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Interior Design for High-End Homes -Owner Will Stay on for 2 Years

Located in the Chicago area with a team of 5!

CASH FLOW
$218,920

Specifications

  • Revenue
    $1,518,477

  • Cash Flow
    $218,920

  • Location
    Chicagoland

  • Account Receivable
    $34,000

  • Profit Margin
    14%

  • Reason for Sale
    Retirement planning

With a posh new location in the suburbs, this interior design firm has three expert designers and a project manager on staff! The owner of this business is willing to remain on staff for up to 3 years to ensure a smooth transfer of industry relationships and daily operations. With over $1.5MM in sales last year, this award-winning firm brings a refined, one-of-a-kind aesthetic to both residential and commercial projects.  This team of five works primarily for high-end home owners, architects, and custom home builders.  Typical projects average $56,000 each and range from whole-home designs to single-room makeovers. 

 

Located in the Chicago area, the team works within a 15-mile radius of the headquarters.  Generally, 90% of client meetings are done on-site, while 10% are completed in trade showrooms throughout the city. The team of five consists of two senior designers, a junior designer, one project manager, and an administrative assistant.

 

This successful company could leverage their aesthetic by engaging on social media to generate excitement as well as new customers.  

Business Highlights

  • Year Established: 20+
  • Location and Service Area: Chicagoland
  • Services: Interior design: new construction and renovation
  • Clients:  High-end home owners, business owners, executives, architects
  • Reason for Selling: Retirement planning
  • Employees: 5: 2 senior designers, 1 junior designer, 1 project manager, 1 administrative
  • Seller Training Period: 2-3 years 
  • Growth Opportunities: Advertise & network within the community, engage on social media particularly Instagram and Pinterest to generate interest in their design style
  • Current Owner’s Responsibilities: Operations 

Financial Highlights

  • List Price: $730,000
  • Gross Sales:
    • 2019: $1,518,477
  • Cash Flow:
    • 2019: $218,920
    • 2018: $341,138
    • 2017: $235,036
  • Assets Included in Purchase*
    • Equipment: $15,000
    • A/R: $34,000
    • Intangible Assets: Excellent reputation, superior social media reviews, positive and long-standing relationships with vendors

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnTax ReturnTax ReturnNotes
2019201820172016
GROSS SALES$1,518,477$1,986,941$1,590,666$1,753,206
Annualized
Net Income Shown on Financial Statement$141,756$276,658$173,113$258,929
ADDBACKS
Compensation to Owner$97,320$97,320$97,320$95,914
11% Tax on Owner Salary$10,705$10,705$10,705$10,551
Depreciation$0$864$864$1,140
Interest$0$1$0$0
Meals & Entertainment$1,854$1,337$1,297$2,343
Contributions$19,662$0$0$0Non-onward going expense
Pension$0$8,738$9,316$7,638Personal expense
Health Insurance$9,320$7,956$8,182$668Personal expense
Auto Repairs$3,644$2,900$2,557$4,551Personal expense
Auto Payments$0$0$0$7,105Personal expense
Auto Fuel$2,592$2,592$239$3,563Personal expense
Auto Insurance$987$987$943$1,312Personal expense
Home Office$1,080$1,080$500$1,573Personal expense
Retain Owner$-70,000$-70,000$-70,000$-70,000
TOTAL ADDBACKS$77,164$64,480$61,923$66,358
Seller's Cash Flow = Total Addbacks + Net Income$218,920$341,138$235,036$325,287
Annualized
Profit Margin14.42 %17.17 %14.78 %18.55 %
.

Typical Clients

Interior design services for:

  • High-end homeowners
  • Business owners
  • Executives
  • Architects
  • General contractors

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

Additional Facts About Interior Enhancement Group:

  • Projects: 10-12 are managed at one time
  • Presentations are done in person and follow-up details are often handled via email.
  • A beautiful new website was implemented one year ago.
  • Software in use: Studio Designer, CAD, Minutes Matter, Sketch Up, and Revit

Employees

Total Employees: 5

  • 2 Senior designers
  • Junior designer
  • Project manager
  • Administrative

Growth Opportunities

  • Obtain storefront with design studio
  • Advertise and network within the community
  • Engage on social media, particularly Instagram and Pinterest to generate interest in their design style

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 multiple is prescribed 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 multiple.

For this business, the three-year average cash flow was used with a prescribed multiple of 2.75.  With this information, the computation is as follows:

$265,031         x          2.75     =          $744,328

The fair market value found above positions the business list price at $730,000.

Funding Example

Purchase Price:                                   $730,000

12.5%Buyer Down Payment:           $91,250

12.5%Seller Financing:                    $91,250

75%Bank Loan:                               $547,500

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $1,701.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $6,078.

After business expenses and loan payments, a buyer with a 12.5% down payment of $91,250 would retain a profit of $171,76, which results in a 188% return on investment in the first year.

A lender is required to have a minimum 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $730,000 with the terms listed above, the coverage ratio is 2.84.

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:

$730,000

$
%
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:
3 year avg 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 avg 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.