Nationwide Commercial Electrical Maintenance with 250 Employees
- Year Established: 1989
- Location: Headquarters is in Colorado
- Service Area: Nationwide service and satellite locations in 35 states, with 8 office locations, and 30 warehouses
- Clients: Large retail and commercial businesses
- Services: Preventative maintenance, on-demand service, retrofits, re-lamps, and special projects
- Main Headquarters: 2 sets of offices in the same complex, conference rooms, 1,000 sq. ft. warehouse
- Reason for Selling: Retirement
- Employees: 250+ across the country
- Seller Training Period: 90 days transition
- Growth Opportunities: Expand client base or industries served
- Current Owner’s Responsibilities: Mostly absentee owner, 5-10 hours/week, Oversight
- List Price: $5,500,000
- Gross Sales:
- 2017: $36,688,876
- 2016: $45,797,211
- 2015: $42,263,413
- 2014: $34,480,550
- Cash Flow:
- 2017: $1,533,343
- 2016: $1,920,706
- 2015: $2,629,957
- 2014: $1,993,976
- Assets Included in Purchase*
- Machinery and Equipment: $207,615: scissor lifts, boom lifts, tools, etc.
- Furniture and Fixtures: $23,378: 60 locations, 8 offices, 30 warehouse locations, 3 headquarters
- Vehicles: $4,864,588: 200 trucks
- Inventory: $4,768,870
- A/R: $3,445,785
- Intangible Assets: Long and successful history of providing exceptional service to customers, well-respected name in the industry, positive long-standing relationships with clients
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||Tax Return||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$1,184,020||$1,545,889||$2,110,024||$1,250,460|
|Compensation to Owner||$86,234||$70,128||$74,512||$72,641||Non-active owner|
|Auto Expense||$14,815||$0||$0||$0||Personal expense|
|Seller's Cash Flow = Total Addbacks + Net Income||$1,533,343||$1,920,706||$2,629,957||$1,993,976|
|Profit Margin||4.18 %||4.19 %||6.22 %||5.78 %|
- Large retailers
- Home improvement stores
- Grocery Stores
- Clothing retailers
- Home goods retailers
- Pet retailers
- Large commercial clients
- Production floors
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Preventative maintenance (28%)
- On-demand service (32%)
- Retrofits (10%)
- Re-lamps (18%)
- Special projects (11%)
- 250 employees across the country
- Vice Presidents (3)
- Directors (7)
- Journeyman Electricians
- *Owner is not active
- Expand client base
- o Hospitals
- o Distribution centers
- o Universities
- o Arenas
- o Event centers
- Expand industries served
- Expand labor-only contracts
- Continue LED retrofits and expand in the “green” market
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.
Justification for the multiple includes:
- Nearly 30 years in business
- More than 250 skilled employees
- 1.5MM – 2.5MM in cash flow
- Owner is passive, 5-10 hours per week
- 13MM in assets included with the sale*
- Seller willing to do 30% earn out to show good faith
- Contract work orders through 2021
*amounts may vary
For this business, a 2017 Cash Flow was used with a prescribed multiple is 3.59. With this information, the computation is as follows:
$1,533,343 x 3.59 = $8,740,055
The Fair Market Value found above positions the business List Price at $5,500,000.
Purchase Price: $5,500,000
Buyer Equity Financing: $1,000,000
Seller Earn Out: $1,100,000
Bank Loan: $3,400,000
Equity financing: $1,000,000 for 20%
Payment within 30 days from accepted offer
Earn out will be based on performance.
Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $20,507.
Bank Loan 10-year term at a rate of 6% equals a monthly loan payment of $37,747.
After business expenses and loan payments, a buyer with a down payment of $1,000,000 would retain a profit of $834,291, which results in an 83% 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 $5,500,000 with the terms listed above, the coverage ratio is 2.19.
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.
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