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Concrete Pumping with Passive Owner

CASH FLOW
$1,206,178

Specifications

  • Price
    $6,700,000

  • Revenue
    $4,595,995

  • Cash Flow
    $1,206,178

  • Equipment
    $7,000,000

  • Location
    Toronto

  • Profit Margin
    26%

Current owner works only 10 hours a week! Offering superior concrete pumping services in Toronto, this company is well-positioned for maximizing their $7MM in assets to earn over $5MM last fiscal year.  This agile team of 17 operators and 3 office staff work efficiently on residential as well as commercial projects.  With the ability to work on projects from custom homes to 20-story high rises, this company is able to efficiently utilize their diverse client base to gain specialty as well as standard, reliable jobs.  Completing over 3,500 jobs, this company is consistently busy throughout the year. 

 

Currently, 55% of work is found in pumping concrete on residential home projects.  Working with large home builders as well as custom home builders, the residential market is the base of this company’s income.  Though pumping for many residential projects, this company also specializes in large-scale builds such as dams, solar farms, commercial properties, high rises, and remote projects. 

 

Capitalizing on long-term relationships with general contractors is a company strength, working directly with foremen to build trusting relationships that returns new work time and time again.  With a huge demand for pumps in rural areas, this is an area for potential growth as well as managing utilization and profitability with current assets and staff. 

Business Overview

Current owner works only 10 hours a week! Offering superior concrete pumping services in Toronto, this company is well-positioned for maximizing their $7MM in assets to earn over $5MM last fiscal year.  This agile team of 17 operators and 3 office staff work efficiently on residential as well as commercial projects.  With the ability to work on projects from custom homes to 20-story high rises, this company is able to efficiently utilize their diverse client base to gain specialty as well as standard, reliable jobs.  Completing over 3,500 jobs, this company is consistently busy throughout the year. 

 

Currently, 55% of work is found in pumping concrete on residential home projects.  Working with large home builders as well as custom home builders, the residential market is the base of this company’s income.  Though pumping for many residential projects, this company also specializes in large-scale builds such as dams, solar farms, commercial properties, high rises, and remote projects. 

 

Capitalizing on long-term relationships with general contractors is a company strength, working directly with foremen to build trusting relationships that returns new work time and time again.  With a huge demand for pumps in rural areas, this is an area for potential growth as well as managing utilization and profitability with current assets and staff. 

Business Highlights

  • Year Established: 1989
  • Location & Service Area:  Toronto
  • Clients:  General contractors, home builders
  • Services: Concrete pumping 
  • Projects:  Commercial (20%), single family residential (40%), custom homes (15%), specialized work (25%)
  • Building: 10k sq. ft.: Shared shop and office (this business occupies 2/3 of the shop and 1/3 of the office) Available for continued lease for 1-2 years
  • Reason for Selling: Focus on non-competing other businesses
  • Employees: 20: Dispatcher (1 FT), HR/Safety (1 FT), Accounting (1 PT), Mechanic (1 PT), Operators (17)
  • Hours: M-F 7-5
  • Seller Training Period: 1-2 years
  • Growth Opportunities: Expand service area northward, manage utilization and profitability, continue customer relationships to increase referrals
  • Current Owner’s Responsibilities:  Asset management, hiring, works only 10 hours a week and oversight

Financial Highlights

  • List Price: $6,700,000
  • Gross Sales:
    • 2018: $4,595,995
  • Assets Included in Purchase*
    • Equipment: ~$7,000,000: Pumps (17), trucks (2), placing boom pedestals (2), equipment
    • A/R:  $1.2MM
    • Pipeline:  $1MM
    • Intangible Assets: Well-established business, positive customer feedback, long-term relationships with customers, high-quality workmanship, knowledgeable team

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
Mar 2018 - Feb 2019
P&L Statement
Mar 2017 - Feb 2018
Notes
20182017
GROSS SALES$4,595,995$5,437,679
Net Income Shown on Financial Statement$1,004,970$904,018
ADDBACKS
Bank Charges$44,659$31,304
Interest$144,317$98,030
Amortization$0$388,799
Auto Expense$5,000$5,000$5K/year for personal auto expense
Cell Phone$1,200$1,200$100/month for personal line
Life Insurance$6,032$3,960$330/month for personal life insurance
TOTAL ADDBACKS$201,208$528,293
Seller's Cash Flow = Total Addbacks + Net Income$1,206,178$1,432,311
Profit Margin26.23 %26.34 %
  • 2018 Profit margin: 26%

Typical Clients and Services

Clients:

  • General contractors
  • Home builders

Services:

  • Concrete pumping and pump rentals
    • Commercial (20%)
    • Single family residential (40%)
    • Custom homes (15%)
    • Specialized work (25%)

Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

Employees

Employees: 20

  • Dispatcher (1 FT)
  • HR/Safety (1 FT)
  • Accounting (1 PT)
  • Mechanic (1 PT)
  • Operators (17)

Growth Opportunities

  • Expand service area northward

 

  • Manage utilization and profitability

 

  • Continue customer relationships to increase referrals

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 2 year average cash flow was used with a prescribed multiple is 5.07.  With this information, the computation is as follows:

$1,319,244      x          5.07     =          $6,688,567

The fair market value found above positions the business list price at $6,700,000.

Funding Example

Purchase Price:                              $6,700,000

15% Buyer Down Payment:   $1,005,000

   20% Seller Financing:            $1,340,000

   65% Bank Loan:                     $4,355,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $24,982.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $57,231.

After business expenses and loan payments, a buyer with a 15% down payment of $1,005,000 would retain a profit of $446,600, which results in a 44% 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 $6,700,000 with the terms listed above, the coverage ratio is 1.45. 

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. 

**The Firm Business Brokerage is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale of purchase of real estate**

Purchase Price:

$6,700,000

$
%
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:
2 Year Average Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2 Year Average 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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210 N 78th St. 2nd Floor
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The Firm Business Brokerage is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.