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Semi Mechanic Grossing $1MM+ w/ Exclusive Contracts

CASH FLOW
$145,613

Specifications

  • Price
    $485,000

  • Cash Flow
    $145,613

  • Revenue
    $1,145,962

  • Equipment
    $250,000

  • Intangible Assets
    Reputation - customers are word of mouth and come from 50-300 miles away

  • Inventory
    $290,000

  • Location
    South Central Nebraska

  • Down Payment
    10%

  • Service Area
    50-mi radius for day-to-day jobs, with clients from 300-mi radius

  • Reason for Sale
    Retirement

  • Lease
    $1,000

  • Employees
    3 FT skilled mechanics

Located in Nebraska, this semi repair business has been in operation for 23+ years, and consistently earns over $1M in sales.  Daily clients come from a 50-mile radius, and many from within 300 miles are served as well.  There are 3 local fleets with 200 semis between them that receive anywhere from daily maintenance to monthly or weekly checks.  Many of the customers are in the ag industry, and the company’s location close to an interstate and a highway are perfect for drawing in customers.

The company is located in a 4,000-sq. ft. space leased at $1,000/month.  3 full-time employees, all skilled mechanics, earn $20-$23/hour repairing semis and trailers for 500 active clients.  Labor charges are $80/hour plus parts, with the average ticket ranging between $500 to $600.  While the seller is somewhat involved in daily maintenance, the employees are able to handle the workload, and a new owner need not be as involved in mechanic work.

Included in the purchase is roughly $540,000 in assets, including brake supplies, airbags, suspension parts, and the software/equipment for Cummins trucks and Caterpillar motors.  The shop is full-service, with the exception of not completing major engine overhauls.  Customers are also able to purchase Rigguards and S-Cams through the business, and can stop in to purchase spare parts.

Currently there is no advertising done, and all new business is word of mouth.  Due to its prime location between two major thoroughfares, simply advertising along them with billboards would draw in new semi traffic for maintenance and recurrent repair work.

Business Highlights

  • Years in Business: 23+
  • Location and Service Area: 50-mile radius for day-to-day jobs, with a customer reach of 300-mi radius
  • Number of Clients: 500 active customers within a 300-mile radius; customers mostly repeat; handles all repairs on 3 nearby fleets with 200 trucks & 500 trailers between them
  • Lease: 4,000 sq. ft. leased at $1,000/month
  • Reason for Selling: Retirement
  • Employees: 3 FT – trained mechanics with 3-4 years’ employment paid $20-$23/hour
  • Seller Training Period: 90 days
  • Growth Opportunities: advertising – located between major interstate and highway that would be perfect for signage
  • Current Owner’s Responsibilities: Management and some mechanic work

Financial Highlights

  • List Price: $485,000
  • 2017 Gross Sales:  $1,145,962   *Sales a bit down due to dip in nationwide ag economy.
  • 2016 Gross Sales: $1,149,672   
  • 2015 Gross Sales: $1,246,418                      
  • 2017 Cash Flow: $136,637
  • 2016 Cash Flow: $147,444
  • $540,000 in Assets included in the purchase:
    • Equipment: $250,000 replacement cost
      • Tranny jacks
      • Clutch jacks
      • Seal drivers
      • Air stops
      • Huck guns
      • Software/equipment for Cummins trucks & Caterpillar motors
    • Inventory: $290,000 (cost before a 10-35% markup)
      • Brake parts
      • Airbags
      • Filters
      • Suspension parts
    • Vehicles (service trucks with service boxes)
      • 1997 Ford Super Duty (outfitted with a crane)
      • 1993 Dodge Ram
    • Intangible Assets: reputation – customers are word of mouth and come from 50 – 300 miles away

Cash Flow Analysis

Description of Financial StatementTax ReturnTax ReturnTax ReturnTax ReturnTax ReturnNotes
20172016201520142013
GROSS SALES$1,145,962$1,149,672$1,246,418$1,220,279$1,388,937
Net Income Shown on Financial Statement$54,975$65,810$83,513$93,885$136,928
ADDBACKS
Compensation to Owner$71,470$79,997$65,000$63,440$64,640
11% Tax on total W2 Salaries$7,862$8,800$7,150$6,978$7,110
Depreciation$1,411$4,286$7,526$9,407$13,820Non-cash item
Non-Business Telephone$1,200$1,200$1,200$1,200$1,200Personal lines at $100/month
Meals & Entertainment$4,179$4,463$4,280$3,997$3,68450% claimed on taxes are personal
Part-Time Bookkeeper$-15,000$-15,000$-15,000$-15,000$-15,000Cost to replace current bookkeeper (owner's wife)
Rent$10,027$-2,112$-996$-6,000$-4,596$1,000/mo onward-going rent
Interest$513$85$0$0$662
TOTAL ADDBACKS$81,662$81,719$69,160$64,022$71,520
Seller's Cash Flow = Total Addbacks + Net Income$136,637$147,529$152,673$157,907$208,448
Profit Margin11.92 %12.83 %12.25 %12.94 %15.01 %


  • Sales down a bit due to a nationwide dip in the ag economy.

Employees

  • Three skilled mechanics able to handle workload, from addressing air leaks to transmission repair
    • Pay ranges from $20/hour to $23/hour
    • Shop foreman is paid $23/hour and has been FT for 7 years
  • Current owner handles the administrative side of business, and while he does take an active role in repairs, a new owner need not be as full time in that area

Charges & Services

  • Customers are charged for labor and any parts needed for repair
  • Labor charges are $80/hour
    • The average ticket is between $500 - $600
  • Services range from oil changes to transmission repair
  • NOTE: no major engine overhaul is performed as there is not much demand for it
    • Factory warranty cannot be applied, as only major dealers can get warranties for engines
  • Roughly 5 to 6 repairs are completed per day with small jobs sprinkled in (anywhere from 3 to 20 per day)
  • Customers are able to stop by and purchase parts as needed
    • 20 to 40% of business is OTC parts
  • Ships Rigguards and S-Cams across Nebraska and several other states
  • Gross billable of $100K+ per month 

Typical Customer

  • Customer base is comprised mostly of semis and small fleets within a 50-mile radius, but some customers come from around 300 miles away
    • Services the lion share of customers in Nebraska
  • Majority of business is repeat and word-of-mouth referrals
  • Handles repairs for 3 nearby fleets with 200 trucks and 500 trailers between them
    • 1 fleet services 48 states & Canada
      • Ag hoppers
      • Services 365 days/year
    • 1 fleet is a local co-op with 50 trucks needing DOT work
      • Services constantly between December and March
    • 1 fleet serving the south & east
      • Services 4 to 5 times per month

Tools & Inventory

  • Equipment: $250,000 replacement cost
    • Tranny jacks
    • Clutch jacks
    • Seal drivers
    • Air stops
    • Huck guns
    • Software/equipment for Cummins trucks & Caterpillar motors
  • Inventory: $290,000 (cost before a 10-35% markup)
    • Brake parts
    • Airbags
    • Filters
    • Suspension parts

Earnings Analysis

  • Consistent YOY labor profits of 75%
  • 3-year average labor charges of $435,633, with 3-year profits of $328,020

  • 2016 profit margin of 14.8%, which is also the 3-year average profit margin for parts & shop

Growth Opportunities

  • Increase OTC sales
    • Clients are able to come in and purchase OTC parts & inventory, which makes up roughly 20-40% of sales
    • Increasing options and other retail products would be an extra revenue stream
  • Currently there is no advertising and new customers are word of mouth
    • The business is located between a major interstate and a state highway that would be ideal for signage to attract new customers
  • Major fleets such as Crete & Werner have contact the owner for service, but the owner has not wanted to accommodate the increase in work
    • Seller willing to share contact with these fleets to gain this business

Valuation

The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business.  The formula used is as follows:

2-Year Average Cash Flow    x          Multiplier          =          Price

“Cash flow” is the sum of net income plus any owner perks and non-onward going expenses.

“Multiplier” is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation (average is 3).

The 3-Year Average cash flow of 2015-2017 is $145,613.  The prescribed multiplier is 3.33.

With this information, the computation result follows:

$145,613         x          3.33     =          $484,891

The List Price is set at $485,000.

Funding Example

Purchase Price:                            $485,000

10% Buyer Down Payment:   $48,500

10% Seller Financing:                 $48,500

80% Bank Loan:                         $388,000

Seller Financing 5-year term at a rate of 4.5% equals a monthly loan payment of $904.

Bank Loan 7-year term at a rate of 6% equals a monthly loan payment of $5,668.

After business expenses and annual loan payments, a buyer would retain a profit of $57,769. A 10% down payment of $48,500 results in a 119% 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 $485,000 with the terms listed above, the coverage ratio is 1.73. 

 

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:

$485,000

$
%
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:
3-Year Average Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
3-Year Average 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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