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Opportunities

Boutique Bicycle Shop with $350K+ in Sales

Pending

CASH FLOW
$119,868

Specifications

  • Price
    $170,000

  • Cash Flow
    $119,868

  • Revenue
    $358,535

  • Profit Margin
    33%

  • Valuation
    $199,304

  • Down Payment
    10%

  • Inventory
    $83,641

  • Equipment
    $9,225

  • Location
    Western Iowa

  • Service Area
    Western Iowa

  • Lease
    $1,000

  • Employees
    Seasonal: 1 PT in winter, 2 PT in summer

Perfect location, great sales, and superior bikes.  For the past 16 years, Council Bluffs has been lucky to have this bicycle retail and maintenance business, but retirement calls and over $350,000 in sales could be yours!  The only location in Western Iowa selling and servicing a major brand, this company also specializes in boutique selections to guarantee the best style and price for all.

Exposed brick walls, high ceilings and ornate molding lend a classy vibe not often found in similar shops, and track lighting highlights the $80,000 worth of inventory.  The workshop in back is well equipped and spacious, and the store uses a full-scale point of sale system with Enterprise-Class scalability and detailed options for monitoring financial performance and inventory.  Location lends itself to event hosting, which could help boost sales with minimal cash expenditure.  Other growth opportunities exist in social media marketing, selling used inventory and electric assist bikes, exploring the fast growing women’s market, and utilizing the customer email list for marketing.

Within the first year of ownership, after debts and expenses of $30,746 are paid, a new owner can expect to profit $74,151 in net operating income. This equates to a 390% return on investment of the initial down payment of $19,000.

Business Highlights

  • Years in Business: 16
  • Location and Service Area: Western Iowa 
  • Lease: $1,000/mo. for 2,000 square feet3
  • Reason for Selling: Retirement and pursuing other opportunities
  • Employees: Seasonal: 1 PT in winter, 2 PT in summer
  • Hours: Tue., Wed., Fri., 10-6, Thurs. 10-8, Sat. 10-5, Sun. 12-4 
  • Seller Training Period: 90 Days
  • Growth Opportunities: Event hosting, social media, sell used inventory, electric assist bikes, explore fast-growing women’s market, utilize email list for marketing
  • Current Owner’s Responsibilities: Inventory, payroll, bookkeeping, sales, repair 

Financial Highlights

  • List Price: $170,000
  • 2016 Gross Sales: $358,535
  • 2016 Cash Flow: $119,868
  • 2015 Cash Flow: $89,927
  • Assets included in purchase: $92,866
    • Equipment: $2,000 Repair shop
    • Vehicles:  2006 Chevy Silverado $7,225
    • Intangible Assets: Website, prime location for special events, brand recognition; only dealer between Omaha and Des Moines for a top brand
    • Inventory:  $83,641
      • Parts are marked up 50%, rubber marked up 70-80%, bikes marked up 42%

        *amounts may vary

Recasted Cash Flow

Description of Financial StatementP&L StatementTax ReturnTax ReturnNotes
201620152014
GROSS SALES$358,535$362,099$397,364
Net Income Shown on Financial Statement$70,687$23,343$20,274
ADDBACKS
Compensation to Owner$53,646$51,250$41,523
11% Tax on total W2 Salaries$5,901$5,637$4,568
Depreciation$0$12,794$3,953Non-cash item
Interest$3,451$7,525$5,311Non-onward going expense
Health Insurance$1,590$2,894$2,524Owner's personal health insurance
Auto-Personal Use$2,057$3,154$1,311Auto use unrelated to business
Personal Fuel$0$761$0Fuel use unrelated to business
New Fuel$-20,000$-20,000$-20,000Cost to buyer to hire new part-time associate
Non-Business Telephone$1,800$1,800$1,800Personal cell phone at $150/month
Auto Insurance$736$768$1,959Owner's personal auto insurance
TOTAL ADDBACKS$49,181$66,583$42,949
Seller's Cash Flow = Total Addbacks + Net Income$119,868$89,926$63,223
Profit Margin33.43 %24.83 %15.91 %

  • The Recasted Cash Flow Analysis shows the add back of Owner non-business expenses or those expenses (such as depreciation and interest) which are specific to the current Owner and will not carry to a new Owner
  • There was an increase in profit margin from 2014 to 2015
  • There is a negative addback of $20,000 to cover the cost of hiring on a part time associate to work in the business 

Competition

  • While being located near Omaha, it is not considered to be direct competition as most Omaha residents will purchase from Omaha and Council Bluffs Residents will purchase from Council Bluffs
  • There are two other similar stores in Council Bluffs however neither offer the same major bike lines as this business
  • High customer satisfaction reflected in repeat business and referrals
  • Repair and service department
  • High quality brands offered, that can’t be found at nearby retailer

Growth Opportunities

  • More active social media presence
  • Keeping in contact with customers via company e-mail list
  • Being active in group/club rides
  • Selling used bikes or bike rentals
  • Taking advantage of the marketing opportunities offered by Trek (Trek University)
  • Electric Assist Bikes
  • Putting more emphasis on the fast-growing women’s market

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:

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. For this valuation, we used a two-year average cash flow of 2014 and 2015. 

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:

2 Yr Ave Cash Flow (2015-2016) x 2.8 = Price

$104,897 x   1.8 = $199,304

The Fair Market Value found above positions the business List Price at $170,000, as the owner is ready to sell!

Funding Example

Purchase Price:                          $170,000

10%Buyer Down Payment:      $17,000

15%Seller Financing:               $25,500

75%Bank Loan:                       $127,500

Seller Financing 5-year term at a rate of 4.25% equals a monthly loan payment of $475.

Bank Loan 7-year term at a rate of 5.25% equals a monthly loan payment of $1,817.

After business expenses and annual loan payments of $27,510, a buyer would retain a net operating income (profit) of $77,387.

A down payment of $17,000 results in a four-fold return on investment in the first year!

At a proposed Purchase Price of $170,000 with the terms listed above, the coverage ratio is 3.81.  


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