Plumbing with 80% Commercial Work
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.
- 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
- 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 Statement||P&L Statement|
January - November
|Net Income Shown on Financial Statement||$349,079||$364,632|
|Compensation to Owner||$55,719||$54,171|
|11% Tax on total W2 Salaries||$6,129||$5,959|
|Meals & Entertainment||$6,069||$7,332|
|Line Item 24||$0||$2,915||10% Personal|
|State (IA) Taxes||$84,140||$0|
|Seller's Cash Flow = Total Addbacks + Net Income||$692,395||$620,968|
|Profit Margin||24.36 %||27.48 %|
- Profit margin: 24%
- Agricultural companies
- Property managers
- The State and Federal Government
- Single-family owned homes
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Service installation
- Agricultural projects
- Steam hydronics
- Chilled water lines
- Boiler servicing
- And much more!
Total Employees: 21
- 3 Directors
- 4 Managers
- 6 Journeymen
- 6 Apprentices
- 2 Administrative
There are 2 Master Plumbers
- Implement annual service contract sales
- Increase residential sales
- Increase Federal work
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.
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.
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: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
2018 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2018 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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