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Commercial Contractor with Full Staff

CASH FLOW
$283,787

Specifications

  • Price
    $985,000

  • Cash Flow
    $283,787

  • Revenue
    $2,609,755

  • Equipment
    $207,019

  • Valuation
    $993,254

  • Account Receivable
    $208,000

  • Reason for Sale
    Capital for new investments

  • Profit Margin
    22%

  • Service Area
    Omaha, with jobs across Nebraska and Iowa

For 10 years, this general contractor has steadily grown in size and reputation, earning $2,609,755 in sales during 2016, an impressive increase of 169% from 2015!  With projections of a further 9.6% increase in sales for 2017, this company is only just beginning to stretch its legs. Located in Omaha with jobs across Nebraska and into surrounding states, projects are 95% commercial in nature and 80% new construction.

Each year, roughly 30 jobs are completed, with most lasting around 3 months in duration. Some jobs do stretch to 9 months and beyond, and in anticipation of this the seller is willing to transition for up to 6 months after the sale. Assisting with projects are 7 staff, consisting of 2 Estimators, 2 Superintendents, and 2 office personnel. The seller acts as Project Manager, negotiating deals, planning out projects and handling the front end of business. A buyer could delegate some of these duties to the Superintendents and Estimators, as the seller has not done so by choice.

Growth areas could be an increase in marketing as the current owner has not devote time to that area. Even without marketing, the company has seen tremendous growth, but some attention here could ensure steady numbers year over year. A buyer would also be wise to focus on business development to see the company into the next 10 years and beyond.

With a purchase price of $985,000 and a 10% down payment, a buyer could expect a first year’s profit of $126,987.

Business Highlights

  • Years in Business: 10
  • Location and Service Area: Omaha, with jobs across Nebraska and Iowa
  • Projects: About 30/year – jobs average around 3 months, with some lasting 9+ months
  • 95% commercial / 5% residential
  • 80% new construction / 20% remodel
  • Lease: $850/month for 900 sq. ft.
  • Reason for Selling: Capital for new investments
  • Employees: 7 – 2 Estimators, 1 Office Manager, 1 Office Assistant, 2 Superintendents
  • Hours: Mon – Fri 9am to 5pm
  • Seller Training Period: 6 months
  • Growth Opportunities: Marketing and focus on business development
  • Current Owner’s Responsibilities: Project Manager – negotiates deals, plans out projects, handles front end of business

Financial Highlights

  • List Price: $985,000
  • 2017 Gross Sales: $2,865,435 Annualized - a 9.6% increase from 2016
  • 2016 Gross Sales: $2,609,755
  • 2015 Gross Sales: $969,692
  • 2017 Cash Flow: $626,061 Annualized
  • 2016 Cash Flow: $283,787
  • Profit Margin: 22%
  • Assets included in purchase: $504,517
    • Equipment - $207,019
      • Telehandlers, Bobcat, skidsteer, forklift, trailers, boomlift
    • Vehicles: $89,498
      • Ford F650, Dodge Ram, 2015 Chevy Silverado
    • A/R - $208,000
      • Generally 60 to 90 days out

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - April
Tax ReturnTax ReturnNotes
201720162015
GROSS SALES$954,145$2,609,755$969,692
Annualized$2,862,435
Net Income Shown on Financial Statement$197,578$62,034$41,964
ADDBACKS
Compensation to Owner$0$13,000$15,000
11% Tax on total W2 Salaries$0$1,430$1,650
Depreciation$0$54,763$14,229Non-cash item
Interest$3,955$11,246$14,452Non-onward going expense
Misc Expenses$0$58,777$0Personal construction costs for rental home & primary residence
Contributions/Donations$250$0$0Non-onward going expense
Personal Asset Tax$0$1,553$0Farm storage asset tax
Non-Business Telephone$300$900$900$75/mo for owner's cell phone
Life Insurance Premiums for Owner$720$2,160$2,160$180/mo for owner's life insurance
Meals & Entertainment$1,416$782$56980% of meals & entertainment for owner's personal expense
Auto-Personal Use$1,188$67,622$18,23570% of auto expense for owner's personal use
Travel$1,880$5,320$030% personal
Auto Insurance Premiums for Owner$1,400$4,200$4,200Owner's personal auto insurance
TOTAL ADDBACKS$11,109$221,753$71,395
Seller's Cash Flow = Total Addbacks + Net Income$208,687$283,787$113,359
Annualized
Profit Margin21.87 %10.86 %11.69 %
  • 169% increase in sales between 2015 and 2016
  • 2017 is projected to gross $2,862,435 – a 9.6% increase in a 1-year period

Services

  • General construction & remodeling
    • Estimating and project management
    • Ground up, buildout and renovation services
    • New construction or remodels
  • EIFS & stucco coatings
  • Masonry, brick, block and stone
    • Block foundations, walls, FEMA enclosures, elevator & stairwell shafts
    • Brick installations
    • Thin brick
    • Tuckpointing restoration
    • Natural and composite stone

Project Sampling

Past jobs:

  • Security and energy upgrades for federal space
    • Blast proof glass
    • Perimeter upgrades
    • Fire and communication
    • New roof system
    • Automated and efficient lighting
    • Efficient HVAC and plumbing
  • Restoration project
    • City funded
    • Restore to original condition with energy upgrades
    • Residential units nearly 100-years-old
  • Small office conversion
    • Creation of performance area
      • Stage, DJ booth, concession and lighting upgrades
      • ADA upgrades
      • Sound baffling glass wall

Upcoming jobs:

  • College dorm with over 200 rooms
  • City library
  • Affordable mixed housing

Employees

  • Office Manager
    • $33,000/year in salary
    • Works 35 hours/week
  • Office Assistant
    • $39,000/year in salary
    • Works 40 hours/week
  • Estimator (2)
    • Each is paid $31,000/year in salary
    • Work 40 hours/week
  • Superintendents (2)
    • Each is paid a $64,000/year salary and works approximately 50 hours/week
    • Oversee job sites on day-to-day basis

In addition these employees, the company subcontracts from 30 companies, all of whom provide their own insurance and bonding. Companies are qualified for jobs based on skill and employee numbers.

Seller works full-time as a Project Manager:

  • Negotiates deals
  • Handles the front end of the business
  • Plans out projects
  • Attends weekly or monthly meetings with clients regarding projects
  • Spends 1/3 of the time on business operations, and the remaining 2/3 on project managing

Job Statistics

  • Company bids on 90% of jobs available
    • Utilizes job bidding services or is approached directly
  • 95% of jobs are commercial
    • Of these, 50% are commercial residential with the remaining 50% consisting of:
      • Banks
      • Schools
      • Gas stations
      • Libraries
      • Jails
  • Average job is 3 months in length
    • Many go as long as 9 months or more
  • On average, there are 8 jobs being worked on in a month
  • Job bids range from $250,000 to $600,000
    • Average job is around $250,000 in billings
  • In an average month, billing amounts to $50,000/job
    • Taking into account that at any one time there are generally 8 open projects, that puts monthly billing at $400,000
    • Bills are typically 60 – 90 days out

Income Analysis

  • 2016 sales increased by 169% from 2015, by a margin of $1,640,063
  • Sales jumped by 326% in a two-year period between 2014 and 2016, by a margin of $1,998,348
  • Company growth can be attributed to increasing staff and more concentrated management, as well as continued bidding and growing reputation

Billing and Contract Analysis

Data has been taken from the year ended December 31, 2016.

As of December 2016, there were 12 projects still on the books, ranging from 0% to 90% completed. Data has been split into 2 charts, the first focusing on estimated costs and earnings, as well as earnings, costs and revenue accrued thus far.

The second chart focuses on current billing, what is left to bill, the remaining costs and estimated earnings.

Project Contracts

Project Contract Est. Costs Est. Earn % Revenue Cost Earn % Done
A 668,890 391,940 276,950 41.4 553,909 324,566 229,343 82.8
B 481,260 359,927 121,333 25.2 344,236 257,449 86,787 71.5
C 91,217 43,128 48,089 52.7 82,450 38,983 43,467 90.3
D 114,600 80,496 34,104 29.7 92,238 64,789 27,449 80.4
E 96,800 82,079 14,721 15.2 87,306 74,029 13,277 90.1
F 216,600 183,489 33,111 15.2 65,870 55,801 10,069 30.4
G 86,900 60,655 26,245 30.2 - - - 0
H 246,095 186,154 59,941 34.3 90,561 68,503 22,058 36.8
I 325,900 211,870 114,030 34.9 - - - 0
J 120,800 89,290 31,510 26.0 - - - 0
K 215,000 160,694 54,306 25.2 - - - 0
L 219,513 151,755 67,758 30.8 9,187 6,351 2,836 4.1
2,883,575 2,001,477 882,098 30.5 1,325,757 890,471 435,286 44.4
  • Estimated earnings average around 30.5% for jobs with COGS at 69% of revenue
  • The year ended with projects averaging 44.4% completed
  • Actual earnings were around 32.8%

Billings

Project Progress Billing Under Bill Over Bill Rev. Remaining Cost to Complete Est. Earnings
A 587,352 - 33,443 114,981 67,374 47,607
B 232,178 112,058 - 137,024 102,478 34,564
C 59,279 23,171 - 8,767 4,145 4,622
D 89,640 2,598 - 22,362 15,707 6,655
E 62,100 25,206 - 9,494 8,050 1,444
F 75,222 - 9,352 150,730 127,688 23,042
G - - - 86,900 60,655 26,245
H 105,165 - 14,604 155,534 117,651 37,883
I - - - 325,900 211,870 114,030
J - - - 120,800 89,290 31,510
K - - - 215,000 160,694 54,306
L - 9,187 - 210,326 145,404 64,922
  1,210,936 172,220 57,399 1,557,818 1,111,006 446,812
  • The year ended with over $1.5M left to bill with remaining earnings of $446,812 carrying over into 2017

Assets Included in Purchase - $293,000

Equipment     Vehicles  
         
SkyTrak Telehandler  $24,000   2015 Chevy Silverado $18,000
Bobcat T250 $19,000   Ford F650 $34,000
Cat Skidsteer $22,000   Dodge Ram $28,000
Lull Telehandler 50ft $26,000   2015 Chevy Silverado $18,000
Forklift Trailer Small $3,000   Ford F650 $34,000
Forklift Trailer Large $4,000      
New Forklift Trailer $14,000      
Carelift Telehandler  $19,000      
Scaffold $62,000      
JLG 600S Boomlift $20,000      

Market & Growth Outlook

  • The current owner spends around $800 per month on a Dex media ad
    • Marketing could be added by signage along the road in front of the office, at job sites and through vehicle wraps
  • Growth exists in delineating some of the seller’s Project Management duties to the Superintendents and Estimators
    • The seller has not delegated some duties that could be shared by choice
  • Add a Business Development position
    • The current owner has not had time to devote to developing the business
    • A position (or buyer) focusing on developing marketing, bidding, and adding staff could increase the business even further
  • Expand territory
    • Most jobs are completed in Omaha and Lincoln, with some jobs across the state and into Iowa and Kansas
    • Bidding more rural jobs or moving into surrounding states would increase the company’s reach

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.

$283,787         x          3.5       =          $993,254

The Fair Market Value found above positions the business List Price at $985,000.

Funding Example

Purchase Price:                             $985,000

10%Buyer Down Payment:             $98,500

10%Seller Financing:                      $98,500

80%Bank Loan:                                $788,000

Seller financing 5-year term at a rate of 4.5% equals a monthly loan payment of $1,836.

Bank loan 7-year term at a rate of 5.25% equals a monthly loan payment of $11,230.

After business expenses and annual loan payments of $156,800, a buyer would retain a profit of $126,987.  A 10% down payment of $98,500 results in a 128% return on investment during 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 $985,000 with the terms outlined above, the coverage ratio if 1.81. 

Please note that the decision 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:

$985,000

$
%
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:
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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