Sacramento HVAC with 70 Employees
Largest HVAC in Northern California!
This is the largest HVAC company in Northern California! Serving the Sacramento area, this HVAC and plumbing company has been growing year-over-year. There are 70 employees on staff, including controllers, foremen, project managers, assistants, and a field/shop work force. The owner has built a solid customer base with a focus on serving schools, government institutions, and commercial office buildings and many customers have been with this company for over fifteen years. They complete HVAC (70%) and plumbing (30%) services. With an on-site fabrication shop, this company can meet any HVAC needs of their customers located throughout Northern California. The owner currently focuses on lead generation, some estimations, bonding, and general oversight of the business.
Operations are managed from a large 14,000 square foot location in the Sacramento Valley area. The office has 2,000 square feet of space with a reception area, private offices, and staff spaces. The remaining 12,000 square feet is dedicated to warehouse, storage, and the fabrication shop.
This company has been experiencing year-over-year growth, yet continued evolution is possible. The industry in Northern California always has room for expansion and the company could take on additional available work in the region. Another area for development could be found in adding a service department and considering the implementation of maintenance and inspection contracts.
- Year Established: 2003
- Location: Sacramento Valley California
- Service Area: Northern California
- Services: HVAC (70%) and plumbing (30%)
- Clients: Educational institutions, government institutions, commercial office buildings
- Lease: 22,000 sq. ft.: 2,000 sq. ft. office, remaining is warehouse and storage, large roll-up doors
- Reason for Selling: Strategic roll up/ industry consolidation
- Personnel: 70: Controllers, foremen, project managers, assistant, field and shop workforce
- Seller Training Period: Two years
- Growth Opportunities: Consider maintenance and inspections contracts, expand service area
- Current Owner’s Responsibilities: Oversight, no labor or bidding
- List Price: $7,950,000
- Gross Sales:
- 2020: $12,748,699 annualized
- 2019: $11,496,912
- 2018: $8,564,656
- 2017: $7,328,072
- Cash Flow:
- 2019: $1,674,771
- Assets Included in Purchase:
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
|P&L Statement||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$2,128,000||$1,543,340||$512,536||$824,829||$341,519|
|Meals & Entertainment||$211||$27,762||$16,804||$22,649||$12,152|
|Insurance Premiums for Owners: Health, Life, Auto||$14,000||$24,000||$24,000||$24,000||$24,000||$2,000/month|
|Other||$0||$0||$8,553||$0||$0||One time investment expense|
|Seller's Cash Flow = Total Addbacks + Net Income||$2,164,254||$1,674,771||$621,004||$909,588||$420,874|
|Profit Margin||29.10 %||14.57 %||7.25 %||12.41 %||6.62 %|
- Profit margin: 15%
- Educational institutions
- Government institutions
- Commercial office buildings
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Total Personnel: 70
- Project managers
- Field workforce
- Shop workforce
- Add service department
- Consider maintenance and inspections contracts
- Expand service area
- Take on additional available work
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 2019 cash flow was used with a prescribed multiple is 4.75. With this information, the computation is as follows:
$1,674,771 x 4.75 = $7,955,162
The fair market value found above positions the business list price at $7,950,000.
Purchase Price: $7,950,000
12.5%Buyer Down Payment: $993,750
12.5%Seller Financing: $993,750
75%Bank Loan: $5,962,500
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $18,527.
Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $66,196.
After business expenses and loan payments, a buyer with a 12.5% down payment of $993,750 would retain a profit of $658,101 which results in a 66% return on investment in the first year.
A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $7,950,000 with the terms listed above, the coverage ratio is 1.65.
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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