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Manufacturer of Commercial Door Hardware with 1.5M Profit

CASH FLOW
$1,562,160

Specifications

  • Price
    $7,989,000

  • Cash Flow
    $1,562,160

  • Revenue
    $4,906,915

  • Location
    Toronto

  • Service Area
    Canada

  • Profit Margin
    32%

  • Equipment
    $485,599

  • Employees
    25 – 30 FTE; 8 are in the office, the rest are in the factory. Company also works with sales reps located across 11 provinces

  • Inventory
    $490,442

What was once a home-based business has grown into a lucrative commercial door hardware company profiting $1.5M. Headquarted in Toronto, there are over 200 distributors across Canada and with the right infrastructure in place the business has great potential to move into the U.S. market and abroad.

The business supplies its products to government funded institutional projects such as hospitals, long-term care facilities and schools in addition to privately funded projects such as condos, hotels, restaurants and office buildings. Thousands of projects have been completed to date including Google, Marriott Hotels, Suncor Energy, Time-Warner and Walmart.

The business operates in a redesigned and renovated 22,000 square foot facility with approximately 10 employees in the office and 20 employees in the factory. The company also has sales reps across the 13 Canadian provinces and territories which adds another 20 employees to the team. The seller primarily manages sales and has a role in overseeing operations.

The company’s strong market presence and solid reputation offers a unique opportunity to take an established name and grow it to the next level. At a purchase price of just under $8M, a buyer would be receiving a 7-figure cash flowing operation.    

Business Highlights

  • Years in Business: 28
  • Location: Toronto
  • Service Area: Canada
  • Number of Clients: 200 distributors
  • Products: Kick plates, door stops, push bars, door pulls & pushes, coat hooks, closet rods and more
  • Lease: 22,000 sq. ft. (office & manufacturing) to be leased for $14,583/month
  • Reason for Selling: Retirement
  • Employees: 25 – 30 FTE; 8 are in the office, the rest are in the factory. Company also works with sales reps located across 11 provinces
  • Seller Training Period: 6 months
  • Growth Opportunities: Tap into U.S. market. No marketing has been done over the last decade. Product expansion (patch locks, locking door pulls).
  • Current Owner’s Responsibilities: Office and oversees management.

Financial Highlights

  •  List Price: $7,989,000
  • Gross Sales
    • 2016 - 2017: $4,906,915
    • 2015 - 2016: $4,872,052
    • 2014 - 2015: $4,192,685
  • Owner Profit/Cash Flow
    • 2016 - 2017: $1,562,160
    • 2015 - 2016: $1,633,484
    • 2014 - 2015: $1,131,800
  • YOY Growth/Sales Trends: 17% increase in sales over a 2-year period
  • Profit Margin: 32%
  • Assets Included in Purchase Price:
    • Equipment
      • Machinery - $407,819
      • Computers - $67,618
      • Furniture/Fixtures - $10,162
    • Inventory - $490,442
      • Finished Goods - $346,125
      • Raw Material - $54,777
      • Completed Orders - $29,503
      • Trade/Subs - $19,303
      • Miscellaneous - $40,734

*amounts may vary – equipment is replacement value

Cash Flow Analysis

Description of Financial StatementTax ReturnTax ReturnTax ReturnNotes
2016/20172015/20162014/2015
GROSS SALES$4,906,915$4,872,052$4,192,685
Net Income Shown on Financial Statement$704,904$727,189$513,403
ADDBACKS
Amortization$91,541$84,284$57,348Non-onward going expense
Interest$5,212$3,409$3,299Non-onward going expense
Meals & Entertainment$2,738$9,394$17,123Personal expenses
Vehicle Expense$39,065$50,755$58,91575% personal expenses
Travel$18,327$44,898$52,17775% personal expenses
Management Salaries$522,217$535,354$319,344Remainder outside of $75,000/year to Production Manager
Rent Adjustment$178,156$178,201$110,191Onward going rent of $175,000/year
TOTAL ADDBACKS$857,256$906,295$618,397
Seller's Cash Flow = Total Addbacks + Net Income$1,562,160$1,633,484$1,131,800
Profit Margin31.84 %33.53 %26.99 %

 

  • 32% profit margin during the fiscal year ending May 31, 2017
  • Sales grew by 17% over a 2-year period

Please note - these figures are in Canadian dollars

Products

  • Sales are split 50% custom / 50% “off the shelf”
  • To remain competitive, raw material is purchased, then finished in the company’s facility
  • Material is purchased from a selection of 5 – 10 suppliers
  • The factory houses thousands of stainless steel sheets, many of them measuring 48 x 105

Below is a small sampling of the hundreds of products offered: 

Door pull Glass door rose B/plate
Bar Rectangular pad Bumper bar
Plate pull Church pull Offset door pull
“C” pull “S” pull “L” bar
Flush bolt “T” strike Roller latch
Ball latch Grab bar Swing away bar
Lift up bar Straight bar/center support Flush pull
Hospital grip Edge guard Cabinet pull

Finishes

Steel
  • Primed for painting
  • Cadmium plated
  • Zinc plated bright
Bronze
  • Oxidized light and lacquered
  • Oxidized medium and lacquered
  • Oxidized dark and lacquered
Bright Brass (clear lacquered or no lacquer) Bright Bronze (clear lacquered or no lacquer)
Stainless Steel (bright or satin) Aluminum, anodized black
Satin Brass
  • Clear lacquered
  • Oxidized and relieved (Antiqued)
Satin Aluminum
  • Clear lacquered
  • Clear anodized
Bright or Satin Chromium Bright or Satin Nickel
Nickel Plated
  • Blackened
  • Matte relieved
  • Clear coated
Satin Bronze
  • Clear lacquered
  • No lacquer
  • Oxidized and oil rubbed

Customers

  • The company sells to about 200 distributors, many of whom are ordering products for their own stock
  • Most products end up in commercial businesses
    • Hospitals
    • Condos – there are many of these in Toronto
    • Schools
    • Restaurants
    • Small businesses
  • Customers are able to pick up their orders or have them shipped
    • There are is no delivery provided by the company

Growth Opportunities

  • Tap into U.S. market
    • Compared to the Canadian market, the U.S. space is 10x larger
    • The company has not had the resources to expand into the American market, but the demand is there
  • Marketing
    • Money has not been spent on marketing for many years, and a buyer could begin introducing those expenses again to increase the top line
  • Product expansion
    • Increase catalog with patch locks, locking door pulls or door viewers
  • Revamp website
    • Update company website to facilitate online sales

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:

2-Year Average 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.

With this information, the computation is as follows:

$1,597,822      x          5          =          $7,989,110

The Fair Market Value found above positions the business List Price at $7,989,000.

Funding Example

Purchase Price:                          $7,989,000

12.5% Buyer Down Payment:          $988,625

12.5% Seller Financing:                   $988,625

75% Bank Loan:                                $5,991,750

Seller Financing 7-year term at a rate of 4.5% equals a monthly loan payment of $13,881.

Bank Loan 9-year term at a rate of 5.25% equals a monthly loan payment of $69,734.

After business expenses and loan payments, a buyer with a 12.55% down payment of $988,625 would retain a profit of $558,785, a 55% 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 $7,989,000 with the terms listed above, the coverage ratio is 1.56. 

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:

$7,989,000

$
%
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:
2-Year Average Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2-Year Average 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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