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GSA & Public Works Aluminum Boat Manufacturer

CASH FLOW
$186,524

Specifications

  • Price
    $700,000

  • Cash Flow
    $186,524

  • Revenue
    $1,670,436

  • Equipment
    $360,788

  • Down Payment
    10%

  • Inventory
    $514,254

  • Location
    Eastern Iowa

  • Reason for Sale
    Retirement

  • Service Area
    Nationwide

For over 50 years, this custom aluminum boat manufacturer has been creating sought-after designs popular with government and state entities. The seller has just renewed a decades-long contract with the GSA, and continually receives orders from state entities, who have brought clients in from across the nation. Notable purchasers include the Army Corps of Engineers, Department of the Interior, the Bureau of Land Management, Georgia Power and Alabama Power.

Operating out of 2 buildings located in Eastern Iowa, there are 12 full-time employees working on the boats from start to finish. Flat sheets of aluminum are crafted into work boats, pontoons, fire/rescue boats and more. Seating is purchased, then embroidered and installed before the final product is delivered. When weather conditions are favorable, the boats are water-tested on the Mississippi. For inclement months, some testing can be completed indoors.

While the business has an established name and requested product, growth does exist in offering new lines for the private sector. A buyer should consider creating basic fishing boats and motor boats. The full-stocked showroom is set up for anything a boater would need, so adding new lines should fit well into the existing business model.

Business Highlights

  • Years in Business: Over 50
  • Location: Eastern Iowa
  • Service Area: Nationwide
  • Products: Aluminum boats – pontoons, work boats, fire/rescue, and more. Steel trailers. – Everything is custom.
  • Clients: 40% GSA / 40% State / 20% Private
  • Building: Office space & show room are in a 16,160-sq. ft. building, which also has a production area. Paint booth & open storage area in a 7,200-sq. ft. building on the same lot.
  • Reason for Selling: Retirement
  • Employees: 12 FT
  • Seller Training Period: 90 days
  • Growth Opportunities: Basic fishing boat line. Motor boat line.
  • Current Owner’s Responsibilities: Oversee operations, inventory, ordering, bids and light bookkeeping.

Financial Highlights

  • List Price: $700,000
  • Gross Sales:
    • 2017: $1,670,436 Annualized
    • 2016: $1,606,638
    • 2015: $1,726,711
    • 2014: $1,429,702
  • 2016 Cash Flow: $186,524
  • 2015 Cash Flow: $170,742
  • Profit Margin: 12%
  • Assets Included in Purchase Price:
    • Equipment: $360,788* – furniture, fixtures and equipment
    • Intangible Assets: Contracts, great product and name recognition in the industry
    • Inventory: $514,254 – raw material, motors, boating supplies
    • Work in Progress: $128,929

    *replacement value

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - July
Tax ReturnTax ReturnTax ReturnNotes
2017201620152014
GROSS SALES$974,421$1,606,638$1,726,711$1,429,702
Annualized$1,670,436
Net Income Shown on Financial Statement$50,860$101,111$127,198$50,935
ADDBACKS
Compensation to Owner$22,320$35,421$0$0
11% Tax on total W2 Salaries$2,455$3,896$0$0
Interest$499$13,871$17,034$22,459Non-onward going expense
Contributions/Donations$70$65$365$0Non-onward going expense
Depreciation$0$27,405$22,214$20,650Non-cash item
Meals & Entertainment$344$1,501$2,715$4,830Personal items run through the business
Auto-Personal Use$481$3,254$1,216$3,67120% personal
TOTAL ADDBACKS$26,169$85,413$43,544$51,610
Seller's Cash Flow = Total Addbacks + Net Income$77,029$186,524$170,742$102,545
Annualized$132,050
Profit Margin7.91 %11.61 %9.89 %7.17 %

 

  • The company spent time in 2016 streamlining fabrication and assembly as well as investing in plant facilities
  • Sales in 2017 are expected to outpace 2016 by 4%

Products

  • About 20 – 25 boats are built each year, ranging in price from $25,000 to $200,000.
    • It takes 2 1/2 weeks to complete a standard boat
    • Pontoons take 4 weeks
    • Larger boats (i.e., 45') take 6 - 8 weeks
  • Each boat is built to exacting custom specifications.
  • The hull and superstructure are hand crafted from high-quality aluminum and assembled.
  • Customized electrical installations support unique lighting, audio and instrumentation requirements.
  • A wide range of motor systems are accommodating with industry-leading support structures and factory-certified installation standards.
    • The company is a Mercury dealer, but will use whichever motor the customer wants. However, they do not sell Yamaha, as they would then be required to bulk purchase about 100 Yamaha motors per year, which run at a steeper price.
  • Upholstery for seating is fabricated and installed on site.
  • Each boat is tested on the Mississippi.
Work Boats
  • Styrofoam floatation
  • Front deck partially filled
  • Two flotation boxes in rear
  • Flat or V front
  • Flat or V bottom
Fire/Rescue Boats
  • Mercury outboard or jet drives
  • Flat or modified V front
  • 6-degree V bottom
  • Side boarding ladders
  • Roller or bunk drive on trailers
Trailers: boat, single, tandem, tri-axle, utility – all with or without brakes

 

 

  • Patrol boats
  • Water taxi
  • Pontoons
  • Trailers
  • Houseboats
  • Duck boats

 

Sales Analysis

  • 92% of sales are custom boat orders
  • In the past, some customers were able to trade in their boats, which the company would then refurbish as needed to resell
    • This is rarely done anymore, but could be a revenue stream to consider

Clients

  • GSA – 40% of revenue
    • Seller has just renewed this contract for another 5 years
    • Past projects have included:
      • Dump boat and trailer for Department of Interior
      • Pontoon barge work boat for the Army
      • Orders for the EPA and the Navy
    • Anything not included in the GSA specifics for a basic boat is charged extra (for example, dive tank holders)
  • State Governments – 40% of revenue
    • Clients come from across the nation, including New York, Arizona, Georgia, Minnesota and Nebraska
  • Private – 20% of revenue
    • Duck boats, pontoons, houseboats and custom trailers are popular with individuals
    • The showroom retails parts, such as bilge pumps, fire extinguishers, life preservers and more for just about any boating needs

Notable clients include:

  • Nebraska Game and Parks
  • Alabama Power
  • Dresden Nuclear Plant
  • Minnesota DNR, USACE
  • Bureau of Land Management in Arizona

Customization includes cranes, buoys, outfitting of boats for diving and electroshocking, and more.

Employees

12 full-time staff

  • 1 Mechanic
  • 1 in Painting/Vinyl Lining
  • 2 in Pontoons
  • 3 in Finishing
  • 1 in Hull
  • 1 in Trailer Framing/Finishing
  • 3 in Rigging

Employees build boats and trailers from the ground up, taking a flat aluminum sheet and crafting that to customer specifications. Seats are embroidered with the company logo, and the boat is painted as desired. Employees are also responsible for water testing the boats, using either nearby water sources or indoor testing equipment.

Growth Opportunities

  • Build up private clients
    • The business has been so busy with GSA contract work that there has not been a concerted effort to build up the private client base
    • Introduce a basic fishing boat line
    • Add a motor boat line
  • Improve website
    • Updating the website and SEO capabilities should drive more traffic to the company
  • Attend trade shows
    • Great way to meet industry contacts and to build up the private base

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.

For this business, the 2016 Cash Flow was used with a prescribed multiple of 3.75.  With this information, the computation is as follows:

$186,524         x          3.75     =          $699,465

The Fair Market Value found above positions the business List Price at $700,000.

Funding Example

Purchase Price:                           $700,000

10%Buyer Down Payment:           $70,000

10%Seller Financing:                   $70,000

80%Bank Loan:                          $560,000

Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $1,305.

Bank Loan 7-year term at a rate of 5.25% equals a monthly loan payment of $7,981.

After business expenses and loan payments, a buyer with a 10% down payment of $70,000 would retain a profit of $75,093, which results in an 107% 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 $700,000 with the terms listed above, the coverage ratio is 1.67. 

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:

$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:
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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