Commercial Plumbing - Nearly $3 Million in Sales
A successful commercial plumbing company operating in the Des Moines area with many long-term contracts is for sale. With over $580,000 in assets, this team mainly works with commercial clients (80%) such as universities, property management companies, agricultural operations, as well as state and federal governmental entities. They also provide some services to residential clients (20%). About 10% of all services fall outside the typical contracted relationships. Operating with a nimble team of 21, Master Plumbers and apprentices work together on projects such as service installation, agricultural projects, steam hydronics, chilled water lines, boiler servicing, and much more!
The 5,400 space is owned by the seller, but the space will be available for uninterrupted continued lease after the sale. The building features an office with a large warehouse and a one-acre lot for storage.
The owner currently manages the development of new business including estimations. This owner has also developed a strong company culture, creating a close-knit atmosphere where apprentices can learn, individuals have the resources they need, and projects are matched to the best technician possible.
- Year Established: 2003
- Location: Des Moines Area
- Service Area: Des Moines and the northern surrounding counties
- Clients: Commercial 80% including university, agricultural, property managers, and specialty work; Residential 20%
- Services: General plumbing, service installation, agricultural plumbing, steam hydronics, etc.
- Lease: 5,400 sq. ft.: Office and warehouse, 1-acre storage yard, available for continued lease
- Reason for Selling: Exit strategy
- Employees: 21: 3 Directors, 4 Managers, 6 Journeymen, 6 Apprentices, 2 Administrative (There are 2 Master Plumbers)
- Hours: M-F: 8-5
- Seller Training Period: The owner is willing to stay on for a year
- Growth Opportunities: Implement annual service contract sales; Increase residential sales; Increase Federal work
- Current Owner’s Responsibilities: Estimation, business development and oversight
- List Price: $2,400,000
- Gross Sales:
- 2018: $3,101,318 Annualized
- 2017: $2,259,352
- Cash Flow:
- 2018: $755,340 Annualized
- 2017: $620,968
- Assets Included in Purchase*
- Equipment and Vehicles: $502,000
- Average Inventory: $80,000
- A/R: $67,000
- Intangible Assets: Secured contracts, long-term relationships with large brand customers, cohesive staff with great company culture, positive social media reviews, well-known in the area
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
January - November
|Net Income Shown on Financial Statement||$349,079||$364,632|
|Compensation to Owner||$55,719||$54,171|
|11% Tax on total W2 Salaries||$6,129||$5,959|
|Meals & Entertainment||$6,069||$7,332|
|Line Item 24||$0||$2,915||10% Personal|
|State (IA) Taxes||$84,140||$0|
|Seller's Cash Flow = Total Addbacks + Net Income||$692,395||$620,968|
|Profit Margin||24.36 %||27.48 %|
- Profit margin 2017: 27%
- Agricultural companies
- Property managers
- The State and Federal Government
- Single-family owned homes
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Service installation
- Agricultural projects
- Steam hydronics
- Chilled water lines
- Boiler servicing
- And much more!
Total Employees: 21
- 3 Directors
- 4 Managers
- 6 Journeymen
- 6 Apprentices
- 2 Administrative
There are 2 Master Plumbers
- Implement annual service contract sales
- Increase residential sales
- Increase Federal work
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 3.9. With this information, the computation is as follows:
$620,968 x 3.9 = $2,421,775
The fair market value found above positions the business list price at $2,400,000.
Purchase Price: $2,400,000
15% Buyer Down Payment: $360,000
10% Seller Financing: $240,000
75% Bank Loan: $1,800,000
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $4,474.
Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $23,655.
After business expenses and loan payments, a buyer with a 15% down payment of $360,000 would retain a profit of $283,421, which results in a 78% 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 $2,400,000 with the terms listed above, the coverage ratio is 1.84.
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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