Award Winning Residential Remodel & Renovation
As an award winning high-end GC for residential renovation & remodeling company, this business is all about fine finishes, architectural detail, and customer service. With over $500k in the Pipeline and nearly $800k in secured work, this design-build team can accommodate customers who want to turn ideas into reality or to those who already have plans in hand. With a goal of creating a turn-key build for clients, this home remodeler can meet the structural and design needs of clients with contemporary to traditional styles.
Working with a small staff, this company is a general contractor with the knowledge and reputation to coordinate everything from a kitchen redesign to a whole-home remodel. With a focus on larger, detail-oriented, and high-end projects, this company works with reputable subcontractors who provide quality craftsmanship when completing projects on time and on budget. At any one time, this business coordinates 4-8 projects and sees little fluctuation in sales throughout the year.
The current owner is responsible for sales/estimates and oversight, but a new owner could assume those responsibilities or hire on an additional staff member. Areas for growth include diversification of services or possibly the addition of staff to increase capacity.
Year Established: 2002
Location: Houston, Texas
Service Area: Roughly a 15-mile radius from office
Capacity: 4-8 projects at a time
Average Sale: $80-100k per project
Building: 3,600 sq. ft. workshop with 700 sq. ft. office
Reason for Selling: Retirement
Employees: FT Office Manager (1), FT Project Manager (1), PT Contracted Assistant (1)
Hours: M-F 9-5
Seller Training Period: 90 days – 1-year transition
Growth Opportunities: Diversify services and projects, increase team to increase capacity, work with investment flippers
Current Owner’s Responsibilities: Business development, estimates, oversight
- List Price: $790,000
- Gross Sales:
- 2018: $1,634,933
- 2017: $1,299,641
- 2016: $1,506,879
- Cash Flow:
- 2018: $284,916
- 2017: $185,556
- Assets Included in Purchase*
- Equipment: $13,500: Tools, scaffolding, saws, FF&E
- Vehicles: $37,000: 2 Trucks
- Inventory: Materials are ordered by project
- A/R: $10,000
- Secured Work: $797,000
- Work in Progress: $500,000
- Intangible Assets: Positive reputation for high-end building, excellent customer service, award winning design and construction
*amounts may vary
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||$102,103||$19,107||$161,180||$17,001||$29,912|
|Compensation to Owner||$105,250||$102,000||$113,500||$3,000||$26,790|
|11% Tax on total W2 Salaries||$11,578||$11,220||$12,485||$330||$2,947|
|Meals & Entertainment||$4,109||$4,251||$2,530||$2,528||$3,748|
|Employee Benefit Plan||$21,050||$13,500||$22,100||$600||$0||To Owner|
|Security||$631||$1,468||$0||$0||$0||Personal Vet Bills|
|Seminars & Training||$29,490||$28,800||$28,800||$11,785||$0||Business Coach - $2,400/month|
|Rent Adjustment||$-3,500||$-6,000||$-4,600||$-9,600||$-11,200||$2,500/month onward going|
|Professional Fee||$0||$0||$0||$31,174||$0||25% non-onward going|
|Seller's Cash Flow = Total Addbacks + Net Income||$284,916||$185,556||$336,230||$61,229||$59,140|
|Profit Margin||17.43 %||14.28 %||22.31 %||8.49 %||10.31 %|
High-end projects utilizing fine craftsmanship, materials, and design. Projects include all aspects of design including, but not limited to: architectural design, construction, plumbing, electrical, flooring, cabinets, fixtures, countertops, windows and doors, appliances, closets and storage, and so much more!
- Kitchen remodels
- Bathroom remodels
- Living space remodels
- Room additions
- Whole-home remodels
- Porches and decks
- Whatever a client can conceive of inside and outside of the home
- FT Office Manager (1)
- FT Project Manager (1)
- PT Contracted Assistant (1)
- Diversify services
- Include additional landscaping services
- Include handyman services
- Include one-off work for small jobs
- Diversify projects
- Increase the team to increase capacity
- Project manager can coordinate 4-8 jobs at one time
- Work with investment flippers and gain subcontractors who can accommodate this type of work
Reason for Price Increase Per the Seller
- Signed contracts totaling $210K in early October
- In Mid-October, I will sign a contract worth $120K
- Have pending work to start with a previous client, anticipated total of $500K
- Currently have $1.285M in production of which we have billed 37.7%
- Another signed contract still in permitting worth $100K
- Gross revenue to date is $1.157M (as of October 15, 2018)
- Another $500K project that I place at 80% likelihood to sign
The Firm Business Brokerage 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 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.
For this business, a 2018 Cash Flow was used with a prescribed multiple is 2.78. With this information, the computation is as follows:
$284,916 x 2.78 = $792,066
The Fair Market Value found above positions the business List Price at $790,000.
Purchase Price: $790,000
10%Buyer Down Payment: $79,000
10%Seller Financing: $79,000
80%Bank Loan: $632,000
Seller Financing 6-year term at a rate of 4.5% equals a monthly loan payment of $1,254.
Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $8,305.
After business expenses and loan payments, a buyer with a 10% down payment of $79,000 would retain a profit of $170,203 which results in an 215% 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 $790,000 with the terms listed above, the coverage ratio is 2.48.
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.
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