Electrical Contractor w/ 4M in Upcoming Work
For over 40 years in western Pennsylvania, this electrical contractor has been servicing the area’s commercial and industrial businesses with new construction projects, design build engineer services and more. On staff are 30 full-time employees. The business has distinguished itself with on time and on budget completions, and has developed an outstanding apprentice program.
Offices and a warehouse are housed in a 15,000-sq. ft. facility with a loading dock and overhead doors.
Electrical services include electrical construction, design build services, electrical maintenance and more. Over half of revenue comes from construction jobs, with other services sharing the remaining mix. Please note that the in-house Engineer is qualified to obtain a Master Electrician’s license.
The company maintains steady work in the area, but growth opportunities are possible outside the existing 50-mile radius typically covered in the past. These include construction project opportunities in Pennsylvania, Ohio and New York, if current licensing is updated. As a long-standing Associated Builders & Contractors member, additional construction sales are available.
This business has 4M in upcoming work for 2018!
- Years in Business: Over 40
- Location: Western PA
- Service Area: Pennsylvania, Ohio, New York
- Clients: 100’s on a continual basis
- Services: Electrical construction (new & remodel), design build services, electrical maintenance, and energy
- Building: 15,000 sq. ft.
- Reason for Selling: Retirement
- Employees: 30
- Seller Training Period: Transition will last while Electrical Engineer obtains Master Electrician’s license
- Growth Opportunities: Electrical construction beyond a 50-mile radius. Development of current experience in special systems and services contracts.
- Current Owner’s Responsibilities: Sales & employee management. Seller is not an Electrical Engineer.
- List Price: $1,068,000
- Gross Sales:
- 2016 – 2017: $3,463,515
- 2015 – 2016: $3,010,156
- 2014 – 2015: $3,604,478
- Cash Flow:
- 2016 – 2017: $273,992
- 2015 – 2016: $142,168
- Sales Breakdown:
- Construction – 56%
- Commercial Service Work – 16%
- Energy/Residential Service Work – 28%
- Assets Included in the Purchase:
- Equipment: $164,875 – trailers, scissors lifts, ladders, scaffolding, drill units and more
- Vehicles: $62,500 – 9 Chevy Cargo Vans, 1 Ford Transit
- Inventory: $126,635
- A/R: $579,326
- Retainage Receivables: $87,876
- Upcoming: $2,615,000 Bids / $2,427,805 Contract / $520,600 Pending
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
|Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$142,881||$59,724||$-59,724|
|Compensation to Owner||$31,000||$31,000||$76,000|
|11% Tax on total W2 Salaries||$3,410||$3,410||$8,360|
|Wife's Work Package||$15,000||$15,000||$15,000||$15,000/year salary|
|Health & DDS Insurance||$3,871||$0||$0||$74.46/week x 52 weeks|
|Meals & Entertainment||$6,017||$3,528||$3,555||Personal expenses|
|Personal Club Membership||$3,784||$5,000||$5,000||Travel & Lodge Expense ($2,379/year + 5 months x $281)|
|Rent Adjustment||$6,000||$0||$0||$116,000 onward rent|
|Seller's Cash Flow = Total Addbacks + Net Income||$273,992||$142,168||$78,308|
|Profit Margin||7.91 %||4.72 %||2.17 %|
- Fiscal year runs August through July
- While sales were slightly higher during the 2014 – 2015 FY, net income was 139% higher during the 2016 – 2017 FY
- 2015 saw a drop in sales as a major customer retired
- Construction and project management for general contractors, architects, professional engineers, and building managers
- Past projects have included work with an imaging center, an elementary school, office buildings, and sports facilities
Design Build Services
- Electrical Engineering with Computer Aided Drafting
Service and Maintenance
- Service crews available 24/7
- Services include electrical maintenance, repairs, and installations.
- Special systems
- Customers have included major manufacturing concerns, colleges, and government agencies.
- Design, engineering, installation and support of voice/data structured cabling
- Certified with several manufacturers for Cat5, Cat5e, Cat6 and optical fiber solutions
- Leviton-certified installations and Hubbell-certified installations
- While currently a smaller part of the company’s income, special systems such as lighting controls,
fire alarm, security and entry access offer great potential due to higher percentage profit
- Over half of revenue is generated from construction jobs
- Construction and project management for general contractors, architects, professional engineers and building managers
- Lighting, producing 27% of income, aims to replace existing lighting systems through improving lighting levels and energy savings
|August – October 2017||August – October 2016|
|Income: $986,259||Income: $532,605|
|Net Income: $34,994||Net Income: ($60,831)|
- FY 2017 – 2018 is outshining 2016 – 2017 by an 85% increase in sales!
- 30 Employees
- Business Manager
- Operations Manager
- Warehouse Manager
- Warehouse Delivery person
- Electricians/Field Workers
- Electrical Engineer/Project Manager
- Project Manager
- Service Manager
The Firm Business Brokerage used a Cash Flow Valuation to determine the Purchase Price of a business.
The formula used is as follows:
2016 – 2017 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.
With this information, the computation is as follows:
$273,992 x 3.88 = $1,063,089
The Fair Market Value found above positions the business List Price at $1,063,000.
Purchase Price: $1,063,000
15% Buyer Down Payment: $159,450
10% Seller Financing: $106,300
75% Bank Loan: $797,250
Seller Financing 5-year term at a rate of 4.5% equals a monthly loan payment of $1,982.
Bank Loan 7-year term at a rate of 6% equals a monthly loan payment of $11,647.
After business expenses and loan payments, a buyer with a 15% down payment of $159,450 would retain a profit of $110,451, a 69% 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 $1,063,000 with the terms listed above, the coverage ratio is 1.68.
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.
2016 - 2017 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2016 - 2017 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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