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Medical Instrument Manufacturer & Distributor

CASH FLOW
$493,872

Specifications

  • Price
    $2,200,000

  • Revenue
    $2,516,508

  • Inventory
    $600,000

  • Location
    Miami, Florida

  • Service Area
    International customers

  • Intangible Assets
    Positive reputation, responsive to the needs of the customers, innovative, export to countries with fewer regulations

  • Employees
    Sales (3), Shipping and testing (1)

  • Profit Margin
    20%

  • Reason for Sale
    Retirement

This company is a leader in precision manufacturing of laser welded HD endoscopes and other surgical equipment.  An innovative manufacturer and distributor of endoscopes and related equipment, this business develops and distributes several hundred products worldwide.  Specializing in minimally invasive surgical equipment, these endoscopes and hand instruments are used in the areas of urology, arthroscopy, laparoscopy, otorhinolaryngology, gynecology, and gastroenterology.  

 

Built upon the fundamental perspective of being highly responsive to customer needs, client feedback is vital to the growth of this business.  The ability to work with the manufacturer to tweak their instruments to improve the usability as well as the effectiveness is imperative to building superior products as well as brand-loyalty.

 

Currently sales are focused in Latin America, though this company has sold products worldwide.  With an emphasis in expanding into the US and Canadian markets, a new buyer could potentially increase sales. 

 

The current owner attends to business development and financial management and the duties could be assumed by the new owner. 

Business Highlights

  • Year Established: 1995
  • Location:  Miami, Florida
  • Service Area:   International customers
  • Products: Endoscopes: rigid, semi rigid, flexible Fields: Urology, arthroscopy, laparoscopy, ENT, etc.
  • Number of Clients:  5,000 past and current clients
  • Building:  4,500 sq. ft., designed for this company, 5 offices, showroom/warehouse with 4 workstations, shipping and receiving with rolling door and ramp   
  • Reason for Selling:   Retirement
  • Employees:  Sales (3), Shipping and testing (1), all are bilingual
  • Seller Training Period: 90 days transition
  • Growth Opportunities:  Expand US market, expand into countries outside of current focus
  • Current Owner’s Responsibilities:  Business development, financial management, passive working 10-15 hours/week

Financial Highlights

  • List Price: $2,200,000
  • Gross Sales:
    • 2017: $2,516,508
    • 2016: $2,506,784
  • Cash Flow:
    • 2017: $493,872
    • 2016: $385,471
  • Assets Included in Purchase*
    • Equipment: Device testing equipment
    • Inventory: $600,000 in devices
    • Intangible Assets:  Positive reputation, responsive to the needs of the customers, innovative, export to some countries with fewer regulations

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnNotes
20172016
GROSS SALES$2,516,508$2,506,784
Net Income Shown on Financial Statement$88,901$-47,467
ADDBACKS
Compensation to Owner$260,431$275,818
11% Tax on total W2 Salaries$28,647$30,340
Insurance Premiums for Owners: Health$23,388$21,642
Owner's Pension$34,461$34,461
Auto-Personal Use$16,137$17,468
Meals & Entertainment$6,518$4,911
Interest$11,529$20,314
Depreciation$19,278$16,390
Amortization$982$982
Non-Business Telephone$3,600$3,6003 lines at $300/month
Consulting Fee$0$7,012Non-onward going expense
TOTAL ADDBACKS$404,971$432,938
Seller's Cash Flow = Total Addbacks + Net Income$493,872$385,471
Profit Margin19.63 %15.38 %
  • Profit margin 20% for 2017
  • Profit margin 15% for 2016

Typical Clients

  • Surgeons
  • Medical equipment distributors
  • Owners of hospitals
  • Owners of medical clinics

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

Representative Products

  • HD endoscopes
  • Ureteroscopes
  • Nephroscopes
  • Arthroscopic endoscopes
  • Resectoscopes
  • Video systems
  • Orthopedic power equipment
  • Flexible, semi-rigid, and rigid instruments
  • And many more!

Employees

  • Sales
    • 3 full-time employees

 

  • Shipping and testing
    • 1 full-time employee

Growth Opportunities

  • Expand US market

 

  • Expand into countries outside of current focus

 

  • Continue to expand product line

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

$493,872         x          4.46     =          $2,202,669

The Fair Market Value found above positions the business List Price at $3,200,000.

Funding Example

Purchase Price:                          $2,200,000

10% Buyer Down Payment:          $220,000

15% Seller Financing:                   $330,000

75% Bank Loan:                          $1,650,000

Seller Financing 6-year term at a rate of 4% equals a monthly loan payment of $5,163.

Bank Loan 8-year term at a rate of 5.75% equals a monthly loan payment of $21,483.

After business expenses and loan payments, a buyer with a 10% down payment of $220,000 would retain a profit of $174,120, which results in a 79% 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 $2,200,000 with the terms listed above, the coverage ratio is 1.54. 

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:

$2,200,000

$
%
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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