Management & Planning of Home Building
All work is subbed out!
All work is subbed out for this custom home building company and is available to purchase with less than $50,000! Building superior custom homes is the mission of this Southern Illinois business. Serving Marion and the surrounding communities, this company prides itself on exceeding its customers’ expectations, while making their home affordable. Their business location is an example of a model home, so when their customers walk through the office doors, they get to see for themselves the high quality they will be purchasing.
Customers can choose from existing floor plans or choose to have the talented team design one for them. Word of mouth travels far and wide; this company’s homes are structurally sound, energy efficient, and completed quickly, saving the customer money but not skimping on quality.
Growth opportunities include increasing advertising and marketing, as well as regularly updating the company’s website. Additionally, if a new owner would be interested in pursuing modular home building, the current owner could pass on several factory contacts to help make this happen.
- Year Established: 1997
- Location: Marion, Illinois
- Service Area: Marion and nearby surrounding communities
- Clients: Home buyers looking for a high-quality new build
- Services: Site-built custom homes
- Lease: 3,400 square feet
- Reason for Selling: Retirement planning
- Personnel: 1 owner + 1 W2 employee + subcontractors
- Seller Training Period: 3 months
- Growth Opportunities: Increase advertising, marketing, update website
- Current Owner’s Responsibilities: 35-40 hours/week in the office
- List Price: $340,000
- Gross Sales:
- 2019: $1,050,544
- Cash Flow:
- 2019: $112,368
- Assets Included in Purchase*
- Equipment: $50,000
- Intangible Assets: Well-established reputation, business through word of mouth, reliable staple of subcontractors
Cash Flow Analysis
|Description of Financial Statement||P&L Statement||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$45,582||$79,104||$-66,078|
|Compensation to Owner||$21,674||$26,520||$26,400||Ellen|
|Other unrelated salaries||$21,674||$26,520||$26,433||Charles|
|11% Tax on total W2 Salaries||$4,768||$5,834||$5,812|
|Owner's Life Insurance||$2,189||$0||$0|
|Pension & Profit Sharing||$1,037||$853||$930||Owner Only|
|Vehicle Expense||$10,729||$9,123||$9,692||100% Personal|
|Seller's Cash Flow = Total Addbacks + Net Income||$112,368||$171,444||$30,452|
|Profit Margin||10.70 %||9.48 %||5.35 %|
- Home buyers looking for a high-quality new build
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Site-built custom homes
- 1 owner
- 1 W2 employee
- Increase advertising, marketing
- Frequently updating website
- Pursue modular home building
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 2019 cash flow was used with a prescribed multiple of 3. With this information, the computation is as follows:
$112,368 x 3 = $337,104
The fair market value found above positions the business list price at $340,000.
Purchase Price: $340,000
12.5%Buyer Down Payment: $42,500
12.5%Seller Financing: $42,500
75%Bank Loan: $255,000
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $792.
Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $2,831.
After business expenses and loan payments, a buyer with a 12.5% down payment of $42,500 would retain a profit of $68,888, which results in a 162% 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 $340,000 with the terms listed above, the coverage ratio is 2.58.
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.
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.
2019 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2019 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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