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Opportunities

Executive Recruiting & Placement

CASH FLOW
$204,768

Specifications

  • Price
    $970,000

  • Cash Flow
    $204,768

  • Revenue
    $779,621

  • Location
    Midwest

  • Down Payment
    10%

  • Reason for Sale
    Retirement planning

  • Intangible Assets
    Decades-old reputation and 95% repeat clientele

  • Employees
    6

  • Equipment
    Standard office furniture, fixtures, hardware and software

Specializing in management-level and professional candidates, this recruiting and placement company is located in the Midwest and has a decades-old reputation for excellence. Not a staffing or temp-to-hire organization, this business seeks out individuals with 3 or more years’ experience to fill skilled professional roles. Employees are sought for positions in accounting, IT, HR, sales management and more.

As its Midwest location is an ideal spot for many insurance and finance-related organizations, there is always a need for professional employees. Recruiting is handled by full-time recruiters paid by commission. While the seller does some minimal recruiting, his focus is mostly on the administrative side of the company.

This company has a strong, decades-old reputation, but  a buyer could grow the company by expanding the business’s footprint into larger markets. Opening up services to contract workers is another lucrative avenue, as well as seeking out more high-level IT contract work.

A buyer paying 10% down would recoup $69,588 in the first year after debts, representing a 71% return on investment.

Business Highlights

  • Years in Business: 30+
  • Location/Service Area: Midwest
  • Demographics: Candidates are management and executive-level individuals
  • Reason for Selling: Retirement planning
  • Employees: 6
  • Seller Training Period: 90 days
  • Growth Opportunities: Expand into contract work; build relationships with employers in larger markets; seek out high-level IT contract work
  • Current Owner’s Responsibilities: Seller focuses mostly on administrative work with some minimal recruitment

Financial Highlights

  • List Price: $970,000
  • Gross Sales
    • 2017 - $954,493 Annualized (18% increase from 2016)
    • 2016 - $779,621
    • 2015 - $983,432
  • 2016 Gross Sales: $779,621
  • 2015 Gross Sales: $983,432
  • Cash Flow
    • 2017 - $371,427 Annualized
    • 2016 - $204,768
    • 2015 - $412,423
    • 2014 - $324,435
  • YOY Sales Trends: Compared to 2016, sales in the first 7 months are already 53% stronger!
  • Profit Margin: 26%
  • Assets Included in Purchase:
    • Equipment – standard office furniture, fixtures, hardware and software
    • Intangibles – decades-old reputation for excellence; 95% repeat clientele

Please note that 2016 was an anomaly due to a recruiter leaving and the owner not having a replacement to immediately step in. This position has since been filled, and 2017 has already improved drastically and is expected to outpace last year by $174,872 (18%).

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - July
Tax ReturnTax ReturnTax ReturnNotes
2017201620152014
GROSS SALES$556,788$779,621$983,432$1,573,402
Annualized$954,493
Net Income Shown on Financial Statement$134,723$46,789$311,651$216,590
ADDBACKS
Compensation to Owner$42,115$99,385$49,300$45,558
11% Tax on total W2 Salaries$4,633$10,932$5,423$5,011
Depreciation$14,631$8$99$227Non-cash item
Interest$4,304$7,425$6,425$17,515Non-onward going expense
Amortization$15,606$37,455$37,455$37,455Non-onward going expense
401K for Owner$1,055$2,520$1,812$1,680
Meals & Entertainment$0$254$258$399Personal expenses run through the business
TOTAL ADDBACKS$82,344$157,979$100,772$107,845
Seller's Cash Flow = Total Addbacks + Net Income$217,067$204,768$412,423$324,435
Annualized
Profit Margin38.99 %26.27 %41.94 %20.62 %
  • 26% profit margin in 2016, with sales in 2017 already ahead by 53%
  • Sales dropped in 2016 due to the loss of a recruiter
    • A buyer focusing on recruiting could easily bring the numbers back up into the $1M range
    • On that same note, a buyer adding more recruiters would increase sales

Growth Opportunities

  • Expand into contract work
    • The current business model does not focus on temp or temp-to-hire placement, but breaking into this area is a lucrative path and could be easily achieved
  • Increase footprint in larger markets
    • These larger markets offer more employers seeking executive-level candidates
    • Furthermore, many medium to large companies find a recruiter they like and return again and again for services
  • Seek out more high-level IT contract work
    • IT jobs tend to be higher in pay and recruiting and placement of more high-level IT contract work would increase commissions

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 (average is 3).

The 2-Year Average Cash Flow is $288,097. The prescribed multiplier is 3.4

With this information, the computation result follows:

$288,097         x          3.4     =          $979,529

The List Price for the business is set at $970,000.

 

Funding Example, based on the following:

  • Buyer down payment of 10% ($97,000)
  • Seller carry of 10% ($97,000) at a rate of 4.5% for 7 years
  • Bank loan of 80% ($776,000) at a rate of 5.25% for 8 years
  • After loan payments, a buyer with a down payment of $97,000 would receive a return on investment of 71% 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:

$970,000

$
%
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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210 N 78th St. 2nd Floor
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