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Passively Owned Auto Service & Repair - 3 Locations

CASH FLOW
$172,382

Specifications

  • Price
    $560,242

  • Cash Flow
    $172,382

  • Revenue
    $1,233,652

  • Location
    Omaha

  • Down Payment
    12.5%

  • Reason for Sale
    Retirement

  • Employees
    15 employees with a manager at each location

  • Intangible Assets
    Reputation, company longevity, established name

  • Inventory
    $10,000

This passively-run auto service and repair company has 3 locations across the Omaha metro.  In business for over 45 years, the current owner profits over $170,000.  Average sales from the last 3 years amounted to upwards of $1.2M. Full auto services are performed, from engine repair and diagnostics to oil changes and wiper blade replacement.

As the business has passive ownership, all employees are in place for smooth operating.  There are currently 15 employees, with a manager at each location. One of the managers also acts as General Manager and oversees the other 2 shops. The smallest location is just over 3,200 sq. ft. and the largest is nearly twice that at 7,200 sq. ft. Additionally, all locations are in different parts of town and do not compete with each other.

Growth exists in increasing advertising.  A buyer should also consider adding more locations in Omaha, across the river in Council Bluffs or across eastern Nebraska.  Listed at $560,242, a buyer paying 12.5% down should profit $60,984 in the first year after debts.

Business Highlights

  • Year Established: 1970
  • Location and Service Area: Omaha metro
  • Services: Full auto servicing from engine repair to oil changes and wiper blade replacement
  • Building: 3 locations:
    • Location 1 – 7,200 sq. ft.
    • Location 2 – 3,204 sq. ft.
    • Location 3 – 3,608 sq. ft.
  • Reason for Selling: Retirement
  • Employees: 15 – Manager at each location
  • Hours: Mon – Fri 7:30am to 5:30pm, Sat 8am to 3pm
  • Seller Training Period: 90 days
  • Growth Opportunities: Increase advertising or open more locations in Omaha suburbs
  • Current Owner’s Responsibilities: Passive

Financial Highlights

  • List Price:   $560,242
  • Gross Sales
    • 2016: $1,233,652
    • 2015: $1,119,061 (anomaly due to road construction that affected access to 1 location)
    • 2014: $1,277,001
  • Owner Profit/Cash Flow
    • 2016: $172,382
  • Profit Margin: 14%     
  • Assets Included in Purchase:
    • Equipment: $315,000 replacement cost - hoists, alignment machines, tire machines, jacks, lifts, computers, furniture and more
    • Inventory: $10,000
    • Intangible Assets: Reputation, company longevity, established name

 

*amounts may vary

Cash Flow Analysis

Description of Financial StatementTax ReturnTax ReturnTax ReturnNotes
201620152014
GROSS SALES$1,233,652$1,119,061$1,277,001
Net Income Shown on Financial Statement$-58,820$-70,298$-44,743
ADDBACKS
Depreciation$6,183$2,687$8,324Non-cash item
Management Fee$83,950$82,000$128,575Paid to seller
Unrelated Wages$10,560$10,560$10,824Paid to family member (not business related)
3 Location Rent Adjustment$21,600$0$0Onward going expense of $110,400
One-Time Costs$17,950$0$0Software conversion of $8,799 and roof repair of $9,151
North Location$90,959$76,057$70,200North location not in purchase price
TOTAL ADDBACKS$231,202$171,304$217,923
Seller's Cash Flow = Total Addbacks + Net Income$172,382$101,006$173,180
Profit Margin13.97 %9.02 %13.56 %
  • 14% profit margin for passive ownership
  • Consistent sales at or above $1.1M

2017 Financials

  • YOY sales through August are $789,047
    • Sales through August 2016 were $789,987
  • A new technician has been added
  • New marketing (Bay IQ) is being tested to help improve sales
    • Cost of $14,400 per year
  • Utilities were up by $3,500 due to an employee error that has been corrected
  • Labor rates have been raised by from $98 to $105 (an increase of 7%)
    • Labor sales are generally around $500,000 per year
    • Increase in rates should result in an additional $35,000

Locations

  • Location 1
    • 7,200 sq. ft.
    • $4,200/month base rent
  • Location 2
    • 3,204 sq. ft.
    • $2,500/month base rent
  • Location 3
    • 3,608 sq. ft.
    • $2,500/month base rent

Services

A/C and heating Clutches Filters
Exhaust Oil Changes Tune-Ups
Water pumps And more!

 

 

  • Roughly 1/3 of job tickets are for exhaust work
  • Appointments can be booked through the company website
  • Before labor costs, service jobs generally gross 75% at minimum
  • $98 is the shop rate, but a buyer could up that to $104 to stay in line with competition
  • Vehicle inspections are a charge of $100
  • Occasionally does work on city vehicles, but there is no contract in place

Sales & COGS Analysis

  • Location 2 has grown by 46% since 2015
  • Location 3 has increased sales by 26% since 2015

  • COGS range from 22% to 25%

Employees

  • 15 employees
  • Each location has a Manager
  • Additionally, one of these managers also acts as a General Manager for all locations
  • A part-time bookkeeper handles bills, inventory and payroll

 

The owners are passive, generally overseeing the company, and doing some inventory and accounting work. A buyer could choose to be absentee.

Equipment

Included in the purchase is shop equipment, furniture, fixtures, inventory and vehicles.  Below is a sampling of some of those assets:

Alignment machine File cabinets Jacks
Lifts Transmission flush machine Snow plow
2 pick-ups Signage Wheel balancer
Exhaust lifts  Hoists Welding equipment

The estimated replacement cost of assets is valued at $315,000.

A detailed asset list is available upon signing a Non-Disclosure Agreement.

Growth Opportunities

  • Raise hourly rates
    • Current hourly rates are $98, but a bump up to $104 would put this company more in line with competition
  • Open locations in Omaha suburbs
    • This business thrives on a customer demographic that continually repairs older vehicles
    • The suburbs of Omaha usually have many teenaged drivers that do not have the capital for newer cars and, therefore, require more repair services
  • Increase ownership responsibilities
    • The current owners take a passive interest in the business, but a more active buyer could take on some of the bookkeeper’s duties or the General Manager’s duties to boost the bottom line

Valuation Details

The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business.  

The formula used is as follows:

2016 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.

With this information, the computation is as follows:

$172,382         x          3.25    =          $560,242

The Fair Market Value of this business is $560,242.

Funding Example

Purchase Price:                          $560,242

10% Buyer Down Payment:             $70,030

10% Seller Financing:                   $70,030

80% Bank Loan:                             $420,182

Seller Financing 5-year term at a rate of 4.5% equals a monthly loan payment of $1,306.

Bank Loan 5-year term at a rate of 5.25% equals a monthly loan payment of $7,978.

After business expenses and loan payments, a buyer with a 12.5% down payment of $70,030 would retain a profit of $60,984, an 87% 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 $560,242 with the terms listed above, the coverage ratio is 1.55. 

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. 

Purchase Price:

$560,242

$
%
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:
2016 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2016 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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