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Management & Planning of Home Building

All work is subbed out!

CASH FLOW
$112,368

Specifications

  • Price
    $340,000

  • Revenue
    $1,050,544

  • Cash Flow
    $112,368

  • Location
    Marion, Illinois

  • Intangible Assets
    Well-established reputation, business through word of mouth, reliable staple of subcontractors

  • Reason for Sale
    Retirement planning

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.

Business Highlights

  • 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

Financial Highlights

  • 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

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

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnTax ReturnNotes
201920182017
GROSS SALES$1,050,544$1,808,796$569,363
Net Income Shown on Financial Statement$45,582$79,104$-66,078
ADDBACKS
Compensation to Owner$21,674$26,520$26,400Ellen
Other unrelated salaries$21,674$26,520$26,433Charles
11% Tax on total W2 Salaries$4,768$5,834$5,812
Depreciation$0$11,713$12,003
Interest$1,660$11,297$14,780
Contributions$2,575$0$0
Owner's Life Insurance$2,189$0$0
Pension & Profit Sharing$1,037$853$930Owner Only
Cell Phone$480$480$480$40/month
Vehicle Expense$10,729$9,123$9,692100% Personal
TOTAL ADDBACKS$66,786$92,340$96,530
Seller's Cash Flow = Total Addbacks + Net Income$112,368$171,444$30,452
Profit Margin10.70 %9.48 %5.35 %
Profit Margin: 11%

Clients

  • Home buyers looking for a high-quality new build

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

Services

  • Site-built custom homes

Personnel

  • 1 owner
  • 1 W2 employee
  • Subcontractors

Growth Opportunities

  • Increase advertising, marketing
  • Frequently updating website
  • Pursue modular home building

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 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.

 

Funding Example

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.

Purchase Price:

$340,000

$
%
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:
2019 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2019 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
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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.