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Investigation & Consulting for A & E Firms

CASH FLOW
$401,142

Specifications

  • Price
    $1,720,000

  • Revenue
    $1,704,464

  • Account Receivable
    $360,000

  • Location
    Toronto, Ontario

  • Service Area
    1.5 hour radius of Toronto

  • Employees
    12: Engineer (10), Administrative (2)

  • Lease
    2,000 sq. ft.: office, co-working space, conference room, reception, refreshment station

  • Intangible Assets
    Very strong reputation, long-term client relationships, niche specializations, well-educated and highly knowledgeable team, few competitors, recognized and well-respected name

  • Equipment
    $193,969

Established in 1992, this owner works remotely six months per year and will stay on board for three years! The specialized niche this business has perfected is providing excellent building architectural and engineering investigation and consulting services.  This extremely knowledgeable team is made up of engineers, technologists, and administrative staff.  The owner/architect saw a gap in the market for thoughtful building assessments and this company expertly meets that need.  

Working with a diverse client base of building owners and management companies, these specialists examine and test structures in over fifty areas from water leakage to structural integrity.  A report is written after the investigation is complete and any areas of concern that present themselves are matched with suggested repairs or replacements.  This dynamic company also provides services to ensure that the right contractors are hired, the work is done to a high standard, and budgets are met.  

The majority of customers are multi-residential builders, building owners, and management companies.  Due to legislation in Ontario relating to condominiums, this business also does a lot of work with condominium corporations looking to utilize reserve fund studies, associated repairs and maintenance programs.  Additional areas of income are expert litigation support services as well as external teaching seminars and courses.  

Business Highlights

  • Year Established:  1992
  • Location and Service Area:  Toronto, Ontario
  • Services: Architectural and engineering investigation and consulting
  • Clients: Multi-residential housing builders, owners, and management companies, commercial properties, and institutions
  • Lease: 2,000 sq. ft.: office, co-working space, conference room, reception, refreshment station
  • Reason for Selling: Retirement planning
  • Employees: 12: Engineer (10), Administrative (2)
  • Seller Training Period: 2-3 years
  • Growth Opportunities: Expand reserve fund work, increase concrete diagnostics, implement maintenance contracts, refine sales and follow-ups
  • Current Owner’s Responsibilities: 6 months per year in Toronto and 6 months per year in Florida

Financial Highlights

  • List Price: $1,720,000
  • Gross Sales:
    • 2018: $1,704,464
    • 2017: $1,394,285
    • 2016: $1,452,376
  • Cash Flow:
    • 2018: $401,142
    • 2017: $357,840
  • Assets Included in Purchase*
  • Equipment: $193,969: Furniture, fixtures, computers, tools, specialized testing and diagnostic equipment
  • A/R: $360,000+
  • Intangible Assets: Very strong reputation, long-term client relationships, niche specializations, well-educated and highly knowledgeable team, few competitors, recognized and well-respected name

*amounts may vary

Cash Flow Analysis

Description of Financial StatementTax Return
Financial Statement
Tax Return
Financial Statement
Tax Return
Financial Statement
Tax Return
Financial Statement
Notes
2018201720162015
GROSS SALES$1,704,464$1,394,285$1,452,376$1,379,006
Net Income Shown on Financial Statement$150,236$130,617$119,768$372,720
ADDBACKS
Amortization$38,189$49,848$51,945$47,113
Compensation to Owner$180,000$180,000$165,446$33,600Owner
Other unrelated Salaries$120,000$120,000$109,380$21,900Owner's wife
Replacement Salary$-150,000$-150,000$-150,000$-150,000For owner onward going
Bad Debt$0$0$7,500$0One Time Expense
Auto-Personal Use$16,967$15,522$19,484$17,42750% Personal
Travel$19,997$18,293$22,962$20,54075% Personal
Cell Phone$2,400$2,400$2,400$2,400$200/month
Promotions$23,353$21,160$21,153$21,09050% Personal
TOTAL ADDBACKS$250,906$257,223$250,270$14,070
Seller's Cash Flow = Total Addbacks + Net Income$401,142$387,840$370,038$386,790
Profit Margin23.53 %27.82 %25.48 %28.05 %
.

Typical Clients

  • Multi-residential builders, building owners, contractors, and managers 
  • Institutions 
  • Commercial property owners

Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

Services

  • Architectural and engineering investigation and consulting 
  • Building Condition Assessments 
  • Reserve Fund Assessments 
  • Advanced repair and restoration planning and management 
  • Project management 
  • Outside educational classes

Employees

Total employees: 12

  • Engineers (10) 
  • Administrative (2) 
  • Architect (owner)

Growth Opportunities

  • Expand reserve fund work 
  • Increase concrete diagnostics 
  • Implement maintenance contracts 
  • Refine sales and follow-ups 
  • Add an architect to the team 
  • Add a designer to the team

Valuation Details

The Firm 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, the 2018 cash flow was used with a prescribed multiple is 4.35.  With this information, the computation is as follows:

$401,142         x          4.35     =          $1,744,967

The fair market value found above positions the business list price at $1,720,000.

Funding Example

Purchase Price:                          $1,720,000

15% Buyer Down Payment:      $258,000

20% Seller Financing:                $344,000

65% Bank Loan:                      $1,118,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $6,413.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $14,692.

After business expenses and loan payments, a buyer with a 15% down payment of $258,000 would retain a profit of $147,878, which results in an 57% 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 $1,720,000 with the terms listed above, the coverage ratio is 1.58. 

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:

$1,720,000

$
%
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:
2018 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2018 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
Omaha, NE 68114

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