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Opportunities

Corporate Office Furniture & Space Planning

CASH FLOW
$1,608,021

Specifications

  • Price
    $3,066,000

  • Cash Flow
    $1,608,021

  • Revenue
    $11,917,831

  • Equipment
    $163,479

  • Down Payment
    12.5%

  • Inventory
    $250,000

  • Location
    Kansas City

  • Account Receivable
    $459,281

  • Reason for Sale
    Retirement planning

  • Service Area
    Regionally and nationwide

  • Employees
    21

  • Intangible Assets
    Outstanding name, repeat clientele and industry contacts

For nearly 30 years, this Kansas City-based corporate office furniture and space planning business has made a name for itself as a “go-to” for aesthetic and functional office design. Offices and a showroom are in a standalone, 18,000-sq. ft. space. While some inventory is kept there, the bulk of over $250,000 worth of inventory is housed in the company’s separate 30,000-sq. ft. warehouse.

Projects vary in size from $1,200 to the low to mid 6-figures. Many customers buy on a regular basis, contributing to $1,000,000-worth of monthly business that the company sees. The business is not set up for consumer retail transactions, and positions itself as a service dealership for corporate companies. Adding a consumer retail division is a growth area to consider

Contracted workers handle delivery and installation of pieces, and the company has warehouse staff for quality assurance. The owner works about 25 hours/week on recruiting and reviewing financials and booked sales. A staff of 21 allows him to take significant time away from the business if desired.

This is an excellent business with an outstanding reputation and repeat clientele. No immediate growth is needed to ensure steady sales and profits, as the company is a well-oiled machine. An ambitious buyer could take the business and expand in any number of ways.

Business Highlights

  • Years in Business: Nearly 30
  • Location: Kansas City
  • Service Area: 60% Kansas City / 40% Other – regionally and nationwide
  • Client Industries: Tech/software, legal, corporate insurance, banking/finance, and healthcare/pharmaceutical
  • Services: New, used and custom office furniture; space planning; project management
  • Building: 18,000-sq. ft. office/showroom, and a separate 30,000-sq. ft. warehouse
  • Reason for Selling: Retirement planning
  • Employees: 21
  • Hours: 8am to 5pm, Monday - Friday
  • Seller Training Period: 90 days
  • Growth Opportunities: Add a retail office division. Increase used office furniture offerings.
  • Current Owner’s Responsibilities: 25 hours/week - recruiting, review of financials and booked sales. Seller is able to take significant time away from the business.

Financial Highlights

  • List Price: $3,066,000
  • 2017 Gross Sales Annualized: $11,917,831
  • 2016 Gross Sales of $11,016,757
  • 2017 Cash Flow: $1,608,021
  • 2016 Cash Flow of $653,361
  • Assets included in the purchase:                   
    • Equipment: $163,479 in computers, software (Giza), equipment, office furniture and warehouse equipment
    • Intangible Assets: Outstanding name, repeat clientele and industry contacts.
    • Inventory: $250,000+ net in warehouse & showroom inventory.
    • A/R: $459,281

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - October
Tax ReturnNotes
20172016
GROSS SALES$9,931,526$11,016,757
Annualized$11,917,831
Net Income Shown on Financial Statement$1,356,259$549,920
ADDBACKS
Compensation to Owner$46,538$55,000
11% Tax on total W2 Salaries$5,119$6,050
Interest$1,494$2,347Non-onward going expense
Depreciation$37,609$6,987Non-cash item
Contributions/Donations$32,385$0Non-onward going expense
Meals & Entertainment$8,602$9,487Personal expenses run through the business
Auto-Personal Use$5,657$10,935Owner's auto expenses run through the business
Non-Business Telephone$1,780$2,1361 line at $178/month
Travel$2,013$2,81420% personal travel expenses
Warehouse Expense$35,565$45,7972nd whse no long used - not onward going
Warehouse Labor$75,000$150,000Will get W2's to prove 3 Laborers no longer needed
Other Income$0$-110,445Sale of second company sold in 2016
Sublease$0$-77,667Non-onward going expense
TOTAL ADDBACKS$251,762$103,441
Seller's Cash Flow = Total Addbacks + Net Income$1,608,021$653,361
Annualized$1,929,625
Profit Margin16.19 %5.93 %

 

  • Sales are on track to outpace 2016 by 8%

Clients

Top 5 Client Industries

  • Tech/Software
  • Legal
  • Corporate Insurance
  • Banking/Finance
  • Healthcare/Pharmaceutical

Jobs are split 60% Kansas City / 40% Elsewhere

 

Many clients that have Kansas City offices will ask this company to help furnish their locations in other cities. Additionally, many out-of-town jobs are referral based.

 

Many customers buy on a regular basis.

Company does $1M worth of business per month.

  • Projects can range from small $1,200 - $2,600 tickets to low to mid 6-figures.
    • Most projects settle in the lower 6-figure range.
  • The company is not a bid house, and positions itself as a service-base dealership and does not market itself to the retail sector.
  • Bulk of sales comes from open office selections
    • Work stations, desking solutions and seating

Inventory

Over $250,000 worth of inventory is housed between the showroom and warehouse.

 

  • 30,000-sq. ft. warehouse
    • “tall hat” – can stack inventory
  • As the manufacturing industry is now more capable to produce and ship faster, furnishing companies no longer need to keep as much stock
    • The seller likes to work with regional and Midwestern manufacturers for lower cost and for a greener footprint
    • Many American companies that moved factories oversees are trending toward bringing those back to the U.S.
  • Business aims to position itself with the inventory volume and resources necessary to meet the needs of any contract furnishing customer
  • Additionally, a company needs to have the right inventory volume to maintain manufacturing relationships and manufacturing prices
  • Most projects have some customization aspect, and the majority of inventory is ordered for specific client needs
  • There is some inventory maintained for emergency needs and impulsive purchases
  • Factory stocking programs are utilized – specific numbers of desk units, seating, filing, etc.
    • Options are changed frequently to keep flexibility
  • Some used inventory is available
    • Most clients that come in for used inventory end up purchasing brand new pieces

Dealer Brands

  • As is typical in the contract furniture industry, this company tries to give 90% of its business to less than 10 manufacturers
  • The remainder are utilized for specific needs

 

Top 10 Brands:

Allsteel HON
Express Office Furniture Global
RSI Humanscale
Enwork OFS
Gunlocke Herman Miller

 

Sales Analysis

  • New Product consists of very custom orders to factory stocking program orders. Anything sold that is not in the company’s stock is part of the New Product sales line item.
  • Service Sales include delivery and installation that is broken out of sales tickets, as well as labor only tickets.

Employee Information

  • 10 Sales staff
    • 8 FT, 2 in training
    • Product specifications
    • Space planning
    • Duties sometimes overlap with Project Managers
  • Warehouse (5)
    • 1 Warehouse Manager
      • Oversees warehouse staff
      • Handles warehouse product sales
      • Sources used products
    • 1 part-time & 3 full-time warehouse workers
  • Delivery & Installation
    • Contract labor sources
    • Largest contractor operates out of warehouse, but does not work for this company
  • Full-time Designer
    • Another designer is starting by the end of October
    • Office interior design
    • Space planning
    • AutoCAD
  • 3 Project Managers
    • 2 FT, 1 PT working 2 days per week
    • Space planning and design
    • Product specifications
    • Some Sales staff and Project Manager duties cross over
  • 2 Office personnel
    • General administrative duties
    • A/R, A/P

Employees are full-time unless otherwise stated.

Seller works 25 hours per week, handles recruiting and reviews financials and booked sales. Seller is able to take significant time away from the business.

Growth Opportunities

  • Add a retail office division
    • The business does not operate for retail transactions, but offering an outlet of sorts for home offices would provide new customer traffic
    • This would capture home office clients looking for high-end pieces that cannot be found in the likes of Staples, etc.
  • Increase used office furniture offerings
    • While many clients that come in for used furniture end up purchasing new pieces, this is also a great way to increase the client base
    • The Warehouse Manager has been a good source for finding used furniture

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          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. The average multiplier is 3.

The 2-Year Average Cash Flow is $1,130,691, and the prescribed multiplier is 2.71.

With this information, the computation result as follows:

$1,130,691      x          2.71     =          $3,064,172

The List Price for the business is $3,066,000.

Funding Example

Purchase Price:                    $3,066,000

12.5%Buyer Down Payment: $383,250

12.5%Seller Financing:         $383,250

75%Bank Loan:                   $2,299,500

Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $7,145.

Bank Loan 7-year term at a rate of 5.50% equals a monthly loan payment of $33,044.

After business expenses and annual loan payments of $482,266, a buyer would retain a net operating income (profit) of $171,095.  A 12.5% down payment of $383,250 results in a 44% return on investment in the first year.

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:

$3,066,000

$
%
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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