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Fire Sale Absentee Plumbing Business

CASH FLOW
$289,686

Specifications

  • Price
    $420,000

  • Revenue
    $1,024,446

  • Cash Flow
    $289,686

  • Equipment
    $130,000

  • Location
    Central NE

  • Lease
    $750

  • Service Area
    200-mile radius from physical location

  • Reason for Sale
    Seller illness

  • Profit Margin
    23%

Due to the owner’s poor health, this seller is looking to move quickly.  One Master Plumber is ready and willing to step into a role as GM at this profitable Midwest plumbing business.  They are in a rapidly growing area of Central Nebraska with lots of expansion opportunities as companies move into town and need commercial plumbing buildouts.  Included in the sale of the business is $132K in assets, $65K from general equipment, and $65K from vehicles, along with $2K in fixtures and supplies.

 

Currently, the business has about 40 repeat service clients for home repairs and installations and works with several contractors for buildouts of shopping areas and other commercial units.  Bathroom remodels are a popular service as well and range in price from $2,000-$9,000 per job.  With two Master plumbers and 2 Apprentice plumbers, this business is set to take advantage of the many contracting opportunities arising in the area. 

 

They do work within a 200-mile radius of the physical location, so there is a wide range of customers being serviced.  Their services in these areas include commercial work, new construction, remodels, septic systems, sewer cleaning, and general plumbing service work.  A good area for growth would be to bid on more commercial and larger contracts within the growing community they service.

Business Highlights

  • Year Established:  2002
  • Location:  Central Nebraska 
  • Service Area:  200-mile service area
  • Clients:  40 repeat service clients; various commercial contracts
  • Services:  Home plumbing services, septic systems, remodels, installation, new residential, commercial, general service work, sewer cleaning
  • Building:  $750/month for 650 sq. ft. with office/reception area, storage, and 400 sq. ft. detached garage
  • Reason for Selling:  Seller illness
  • Employees:  2 masters (plus owner), 2 apprentice plumbers, 1 journeyman
  • Seller Training Period: 90 days
  • Growth Opportunities:  Bid on more commercial contracts in growing city
  • Current Owner’s Responsibilities:  Master plumber, bidding

Financial Highlights

  • List Price: $420,000
  • Gross Sales:
    • 2017: $1,024,446
    • 2016: $439,726
  • Cash Flow:
    • 2017: $289,686
  • Assets Included in Purchase*
    • Equipment: $65,000 - 3 12’enclosed trailers, 8’ open trailer with ramp, jackhammers, threading machine, pipe presses hammer drills, man lift, ladders and other miscellaneous tools
    • Vehicles: $65,000 - 2017 Nissan Titan with racks, 2017 Dodge ProMaster, 2016 Caterpillar Mini Excavator with trailer, 2011 Chevy Express ½ ton van, 1989 Ford F450 flatbed
    • Inventory: $2,000 - fixtures and supplies 
    • Intangible Assets:  Established reputation leads contractors to repeatedly seek for bids on large projects

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-Sept
Tax ReturnTax ReturnTax ReturnNotes
2018201720162015
GROSS SALES$684,767$1,024,446$439,726$162,827
Annualized$913,023
Net Income Shown on Financial Statement$112,069$216,809$149,121$26,886
ADDBACKS
Compensation to Owner$25,662$25,000$0$0
11% Tax on W2 Salaries$2,823$2,750$0$0
Depreciation$0$13,173$7,708$23,013
Interest$787$11,463$0$0
Health Insurance$12,443$16,591$16,591$16,591$1382.55/month for personal insurance
Meals & Entertainment$1,125$1,500$1,500$1,500$150/month for personal use
Cell Phone$1,800$2,400$2,400$2,400$200/month for personal cell phones
TOTAL ADDBACKS$44,640$72,877$28,199$43,504
Seller's Cash Flow = Total Addbacks + Net Income$156,709$289,686$177,320$70,390
Annualized$156,709
Profit Margin22.89 %28.28 %40.33 %43.22 %
.

Typical Clients

  • Contractors
  • Commercial builders
  • Home Owners

Services

  • Commercial work
  • New construction
  • Remodels
  • Septic systems
  • Sewer cleaning
  • General service work

Employees

  • 2 master plumbers (plus owner)
  • 2 apprentice plumbers
  • 1 journeyman

Growth Opportunities

A good area for growth would be to bid on more commercial and larger contracts within the growing community they service.

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          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, a 2017 cash flow was used with a prescribed multiple is 1.45.  With this information, the computation is as follows:

$289,686         x          1.45     =          $420,045

The fair market value found above positions the business list price at $420,000.

Funding Example

Purchase Price:                       $420,000

15% Buyer Down Payment:     $63,000

15% Seller Financing:               $63,000

70% Bank Loan:                      $294,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $1,175.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $3,864.

After business expenses and loan payments, a buyer with a 15% down payment of $63,000 would retain a profit of $229,229, which results in a 364% 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 $240,000 with the terms listed above, the coverage ratio is 4.79. 

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. 

**The Firm Business Brokerage is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.**

Purchase Price:

$420,000

$
%
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:
2017 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2017 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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The Firm Business Brokerage is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.