Cabinet Remodeling & Kitchen Design
Averaging year-over-year growth of 20% with roughly 12 projects per month has helped this designer kitchen & cabinet remodeling company gather a good share of the Omaha market. In 3 years’ time, the company has seen a 66% increase in Gross Sales and a 196% increase in Cash Flow. Focusing on re-facing, refinishing, and repainting existing kitchen cabinetry, the average project ranges from $4,000 - $15,000.
The client base is made up of 30 to 60-year-olds with some wealth. Most projects are cabinet re-facing and re-dooring, with many being upsold to include extras such as new countertops. Between 50 – 75% of projects require carpentry and countertop work
The company employs 8 Laborers who each handle their own project. Also on staff is a full-time Project Manager, a Bookkeeper, one Office Support person, and one-part-time Salesperson. The seller focuses on bids and sales, and also aggressively markets the company.
Growth exists in working with new builds, which continue to be a good share of the Omaha housing market. The seller has rights to two prefabricated cabinet lines, which are not currently being utilized and are a great asset for new builds. This is a perfect opportunity for a business-minded individual to take a growing company to the next level.
- Years in Business: 5
- Location and Service Area: Omaha
- Services: Cabinet refinishing, repainting, re-dooring, replacement, and reconstruct elements. Kitchen backsplashes, granite & quartz countertops, minor remodeling, and designer kitchen finishes.
- Projects: About 12/month ranging from $4,000 to $15,000
- Building: 2 offices, 3 cabinet refinishing rooms, 2 spray booth rooms, shared bathrooms, use of a showroom, conference room, and kitchen
- Employees: 8 Laborers, 1 Project Manager, 1 Office Support, 1 Bookkeeping, 1 PT Sales. Company also uses 6 – 7 subcontractors for carpentry, countertops, electrical and plumbing needs
- Seller Training Period: 3 – 6 months
- Growth Opportunities: New builds. Cabinet shop finishes. Prefabricated cabinets. Hire interior designers.
- Current Owner’s Responsibilities: Bids and sales.
- List Price: $793,000
- Gross Sales
- 2017: $1,459,295
- 2016: $1,317,645
- 2015: $909,547
- 2014: $869,042
- Owner Profit/Cash Flow
- 2017: $234,236
- 2016: $138,004
- 2015: $97,535
- 2014: $76,555
- YOY Growth Trends: 66% increase in Gross Sales between 2014 – 2017
- Assets Included in Purchase:
- Office Equipment: Desks, laptops, catalogs, and more
- Shop/Field Equipment: Exhaust systems, rack shelves, shop vacs, paint sprayers, and more
- Vehicles: 2 cargo vans
Cash Flow Analysis
|Description of Financial Statement||Tax Return||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$159,961||$67,528||$32,307||$16,360|
|Compensation to Owner||$36,000||$36,000||$36,000||$0|
|11% Tax on total W2 Salaries||$3,960||$3,960||$3,960||$0|
|Interest||$10,339||$7,138||$1,276||$0||Non-onward going expense|
|Health Insurance||$9,261||$9,261||$9,261||$0||Personal health insurance for owner|
|Auto Insurance||$3,451||$3,451||$3,451||$0||Personal auto insurance for owner|
|Meals & Entertainment||$1,417||$512||$509||$0||50% of meals are personal|
|401K for Owner||$1,260||$1,260||$1,260||$0|
|Auto-Personal Use||$8,180||$8,180||$8,180||$0||Auto lease and fuel for owner|
|Seller's Cash Flow = Total Addbacks + Net Income||$234,236||$138,004||$97,535||$16,360|
|Profit Margin||16.05 %||10.47 %||10.72 %||1.88 %|
- YOY, the average increase in Gross Sales is 20%
- Seller attributes the great increase in sales to more countertop sales, cabinet refinishing, and more reconstruction/remodeling of kitchens
- Re-facing & re-dooring
- New cabinet door and drawer faces
- Application of solid wood facing over existing boxes
- Install new hardware, hinges, and crown molding
- Refinishing & repainting
- Changing the stain of existing cabinetry or woodwork
- Painting over existing woodwork or cabinetry
- Cabinet replacement
- Granite & quartz countertops
- Kitchen backsplashes
- Designer kitchen finishes
- Antique Glazed, Contemporary and Modern Glazed, Transitional Finished, Metallic and Metallic Glazed, Distressed, Country French, Old Word, Antique Chipped, Shabby Chic, Rustic, Clay Composition Applied Moldings, Gilded, and more!
- Kitchen remodeling
- Refinishing and repainting (a combined 65% of sales) are the biggest earners
- Countertop sales ($218,041) are 28% higher in 2017 than in 2016 ($169,677)
- First, the customer’s kitchen is measured for a free estimate
- Finish consultations are offered
- Work with design styles, fabrics, tile, hard surfaces, etc. to determine the possibilities
- Then, the customer is invited to the showroom to learn about the process
- Includes finish options, pricing, and timeline
- For refinishing and refacing, the doors and drawers are removed and brought to the studio
- The remainder of the cabinetry will be finished in the customer’s home, including the reinstallation of doors, drawers, and any hardware changes
Client Demographics & Projects
- Typical client is 30 to 60-years old with some wealth
- Projects range from $4,000 - $15,000 in general
- Cabinet refinishing projects are on the lower end, but many clients can be upsold
- About 12 projects can be completed each month
- The number of projects per year range between 100 – 120
- Projects are single-worker (i.e., 1 Laborer will handle a project on his/her own)
- Between 50 – 75% of jobs require countertop and/or carpentry work
- 8 FT Laborers
- 6 do field work
- 1 does field and shop work
- 1 is a floater
- Laborers fluctuate between 6 – 10, with a steady number of 8 – 9 Laborers at any one time
- 1 Laborer is assigned to 1 project
- 1 FT Project Management Lead
- 1 FT Office Support
- 1 FT Bookkeeper
- 1 PT Sales
- Company also works with 6 – 7 subcontractors for carpentry, countertops installations, electrical, and plumbing needs
Seller handles bids and some sales. A typical week consists of bidding on Tuesdays and Thursdays (about 8 kitchens can be bid in a day), and presenting bids on Wednesdays in the company office.
- New builds
- Current client base is kitchen remodels of existing homes
- Omaha and the larger metro area is still in the midst of a large housing boom with many new builds constantly occurring, opening up a great opportunity to work with General Contractors on new home builds
- Many homes built in Omaha over the last 25 years have outdated oak and arched door styles, leaving a massive opportunity for grown simply in the refinish sector.
- With most new builds being done in a more modern style, designer finishes are imperative for changing outdated finishes and updating them with modern finishes to bring older homes in line with new home styles
- It’s less expensive to offer new custom door styles to replace existing doors without tearing out existing cabinets. This leaves a very wide-open marketing in Omaha, as most real estate agents are faced with buyers wanting existing homes to have modern looks.
- Prefabricated cabinets
- The company has rights to 2 prefabricated lines that could be advertised
- Would fit nicely into new home builds
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 Multiplier = Price
“Cash flow” is the sum of net income plus any owner perks and non-onward going expenses.
“Multiplier” is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation (average is 3).
The Cash Flow for 2017 is $234,236 and the prescribed multiplier is 3.4.
With this information, the computation result follows:
$234,236 x 3.4 = $796,402
The List Price for the business is set at $793,000.
Purchase Price: $793,000
15%Buyer Down Payment: $118,950
15%Seller Financing: $118,950
70%Bank Loan: $555,100
Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $2,218.
Bank Loan 7-year term at a rate of 5.50% equals a monthly loan payment of $7,977.
After business expenses and loan payments, a buyer with a 15% down payment of $118,950 would retain a profit of $111,903, which results in an 94% 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 $793,000 with the terms listed above, the coverage ratio is 1.91.
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.
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.
2017 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2017 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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