | $1,212,639 | $1,760,804 | $1,888,366 | $448,536 | $527,182 | |
| ADDBACKS | ||||||
| Depreciation | $0 | $2,408 | $6,543 | $8,751 | $16,950 | |
| Interest | $0 | $0 | $862 | $2,947 | $4,997 | |
| Meals & Entertainment | $4,680 | $4,526 | $5,121 | $7,631 | $6,041 | |
| Cell Telephone | $1,800 | $1,800 | $1,800 | $1,800 | $1,800 | |
| IRA | $8,876 | $0 | $0 | $0 | $0 | |
| Life Insurance | $3,592 | $0 | $0 | $0 | $0 | |
| TOTAL ADDBACKS | $18,948 | $8,734 | $14,326 | $21,129 | $29,788 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $1,231,587 | $1,769,538 | $1,902,692 | $469,665 | $556,970 | |
| Annualized | ||||||
| Profit Margin | 29.35 % | 32.29 % | 43.40 % | 13.15 % | 15.78 % |
Services
- 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
- Fabrication
- 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)
Other Assets
- Included Working Capital: $200,000
- Intangibles: Stellar reputation the Carolinas with 25+ recurring clients
*See additional asset information in the attachments
Valuation Details
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 3-year cash flow average making the business price much more favorable to the buyer.
The formula used is as follows:
3-Yr. Avg. Cash Flow x Prescribed Multiple = Fair Market Value
With this information, the computation is as follows:
$1,771,449 x 3.4 = $6,022,927
Growth Opportunities
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.
Funding Example
Purchase Price: $5,950,000
| 12.5% Buyer Down Payment | $743,750 | Must be unborrowed funds |
| 12.5% Seller Financing or Equity | $743,750 | 5-year term at a rate of 4.50% = a monthly loan payment of $13,866 |
| 75%Bank Loan | $4,462,500 | 10-year term at a rate of 6% = a monthly loan payment of $49,543 |
- Cash Flow: $1,771,449
- Annual Payment:
- To Seller: $166,389
- To Bank: $594,515
- Net Profit (after expenses and loan payment): $1,010,545
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 cash flow |
$ |
| 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 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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210 N 78th St. 2nd FloorOmaha, NE 68114
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f 402.939.0857