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College & Professional Teams Sports Novelties Distributor

CASH FLOW
$1,106,458

Specifications

  • Price
    $4,295,000

  • Revenue
    $10,352,233

  • Equipment
    $104,900

  • Inventory
    $2,903,300

  • Down Payment
    10%

  • Multiplier
    3.89

  • Account Receivable
    $309,912

  • Service Area
    Continental United States

  • Valuation
    $4,304,122

  • Employees
    27: Operations VP, GM, 2 sales, 2 product management, bookkeeper, marketing, 11 warehouse; 7 in another0 state: 3 sales, 4 warehouse

  • Intangible Assets
    Established reputation, diverse customer base, clear and informational website

  • Location
    Nebraska

This sports novelties distributor stocks over 300 types of products manufactured by over 40 licensed vendors and warehoused in two states. Established in 1990, this Omaha-based company distributes mini football helmets, team mugs, team pennants and more to over 800 small businesses coast to coast. Over 95% of business is done business-to-business with the remaining 5% being direct sales to customers (i.e. “Mom & Pop” stores).  In the past 12 months, this company has been granted contracts with Jack Daniels, Harley Davidson and Riddell to distribute their products, making them 1 of only 6 distributors able to do so.

 

There are 19 employees between the two locations, with a VP of Operations, a General Manager; 2 in sales, 2 in product management, 11 in warehouse, 1 bookkeeper and 1 marketing manager.  Manufacturers include WinCraft, Fremont Die, Schutt and more.  Customers are offered Wholesaler or Drop Ship Programs, and most orders are shipped between 24-48 hours.

 

The current owner desires to retire within the next year and is selling the company he has built from the ground up. The business has expanded to include a second location, allowing the business to cut down on shipping costs. Both locations have warehouses and are fully staffed with management and employees who pack and ship orders.  Current ownership is responsible for overseeing general business operations and some purchasing of inventory.

Business Highlights

  • Year Established: Omaha, NE: 1990
  • Location: Omaha, Nebraska (opened 1990) & another Midwestern state (opened 2009)
  • Service Area: Continental United States, with most orders shipping within 24-48 hours
  • Clients: 95% distribution to other businesses; over 800 customers
  • Products: mini football helmets, team mugs, pennants & more (all licenses held by manufacturer)
  • Manufacturers: WinCraft, Fremont Die, Schutt, Riddell, ProMark Northwest, Kolder and more
  • Wholesaler Program: low minimums – items purchased in single piece quantities
  • Drop Ship Program: customer can offer wide variety of products without inventory cost; they take orders and distributor ships
  • Corporate Office & Warehouse: 32,000 sq. ft. at $14,398/month
  • Distribution Center: 17,000 sq. ft. at $8,145.16/month
  • Reason for Selling: Retirement
  • Employees: 19 in Omaha: VP of Operations, General Manager, GM Assistant, 2 sales, 2 product management, bookkeeper, marketing, 11 warehouse; 7 in another state: 3 sales, 4 warehouse
  • Hours: Monday – Friday: 8AM – 5PM
  • Seller Training Period: 90 Days
  • Growth Opportunities: Expand presence in grocery stores, convenience stores, baby/infant retailers, and hardware stores. Add other product lines business has been approved for
  • Current Owner’s Responsibilities: 15-20 hours weekly -purchasing inventory, overseeing general business

Financial Highlights

  • List Price: $4,295,000
  • 2017 Gross Sales: $10,352,233
  • 2016 Gross Sales: $11,104,691
  • 2017 Cash Flow: $1,106,458
  • 2016 Cash Flow: $975,971                            
  • $3.3MM+ worth of assets included in the purchase:
    • Assets: $104,900 – all furniture, equipment, computers, warehouse shelving, 2 fork lifts, 1 pallet shrink wrap machine
    • Inventory: $2,903,300 in licensed sports team novelty Items
    • A/R: $309,912
    • Intangible Assets: Established reputation, diverse customer base, clear and informational website
    • The valuation is based strictly on cash flow, not inventory.  The inventory will always fluctuate, but that will not affect the price.
  • High barrier to entry
    • Large manufacturers (like Riddell) require a minimum of $3M in sales to qualify as a distributor for their products
    • “Platinum” Distributor – 1 of 6 in country allowed to distribute Riddell products

*amounts may vary

Cash Flow

Description of Financial StatementP&L StatementTax ReturnTax Return
Amended
Tax ReturnTax ReturnNotes
20172016201520142013
GROSS SALES$10,352,233$1,104,691$10,131,302$9,603,647$9,830,517
Net Income Shown on Financial Statement$373,634$419,159$179,874$247,346$412,975
ADDBACKS
Compensation to Owner$321,600$287,120$287,120$269,270$267,58580% Shareholder Only
Other unrelated Salaries$60,000$61,558$145,500$122,000$122,50020% Shareholder in buyout phase
11% Tax on total W2 Salaries$41,976$38,355$47,588$43,040$42,909Salary Tax only on W2 Wages only - Employer Match
Interest$42$2,765$1,219$840$1,291Non-onward going expense
Employee Benefit Plan$0$0$200$1,300$1,300Line Item 18 on Tax Return
401K for Owner$16,200$51,220$72,630$36,718$33,456Line Item 17 on Tax Return
Auto-Personal Use$2,404$2,464$8,375$3,569$5,111Personal expense
Rent$20,609$1,917$-26,031$16,211$13,003Columbus Rent/year = $73,000; Omaha Rent/year = $180,000
Contributions/Donations$300$0$0$0$0
Auto Insurance$1,793$1,793$1,793$1,793$1,793Personal expense
Non-Business Telephone$1,620$1,620$1,620$1,620$1,620Personal expense
One-time Bonus$184,000$108,000$0$0$0Non-onward going expense [$92k/each in 2017; $54k/each in 2016]
Depreciation$18,675$0$0$0$0
Travel$7,592$0$0$0$050% Personal
Other unrelated Salaries$130,000$0$0$0$0Removal of Operations Manager
TOTAL ADDBACKS$806,811$556,812$540,014$496,361$490,568
Seller's Cash Flow = Total Addbacks + Net Income$1,180,445$975,971$719,888$743,707$903,543
Profit Margin11.40 %88.35 %7.11 %7.74 %9.19 %
  • In 2014, a consultant was hired to lower expenses and cut labor costs, resulting in 65% increase of net income

Product Offerings

  • Auto Accessories
  • Collectibles
  • Displays & Supplies
  • Helmets
  • Indoor home & office
  • Kitchen & Dining
  • Outdoor Lawn & Garden
  • Party & Tailgate
  • Sporting Goods
  • Toys & Games

Sports Teams

  • NFL
  • NBA
  • MLB
  • Nascar     
  • MLS
  • NCAA
  • NHL
  • US Armed Forces

Programs

  • Wholesaler
    • Over 30,000 products
    • Low minimums
      • Most items can be purchased in single piece quantities
    • Quick turnaround
      • Most orders ship in 24-48 hours
    • Shipping option
      • UPS, FedEx, USPS, LTL
  • Drop Ship
    • Over 30,000 products
    • Drop shipper can offer a wide variety of products without the inventory cost
      • Take the order and the distributor does the work
    • First-tier pricing
    • Quantity discounts

Clients

  • 800 customers
    • 95% distribution to other businesses
      • Grocery stores
      • Hardware stores
      • Baby supply stores
      • Truck stops
    • 5% are straight to customer (i.e. “Mom and Pop” stores)
  • No one client is more than 10% of total sales

Employees

  • Omaha (19)
    • President
    • Vice President of Operations
    • Marketing Manager
    • Product Manager (2)
    • Warehouse (11)
      • Manager
      • Order checker/packer
      • Order puller
      • Receiving & Shipping
    • Bookkeeper
    • Sales Representative (2)
  • Other Warehouse (7)
    • General Manager
    • Sales Representative
      • Sales Assistant
    • Order checker/packer
    • Order Puller
    • Receiving & Stocking

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.

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 2017 Cash Flow was used with a prescribed multiple is 3.87.  With this information, the computation is as follows:

$1,106,458      x          3.89     =          $4,304,122

The Fair Market Value found above positions the business List Price at $4,295,000.

Funding Example

Purchase Price:                             $4,295,000

10% Buyer Down Payment:             $429,500

15% Seller Financing:                    $644,2500

75% Bank Loan:                             $3,221,250

Seller Financing 6-year term at a rate of 4.50% equals a monthly loan payment of $10,227.

Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $42,332.

After business expenses and loan payments, a buyer with a 10% down payment of $429,500 would retain a profit of $475,754, which results in a 111% 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 $4,295,000 with the terms listed above, the coverage ratio is 1.75. 

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:

$4,295,000

$
%
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:
2017 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2017 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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