Placement Firm with Executive Recruiting
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 $87,076 in the first year after debts, representing a 141% return on investment.
- 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
- List Price: $617,000
- Gross Sales
- 2017 - $761,298
- 2016 - $779,621
- 2015 - $983,432
- Cash Flow
- 2017 - $173,062
- 2016 - $204,768
- Profit Margin: 23%
- Assets Included in Purchase:
- Equipment – standard office furniture, fixtures, hardware and software
- Intangibles – decades-old reputation for excellence; 95% repeat clientele
Cash Flow Analysis
|Description of Financial Statement||P&L Statement||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$45,107||$311,651||$216,590||$46,789|
|Compensation to Owner||$71,999||$49,300||$45,558||$99,385|
|11% Tax on total W2 Salaries||$7,920||$5,423||$5,011||$10,932|
|Interest||$9,516||$6,425||$17,515||$7,425||Non-onward going expense|
|Amortization||$37,455||$37,455||$37,455||$37,455||Non-onward going expense|
|401K for Owner||$1,000||$1,812||$1,680||$2,520|
|Meals & Entertainment||$65||$258||$399||$254||Personal expenses run through the business|
|Seller's Cash Flow = Total Addbacks + Net Income||$173,062||$412,423||$324,435||$204,768|
|Profit Margin||22.73 %||41.94 %||20.62 %||26.27 %|
- 23% profit margin in 2017
- Sales dropped in 2016 due to the loss of a recruiter who has since been replaced
- 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
- 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
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 2017 Cash Flow is $173,062. The prescribed multiplier is 3.5
With this information, the computation result follows:
$173,062 x 3.5 = $616,234
The List Price for the business is set at $617,000.
Funding Example, based on the following:
- Buyer down payment of 10% ($61,700)
- Seller carry of 10% ($1,700) at a rate of 4.5% for 7 years
- Bank loan of 80% ($493,600) at a rate of 5.25% for 8 years
- After loan payments, a buyer with a down payment of $61,700 would receive a return on investment of 141% 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.
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.
2017 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2017 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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