Repossession Company with Banking Clients
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.
- 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
- 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
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
|Tax Return||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$8,910||$5,433||$61,066||$-30,386||$-1,866|
|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|
|Interest||$1,960||$215||$0||$136||$26||Non-onward going expense|
|Subscriptions||$1,750||$3,000||$3,000||$3,000||$3,000||Non-onward going expense|
|Non-Business Telephone||$1,283||$2,200||$2,200||$2,200||$2,200||Personal cell payments|
|Insurance Premiums for Owners: Health, Life, Auto||$13,300||$22,800||$22,800||$22,800||$22,800||Owner's insurance premiums|
|Retirement Plan||$0||$4,057||$2,276||$12,070||$11,709||Owner's retirement plan|
|Auto-Personal Use||$3,500||$6,000||$6,000||$6,000||$6,000||Personal auto use|
|Seller's Cash Flow = Total Addbacks + Net Income||$65,931||$143,025||$172,835||$77,810||$121,935|
|Profit Margin||20.23 %||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 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
- 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
- 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
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.
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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