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Managed Services with 48k in Recurring Monthly Revenue

CASH FLOW
$213,517

Specifications

  • Price
    $980,000

  • Revenue
    $808,272

  • Equipment
    $4,806

  • Inventory
    $36,461

  • Location
    Council Bluffs, Iowa

  • Intangible Assets
    Excellent word-of-mouth referrals, long-term contracts, clients in varied industries

  • Employees
    Service Desk Manager (1), Lead Tech (1), Techs (3)

  • Profit Margin
    26%

  • Service Area
    Omaha and Council Bluffs, with some satellite services

An award-winning company, this growing small business is a reliable and knowledgeable IT provider for clients in the Omaha and Council Bluffs area.  With services based on the managed services model, their services are designed to be convenient and easy to manage for clients.  With a flat fee, a customer gets unlimited break/fix maintenance, after hours support, assistance with wireless systems, and continuous monitoring.  Modifications to equipment and new installations carry additional project labor charges.  This method of service delivery allows customers to breathe easy, knowing that their IT needs are fully covered by this provider at a recurring monthly rate they can accurately budget for. 

 

This business has invested considerable time and money developing tools to automate IT services for their clients.  It has dramatically reduced downtime for their clients, all while reducing labor expense for this business. 

For clients that do not have internal IT departments, this business can act as an extension of their company.  As a responsive provider, this business has taken all customer input and designed services that directly meet the needs of its clients.  They provide support for most devices including computers, tablets, laptops, and servers, and support both PC and Apple users.  Travel is limited to the Omaha and Council Bluffs area but most of the work can be done through remote access, providing the ability to support several satellite locations.  With clients in diverse fields, this business has pursued long-term stability with a proven track record of growth. 

Business Highlights

  • Year Established: 2010
  • Location:  Council Bluffs, IA
  • Service Area:  Omaha and Council Bluffs, with some satellite services
  • Services:  IT support
  • Building:  2,200 sq. ft.: office (1), conference room, open office area with 6 workstations, workbench, attached garage, break room
  • Reason for Selling:  Family Illness: The owner of this company has a child who needs significant medical support and intervention and he is looking to step away from an ownership position to be able to focus on the needs of his family at this time. 
  • Employees:  Service Desk Manager (1), Lead Tech (1), Techs (3)
  • Seller Training Period: 90 days transition
  • Growth Opportunities:  Advertise, lunch-and-learns, grow the team to increase capacity, increase hardware support services
  • Current Owner’s Responsibilities:  Office management and business development

Financial Highlights

  • List Price: $980,000
  • Gross Sales:
    • 2017: $808,272
    • 2016: $783,679
    • 2015: $701,169
    • 2014: $525,873
  • Cash Flow:
    • 2017: $213,517
    • 2016: $135,398
    • 2015: $135,309
    • 2014: $128,224
  • Assets Included in Purchase*
    • Equipment: $4,806:   Server, computer systems
    • Inventory: $36,461
    • A/R:  $31,733
    • Secured Monthly Revenue: $48,467
    • Intangible Assets: Excellent word-of-mouth referrals, long-term contracts, clients in varied industries

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnTax ReturnTax ReturnNotes
2017201620152014
GROSS SALES$806,272$783,679$701,169$525,873
Net Income Shown on Financial Statement$117,344$56,368$67,731$65,495
ADDBACKS
Compensation to Owner$53,770$42,079$45,080$53,580
11% Tax on total W2 Salaries$5,915$4,629$4,959$5,894
Interest$2,569$5,715$4,340$116
Meals & Entertainment$2,201$630$632$413
Depreciation$10,851$0$2,068$0
Insurance Premiums for Owners: Health$10,784$4,187$1,827$1,209
Personal Auto Expense$2,920$3,883$5,096$0
Owner's Retirement Plan$2,441$0$0$1,517
Moving Expense$0$0$3,576$0One time cost
Contributions/Donations$2,770$0$0$0
Non-Business Telephone$1,952$0$0$0
Building Expense$0$17,907$0$0One time cost for building items and enhancements
TOTAL ADDBACKS$96,173$79,030$67,578$62,729
Seller's Cash Flow = Total Addbacks + Net Income$213,517$135,398$135,309$128,224
Profit Margin26.48 %17.28 %19.30 %24.38 %
  • 53% growth from 2014-2017!

Typical Clients

  • Clients with minimum 10 workstations and 1 server ($500 monthly minimum)
  • Non-Profits
  • Law firms
  • Health care providers
  • Small / Medium Businesses

 

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

Services

  • Managed Services
    • Unlimited break/fix support
    • Continuous monitoring
    • System administration
    • Desktop support  
  • Data Back-up and Recovery
    • Cloud support
    • Back-up and disaster recovery 
  • Network Security 
  • IT consulting and strategy 
  • New hardware deployment 
  • Complete IT support

Employees

  • Service Desk Manager (1) 
  • Lead Tech (1) 
  • Techs (3)

Growth Opportunities

  • Advertise 
  • Lunch-and-learns to make connections in the community 
  • Grow the team to increase capacity 
  • Increase hardware support services

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

$213,517         x          4.6       =          $982,178

The Fair Market Value found above positions the business List Price at $980,000.

Funding Example

Purchase Price:                             $980,000

15% Buyer Down Payment:          $147,000

15% Seller Financing:                   $147,000

70% Bank Loan:                             $686,000

Seller Financing 6-year term at a rate of 4% equals a monthly loan payment of $2,300.

Bank Loan 8-year term at a rate of 5.75% equals a monthly loan payment of $8,932.

After business expenses and loan payments, a buyer with a 15% down payment of $147,000 would retain a profit of $78,738, which results in a 54% 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 $980,000 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:

$980,000

$
%
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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