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Repossession Company with Banking Clients

CASH FLOW
$143,025

Specifications

  • Price
    $275,000

  • Revenue
    $629,155

  • Cash Flow
    $143,025

  • Location
    Omaha

  • Equipment
    $296,305

  • Profit Margin
    23%

  • Lease
    1,200-sq. ft. office space, with outside storage lot for 60 vehicles

  • Service Area
    100-mile radius - Nebraska, Iowa, South Dakota

  • Employees
    1 Office Manager, 1 PT Truck Mechanic, 1 Spotter, 2 Field Agents. Seller also works with a network of subcontractors.

 

For over 30 years, this repossession business has worked with lending institutions to recover, transport and remarket vehicles. Located in Omaha and servicing a 100-mile radius across Nebraska, Iowa and South Dakota, this company is fully staffed with room to grow. Open accounts currently sit at 234, with services comprising voluntary & involuntary repossessions, skip tracing, secure storage and locksmith needs.

The business operates out of a 1,200-sq. ft. office space, with an outside storage lot capable of accommodating 60 vehicles. The seller is looking to retire, but has a full staff in place, including an Office Manager, 1 PT Truck Mechanic, 1 Spotter and 2 Field Agents. To cover outlying service areas, the seller works with a network of subcontractors to assist with repossessions.

Growth exists through working with forwarding companies, who are a major player in the repossession game. A buyer should also consider increasing locksmith services and hiring an Office Assistant to help with the Office Manager’s workload.  This is a great chance to join a growing business in an in-demand market.

 

Business Highlights

  • Year Established: 1984
  • Location: Omaha
  • Service Area: 100-mi radius - Nebraska, Iowa, South Dakota
  • Number of Clients: 234 open accounts with 161 lending institutions. Many clients are found through trade groups.
  • Services: Voluntary & involuntary repossessions, skip tracing, secure storage, locksmith services
  • Building: 1,200-sq. ft. office space, with outside storage lot for 60 vehicles
  • Reason for Selling: Retirement
  • Employees: 1 Office Manager, 1 PT Truck Mechanic, 1 Spotter, 2 Field Agents. Seller also works with a network of subcontractors.
  • Seller Training Period: 90 days
  • Growth Opportunities: Work with forwarding companies. Increase locksmith services. Hire an Office Assistant to help Office Manager’s workload.
  • Current Owner’s Responsibilities: Employee management

Financial Highlights

  • List Price: $275,000
  • Gross Sales
    • 2018: $325,877 Jan-July
    • 2017: $629,155
    • 2016: $713,389
    • 2015: $393,321
  • Owner Profit/Cash Flow
    • 2018: $65,931 Jan-July
    • 2017: $143,025
    • 2016: $172,835
    • 2015: $77,810
  • Profit Margin: 23%
  • Assets Included in Purchase: $296,305
    • Equipment: $47,163 - Magnum Wheel Lift, dollies, office furniture, fixtures and equipment
    • Vehicles:  $249,142 – Bobcat, 4 trucks, repo equipment
    • Intangible Assets: Excellent reputation, client relationships and CFBP certification

 *replacement value

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-July
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
20182017201620152014
GROSS SALES$325,877$629,155$713,389$393,321$364,967
Net Income Shown on Financial Statement$8,910$5,433$61,066$-30,386$-1,866
ADDBACKS
Compensation to Owner$29,169$66,629$56,524$41,236$59,566
11% Tax on total W2 Salaries$3,209$7,329$6,218$4,536$6,552
Depreciation$0$20,562$10,009$10,379$11,032Non-cash item
Interest$1,960$215$0$136$26Non-onward going expense
Subscriptions$1,750$3,000$3,000$3,000$3,000Non-onward going expense
Non-Business Telephone$1,283$2,200$2,200$2,200$2,200Personal cell payments
Insurance Premiums for Owners: Health, Life, Auto$13,300$22,800$22,800$22,800$22,800Owner's insurance premiums
Retirement Plan$0$4,057$2,276$12,070$11,709Owner's retirement plan
Travel$2,800$4,800$2,742$5,839$916Personal travel
Auto-Personal Use$3,500$6,000$6,000$6,000$6,000Personal auto use
Contributions/Donations$50$0$0$0$0
TOTAL ADDBACKS$57,021$137,592$111,769$108,196$123,801
Seller's Cash Flow = Total Addbacks + Net Income$65,931$143,025$172,835$77,810$121,935
Profit Margin20.23 %22.73 %24.23 %19.78 %33.40 %
  • 23% profit margin in 2017
  • Business had a contract with a major lender that was not renewed in 2017
    • This lender chose to work only with forwarding companies, and a buyer could regain much of this work by working with forwarding companies

Credentials & Affiliations

 

Company is CFPB (Consumer Financial Protection Bureau) compliant through 2 trade groups. Compliance includes lot and office inspections, among other things. Obtaining this compliance is a huge advantage and provides great credibility to the company. 

Clients

  • Company works with roughly 160 local and national lenders
    • American Heritage Bank
    • Coastal Credit
    • Four Points Federal Credit Union
    • Pinnacle Bank
    • And more!
  • There are currently 234 open accounts
  • Lenders pay different rates for involuntary and voluntary repossessions
    • For example, $350 vs. $250
  • In most cases, the company will charge the debtor a redemption fee and a storage fee 

Employees

  • 1 FT Office Manager
    • Handles invoicing, A/R, A/P, payroll and account management
  • 1 PT Truck Mechanic
  • 1 Spotter
  • 2 Field Agents
    • 1 is paid on commission, the other is salaried

Subcontractors – used for assignments outside of the company’s 100-mile service radius

  • 4 in western Nebraska
  • 1 in Iowa
  • 3 in South Dakota

Growth Opportunities

  • Work with forwarding companies
    • Forwarding companies control 70% of the market and present huge income opportunities
    • A buyer choosing to work with forwarding companies needs to be secure mileage reimbursement or close out fees to ensure profitability
    • Many large lending institutions work mostly with forwarding companies
  • More remarketing
    • Auctions and sales of vehicles with expired leases
  • Increase locksmith services
    • The seller has not had time to expand this service and has mostly subcontracted them out
    • Consider offering key cutting and transponder key services

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 3-year average Cash Flow was used with a prescribed multiple is 2.1.  With this information, the computation is as follows:

$131,223         x          2.1       =          $275,568

The Fair Market Value found above positions the business List Price at $275,000.

Funding Example

Purchase Price:                                   $275,000

10% Buyer Down Payment:                  $27,500

10% Seller Financing:                           $27,500

80% Bank Loan:                                   $220,000

Seller Financing 5-year term at a rate of 4.5% equals a monthly loan payment of $513.

Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $2,891.

After business expenses and loan payments, a buyer with a 10% down payment of $27,500 would retain a profit of $102,179, a 372% 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 $275,000 with the terms listed above, the coverage ratio is 3.5. 

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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