Opportunities
Renowned Beverly Hills Fashion Boutique
Established reputation in the industry with long-standing clientele!
Specifications
This high-end fashion boutique in Beverly Hills is extremely well-known in the industry and has several long-standing customers! Their product line includes the latest European trends imported directly from designers and manufacturers, catering to their clientele of refined, sophisticated women. National and International customers travel to the store to purchase entire wardrobes in one visit. A strong recurring local client base knows this boutique will have new and fresh clothing and accessories year-round. The owners travel to Milan twice per year for Fashion Week to place their orders for the upcoming season. They have been extraordinarily creative in recent months, offering to visit homes of local clients with their rolling racks, sending photos to national and international clients to choose from & shipping their items, and choosing items for long-standing clientele.
The owners handle buying, pricing, inventory, and bookkeeping tasks. The full-time store manager/assistant buyer has been on staff for 13 years and has vast knowledge of the vendors, products, and client base. The team is rounded out by one full-time sales & display person.
With exclusivity on several high-end collections, the store is well-known to designers and manufacturers and has long-term relationships with many vendors. The boutique has not tapped into online sales, which would be a tremendous opportunity for revenue growth. Increasing advertising efforts and expanding their product line to include menswear would also undoubtedly add to their customer base.
Business Highlights
- Year Established: 1987
- Location: Beverly Hills, California
- Service Area: Worldwide
- Products: High-end European fashion & accessories
- Clients: High net worth local, national & international women
- Lease: 2,600 sq. ft.: 2,000 sq. ft. retail floor, 400 sq. ft. storage, 200 sq. ft. office area
- Reason for Selling: Retirement planning
- Personnel: 4 FT: 2 owners + 1 store manager/assistant buyer & 1 sales & display staff
- Business Hours: Mon-Sat., 10 am – 6 pm
- Seller Training Period: 6-12 months
- Growth Opportunities: Add online sales, expand products to include menswear, increase advertising
- Current Owners’ Responsibilities: Buying, pricing, inventory, bookkeeping
Financial Highlights
- List Price: $2,100,000
- Gross Sales:
- 2020 (Aug-Dec 2019): $2,057,686 Annualized
- 2019 (FYE July 2019): $2,009,063
- 2018 (FYE July 2018): $1,951,781
- Cash Flow:
- 2020: $533,013
- 2019: $373,829
- Assets Included in Purchase*
- Equipment: Computer system, Retail Pro Software, sound system, iPads, printers, phone system
- Intangible Assets: Exclusivity on several high-end collections, long-term relationships with many vendors, well-known to designers and manufacturers, long-standing clientele
*amounts may vary, assets may be depreciated, replacement cost, or fair market value
Cash Flow Analysis
| Description of Financial Statement | P&L Statement August 1, 2019-December 31, 2019 (5 months of the 2020 fiscal year) | Tax Return FYE July 31, 2019 | Tax Return FYE July 31, 2018 | Notes |
| 2019/2020 | 2019 | 2018 | ||
| GROSS SALES | $857,445 | $2,009,063 | $1,951,781 | |
| Annualized | $2,057,686 | |||
| Net Income Shown on Financial Statement | $-3,594 | $21,404 | $41,220 | |
| ADDBACKS | ||||
| Compensation to Owner | $63,892 | $119,486 | $187,200 | |
| 11% Tax on total W2 Salaries | $7,028 | $13,143 | $20,592 | |
| Interest | $4,433 | $10,730 | $90,006 | |
| Replacement | $-37,500 | $-90,000 | $-90,000 | |
| Meals & Entertainment | $2,580 | $3,988 | $0 | 80% Personal |
| Cell Phones | $1,250 | $3,000 | $3,000 | $250/month Personal |
| Travel | $0 | $51,321 | $45,806 | 80% Personal |
| Equipment Rental | $175,000 | $219,157 | $210,464 | $20k/month x 12 - what is left over |
| Auto Expense | $5,000 | $12,000 | $12,000 | $1,000/month lease |
| Insurance | $4,000 | $9,600 | $9,600 | $800/month |
| TOTAL ADDBACKS | $225,683 | $352,425 | $488,668 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $222,089 | $373,829 | $529,888 | |
| Annualized | ||||
| Profit Margin | 25.90 % | 18.61 % | 27.15 % |
- Profit Margin: 26%
Clients
- High net-worth local, national, and international women
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Products
- High-end European fashion & accessories
Personnel
- 2 owners
- Management of buying, pricing, inventory, bookkeeping tasks
- 1 FT store manager/assistant buyer
- 1 FT sales & display
Growth Opportunities
- Add online sales
- Expand products to include menswear
- Increase advertising efforts
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, a 3-year average cash flow was used with a prescribed multiple of 5. With this information, the computation is as follows:
$478,910 x 4.5 = $2,155,095
The fair market value found above positions the business list price at $2,100,000.
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