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Opportunities

Plumbing with 80% Commercial Work

CASH FLOW
$755,340

Specifications

  • Price
    $2,250,000

  • Revenue
    $3,101,318

  • Profit Margin
    27%

  • Location
    Des Moines Area

  • Service Area
    Des Moines and the northern surrounding counties

  • Reason for Sale
    Exit strategy

  • Equipment
    $489,000

  • Inventory
    $80,000

  • Account Receivable
    $67,000

  • Lease
    5,400 sq. ft.: Office and warehouse, 1-acre storage yard, available for continued lease

  • Employees
    21: 3 Directors, 4 Managers, 6 Journeymen, 6 Apprentices, 2 Administrative (There are 2 Master Plumbers)

  • Intangible Assets
    Secured contracts, long-term relationships with large brand customers, cohesive staff with great company culture, positive social media reviews, well-known in the area, highly diversified client base

Long term contracts and $3,101,318 in sales located in the Des Moines area. With over $569,000 in assets, this team mainly works with commercial clients (80%) such as universities, property management companies, agricultural operations, as well as state and federal governmental entities.  They also provide some services to residential clients (20%).  About 10% of all services fall outside the typical contracted relationships in the northern surrounding counties.   Operating with a nimble team of 21, Master Plumbers and apprentices work together on projects such as service installation, agricultural projects, steam hydronics, chilled water lines, boiler servicing, and much more!

The 5,400 space is owned by the seller, but the space will be available for uninterrupted continued lease after the sale.   The building features an office with a large warehouse and a one-acre lot for storage.  

The owner currently manages the development of new business including estimations.  This owner has also developed a strong company culture, creating a close-knit atmosphere where apprentices can learn, individuals have the resources they need, and projects are matched to the best technician possible.  

Business Highlights

  • Year Established: 2003
  • Location:  Des Moines Area
  • Service Area: Des Moines and the northern surrounding counties
  • Clients: Commercial 80% including university, agricultural, property managers, and specialty work; Residential 20%
  • Services: General plumbing, service installation, agricultural plumbing, steam hydronics, etc.
  • Lease: 5,400 sq. ft.: Office and warehouse, 1-acre storage yard, available for continued lease
  • Reason for Selling: Exit strategy
  • Employees: 21: 3 Directors, 4 Managers, 6 Journeymen, 6 Apprentices, 2 Administrative (There are 2 Master Plumbers) 
  • Seller Training Period: 1-2 years
  • Growth Opportunities: Implement annual service contract sales; Increase residential sales; Increase Federal work
  • Current Owner’s Responsibilities:Estimation and oversight

Financial Highlights

  • List Price: $2,250,000
  • Gross Sales:
    • 2018: $3,101,318 
    • 2017: $2,259,352
  • Cash Flow:
    • 2018: $755,340 
    • 2017: $620,968
  • Assets Included in Purchase*
    • Equipment and Vehicles: $489,000
    • Average Inventory: $80,000
    • A/R: $67,000
    • Intangible Assets: Secured contracts, long-term relationships with large brand customers, cohesive staff with great company culture, positive social media reviews, well-known in the area

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - November
Tax ReturnNotes
20182017
GROSS SALES$2,842,875$2,259,352
Annualized$3,101,318
Net Income Shown on Financial Statement$349,079$364,632
ADDBACKS
Compensation to Owner$55,719$54,171
11% Tax on total W2 Salaries$6,129$5,959
Depreciation$4,936$172,591
Interest$4,247$5,487
Meals & Entertainment$6,069$7,332
Line Item 24$0$2,91510% Personal
Cell Phone$1,650$1,800$150/month
Auto$5,781$6,08110% Personal
Officer Dividends$64$0
Federal Taxes$174,581$0
State (IA) Taxes$84,140$0
TOTAL ADDBACKS$343,316$256,336
Seller's Cash Flow = Total Addbacks + Net Income$692,395$620,968
Annualized$692,395
Profit Margin24.36 %27.48 %
  • Profit margin: 24%

Typical Clients

Commercial: 80%

  • Universities
  • Agricultural companies
  • Property managers
  • Businesses
  • The State and Federal Government

Residential: 20%

  • Single-family owned homes

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

Services

  • Service installation
  • Agricultural projects
  • Steam hydronics
  • Chilled water lines
  • Boiler servicing
  • And much more!

Employees

Total Employees: 21

  • 3 Directors
  • 4 Managers
  • 6 Journeymen
  • 6 Apprentices
  • 2 Administrative

 

There are 2 Master Plumbers

Growth Opportunities

  • Implement annual service contract sales 
  • Increase residential sales 
  • Increase Federal work

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 2018 cash flow was used with a prescribed multiple is 3.1.  With this information, the computation is as follows:

$755,340         x          3.1       =          $2,341,554

The fair market value found above positions the business list price at $2,250,000.

Funding Example

Purchase Price:                        $2,250,000

12.5%Buyer Down Payment:  $281,250

12.5%Seller Financing:           $281,250

75%Bank Loan:                     $1,687,500

 

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $5,243.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $22,176.

After business expenses and loan payments, a buyer with a 12.5% down payment of $281,250 would retain a profit of $2291,934 which results in a 103% 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 $2,250,000 with the terms listed above, the coverage ratio is 1.89. 

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:

$2,250,000

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