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Furniture Dealer with 6M+ in Sales

CASH FLOW
$547,381

Specifications

  • Price
    $1,775,000

  • Revenue
    $6,399,583

  • Location
    Kansas City

  • Equipment
    $22,840

  • Account Receivable
    $1,608,549

  • Reason for Sale
    Retirement

  • Lease
    $5,700

  • Intangible Assets
    Great reputation, great results, ongoing contracts

  • Employees
    8 FT – Sales, Design & Project Management. Installation and delivery is contracted out.

Strong contracts in place and no inventory to manage have allowed this office furniture dealer to steadily grow year after year. Gross sales increased by 32% between 2015 and 2016, and 2017 is expected to stay strong. With an edge in healthcare-based office solutions, the company has furbished many hospitals in Kansas and Missouri. Even so, they are growing in demand for educational organizations and corporate offices.

A successful sales team is in place and has helped the company expand into areas outside of Kansas City. Utilizing TeamDesign software, sales personnel are able to work in the office or remotely. While the sales team handles much of the design and space planning aspects, there is a full-time Designer on staff to ensure layout and design are accurate and suitable.

Growth exists in increasing Project Management services. The seller has seen an increase in consultations for clients’ project managing needs, and continuing to market this service should produce a nice revenue stream. Also, as corporate clients are becoming a larger part of sales, seeking out these customers is another path to consider.

In operation for 13 years, this company continues to grow every year, and has built a great reputation with great results. This is a wonderful chance to take an already successful company to the next level!

Business Highlights

  • Years in Business: 13
  • Location: Kansas City
  • Service Area: 70% in Kansas City / 30% in Northeastern Kansas. Occasionally, some work in rural Missouri healthcare.
  • Client Demographics: 50% Healthcare-based, 30% Education, 20% Corporate
  • Building: 4,500-sq. ft. for office space and showroom
  • Reason for Selling: Retirement
  • Employees: 8 FT – Sales, Design & Project Management. Installation and delivery is contracted out.
  • Growth Opportunities: Grow corporate clients. Increase Project Management services/consulting.
  • Current Owner’s Responsibilities: Seller oversees finances and contracts, but DOES NOT design or project manage.

Financial Highlights

  • List Price: $1,775,000
  • Gross Sales
    • 2018: $1,811,451
    • 2017: $6,399,583
    • 2016: $5,680,534
    • 2015: $4,281,324
    • 2014: $3,645,252
  • Owner Profit/Cash Flow
    • 2018: $214,349
    • 2018 Annualized: $643,047
    • 2017: $547,381
    • 2016: $359,393
    • 2015: $225,448
  • YOY Growth Trends: 76% increase from 2014 to 2017!
  • Assets included in the purchase:
    • Equipment: $22,840 – software (AutoCAD, 2020, TeamDesign), furniture, fixtures
    • Intangible Assets: Great reputation, great results, ongoing contracts
    • A/R: $1,142,810
    • WIP: $128,125
    • Customer Deposits: $465,739

*amounts may vary

2017 Financials

  • 2017 Gross Sales - $6,399,583
  • Delivery and Installation are contracted out to manufacturer-approved installers.
  • Seller oversees financials, and handles contracts and pricing. The seller does not do any designing or project managing and has a skilled sales staff in place that has helped to grow the company into new markets.

 

From the Seller:

Today, we have a backlog of $1.8M.  Those are orders in-house waiting for shipment and installation. We have never had a cancellation of any order placed.

We finished 2017 strong, and with the current orders, 2018 will be even better.

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-April
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
20182017201620152014
GROSS SALES$1,811,451$6,399,583$5,680,534$4,281,324$3,645,252
Annualized
Net Income Shown on Financial Statement$196,321$498,481$155,963$36,130$53,742
ADDBACKS
Compensation to Owner$0$0$176,920$137,080$200,288Line Item 10 - Guaranteed Payments
W-2 Salary$0$10,500$5,280$22,880$0Owner's W-2 salary
Meals & Entertainment$3,740$5,736$3,647$8,423$2,502Personal expenses run through the business
Depreciation$381$14,105$425$2,477$7,801Non-cash item
Interest$3,291$8,018$13,058$14,358$16,090Non-onward going expense
Contributions/Donations$9,250$6,441$0$0$0Non-onward going expense
Cell Phone$700$2,100$2,100$2,100$2,100$175/mo for personal cell phone
Personal Auto$666$2,000$2,000$2,000$2,000Mileage reimbursements
TOTAL ADDBACKS$18,028$48,900$203,430$189,318$230,781
Seller's Cash Flow = Total Addbacks + Net Income$214,349$547,381$359,393$225,448$284,523
Annualized
Profit Margin11.83 %8.55 %6.33 %5.27 %7.81 %

  • Between 2014 and 2017, sales increased by 76%

Products

Desking
  • L-Shaped
 
  • Corner
 
  • Reception
 
  • Computer
 
  • Home office
 
Tables
  • Conference
 
  • Multipurpose
Workstations
  • Panel-based office solutions
 
Seating
  • Executive
 
  • Conference
 
  • Work/task chairs
 
  • Stools
 
  • Guest chairs
 
  • Lounge

The company purchased product from over 50 manufacturers.  Top manufacturers include but are not limited to:

HON National Office Furniture Carolina Gunlocke Workrite Stylex
  • 90% of project orders are customized
  • It takes between 4 to 8 weeks from order placement to delivery. As most orders have customized aspects, the manufacturers make the products to order.
    • Due to this, the seller does not keep inventory in stock
    • There is showroom space with product samples. These are provided by the manufacturers at minimal cost to the company, either at 50 – 60% off or through funding.
    • For 2017 the showroom expense has been $7,688
      • Every 2 to 3 years, the showroom has a major refresh with the workstations torn down, and the layout redesigned and redone

Software

  • AutoCAD
  • 2020
  • TeamDesign

AutoCAD and 2020 are used by the Project Manager, the Designer and Sales staff to help in space planning.

All employees utilize TeamDesign, which tracks projects from proposal through to billing. TeamDesign also allows for remote working as needed.

Clients

The majority of clients are in the Kansas City metro area. However, do to the company’s contracts, about 30% of jobs occur in northeastern Kansas outside of the metro. Jobs also take place in some rural Missouri communities, most of these involving healthcare organizations.

Top Client Industries:

  • Healthcare – 50% of income
    • Assisted living
    • Hospice
    • Medical offices
    • Hospitals
  • Education – 30% of income
    • K - 12
    • Higher education
  • Corporate – 20% of income
    • Systems furniture needs
    • Growing need for smaller to mid-size companies (great growth opportunity)

A smaller portion of income comes from GSA. Many of the company’s vendors are on a GSA schedule, but GSA contracts tend to be sporadic.

Company has good contracts with large organizations.

Sales Analysis

  • Furniture sales are 89% of income
  • Delivery and installation are contracted out, but still contribute 11% to sales
  • While Design and Project Management fees are a fraction of income, the seller expects to see that rise to between $17,000 - $20,000 within the next year
    • That would be between 280% and 349% increase from where those fees sit as of August 2017
    • This is growing in interest and demand with clients and should prove to be a great area for growth

  • Sales have increased by 56% between 2014 and 2016
  • 2017 was $5,666,744– 13% above gross sales in 2016

Employee Information

There is a total of 8 on staff, all full-time.

  • Sales (6)
    • 4 in Sales with 2 in Sales Support
    • 1 of the Sales personnel works remotely and has developed the company’s presence in northeastern Kansas outside of the Kansas City metro
    • Sales team members (and all employees) work with TeamDesign software, enabling them to work remotely if needed 
  • 1 Project Manager
    • Space planning and design
    • Product specifications
    • Some clients seek out the Project Manager to assist them in design without purchasing furniture from the company
      • A fee is charged to the client for consultation, and this is projected to gross nearly $20,000 within the next year 
  • 1 Designer
    • Office interior design and space planning
    • Ensures specifications and layouts are accurate and feasible
    • Like the Project Manager, some clients require design help without necessarily purchasing product from the company
      • This could be an area of growth by charging clients consultative fees

Growth Opportunities

  • Grow corporate client base
    • Corporate office services comprise 20% of sales
    • Great opportunity to work with smaller to mid-sized businesses
    • Company has existing relationships with many in the Architecture & Design industry that can be tapped to source more corporate projects


  • Market Project Managing and Design consulting/services
    • Some clients desire just consulting services to assist in remodels or redesigns
    • Offering these services is a great way to boost income without incurring COGS expenses

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 3.25.  With this information, the computation is as follows:

$547,381         x          3.25     =          $1,778,988

The Fair Market Value found above positions the business List Price at $1,775,000.

Funding Example

Purchase Price:                          $1,775,000

12.5%Buyer Down Payment:       $221,875

12.5%Seller Financing:                $221,875

75%Bank Loan:                          $1,331,250

Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $4,126.

Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $17,495.

After business expenses and loan payments, a buyer with a 12.5% down payment of $221,875 would retain a profit of $287,810, which results in a 130% 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 $1,775,000 with the terms listed above, the coverage ratio is 2.11. 

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:

$1,775,000

$
%
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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