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Staffing Company with 3 Locations

Sold

CASH FLOW
$187,569

Specifications

  • Price
    $654,000

  • Cash Flow
    $187,569

  • Revenue
    $2,875,688

  • Location
    Eastern Nebraska

  • Account Receivable
    $410,329

  • Intangible Assets
    Recognition and reputation

  • Equipment
    $26,000

  • Reason for Sale
    Retirement

  • Down Payment
    10%

Serving Eastern Nebraska for 24 years, this staffing company has over 100 contracts in several industries, and grosses nearly $3M in sales. With 3 offices roughly 1 hour apart, clients in light industrial, agriculture, warehousing and construction industries come to this company for temporary and direct hire employees. Positions range from landscaping and grain handlers, to retail positions and salesmen opportunities. Ideally situated across a populated area, this company is poised for continued growth.

As of June 2017, the company is currently working with 35 employers to place around 50 open positions. In addition to these clients, between 100 and 150 are contracted with the company for seasonal work as needed. Assisting clients and job seekers are 6 staffing specialists (2 in each location and 3 bilingual) screening, interviewing and placing candidates. In place is an Operations Manager to oversee each office, meet with clients and handle contracts. The seller also employs an Appointment Setter and a part-time Accountant.

In recent years, the seller has moved away from full-time operations management, and instead handles internal payroll, month end, quarterlies and deposits. (Please note, the seller no longer meets with clients.) Looking to retire, the seller will assist in transition for 90 days or longer, if needed.

A 10% down payment of $65,400 would profit $83,460 in the first year after debts. This represents a 127% return on investment.

Business Highlights

  • Year Established: 1993
  • Location and Service Area: 3 locations in Eastern Nebraska
  • Number of Clients: Currently staffing for 35 employers, with an additional 100-150 contracts
  • Industries: Light industrial, construction, food manufacturing and processing, recycling, agriculture, health insurance
  • Building: Location 1: 1,873 sq. ft.; Location 2: 1,150 sq. ft.; Location 3: 2,700 sq. ft.
  • Reason for Selling: Retirement planning
  • Seller Training Period: 90 days
  • Growth Opportunities: Expand into rural areas, list more skilled positions
  • Current Owner’s Responsibilities: Works out of one location handling internal payroll, month end, quarterlies, deposits and unemployment; seller no longer meets with clients

Financial Highlights

  • List Price: $654,000
  • 2016 Gross Sales: $2,875,688
  • 2015 Gross Sales: $1,369,378
  • 2016 Cash Flow: $187,569
  • $436,329 in assets included in the purchase:
    • $6,000 in Equipment – desks, chairs, printers, computers, phones, refrigerators, freezers, microwaves
    • $20,000 in-house server
    • $410,329 in A/R

Cash Flow Analysis

  • Company had a large workers comp claim in 2012 that increased the company’s voluntary workers comp rates
    • Seller has a Direct Hire branch that typically covers workers under the risk pool
    • As the rates increased, the seller did not move fast enough to transfer clients under the Staffing company to the Direct Hire branch to decrease expenses – this affected earnings into 2014
  • Seller has corrected this by partnering with Employer Solutions Staffing Group (ESSG)
    • ESSG handles day-to-day administrative duties
      • Workers’ compensation
      • Employee benefits
      • Payroll processing
      • HR services 

Customer Demographics

  • Currently, there are contracts with 35 employers actively seeking employees to fill roughly 50 open positions                                              
  • In addition, there are 100 to 150 active clients that ask for seasonal help when needed

Currently Open Positions Sampling                                                                                                                        

  • Truss Builder - $14.00+/hour
  • Fabrication Technician - $15 - $18/hour
  • Landscape Crew Member - $9.00+/hour
  • Fill-In Receptionist - $10.00/hour
  • IT/Software Programmer - $20.00/hour
  • Grain Handlers - $14.00 - $15.00/hour
  • Retail - $9.25/hour
  • Salesman - $30,000 to $90,000 salary

Industries

103 billed clients in 2016

 

  • Light Industrial
  • Agriculture
  • Food Processing and Manufacturing
  • Construction
  • Recycling
  • Accounting
  • Health Insurance
  • Warehouse and Distribution
  • Call Centers
  • Office/Clerical
  • General Labor

Top Earners

  • Light Industrial – top 2 producers brought in $907,636 in sales during 2016
  • Food Processing and Manufacturing – top 2 earners produced $268,264 in 2016 sales
  • Agriculture – top ag-based businesses produced $241,396 in 2016 sales

Services

  • Temporary Staffing
    • Vacation coverage
    • Leaves of absence
    • Seasonal support
    • Short and long-term projects
  • Temp-to-Hire
    • During trial period, employee works as temporary employee until the end of assignment
      • At that point, possible hiring is assessed
  • Direct Hire
    • No payment until right candidate is hired

Staffing Company manages all aspects of hiring, including:

  • Profiling of ideal candidate
  • Recruiting
  • Completion of telephone screens and in-person interviews
  • Assessment tests
    • Kenexa/Prove-It Assessment Testing
  • Background screening
    • E-Verify
  • Reference checks
  • Development and presentation of job offers

About ESSG - Earning & Rates

  • ESSG handles day-to-day “back office” administrative responsibilities for staffing companies
    • Payroll funding, workers’ compensation, employee benefits, payroll processing and HR services
  • One of the biggest challenges of workers’ compensation is maintaining competitive rates
    • By partnering with ESSG, a staffing company can reduce their rates and gain more clients

Example Rate and Earnings:

  • An employee is paid $10/hour
  • The employer is charged $15/hour
  • ESSG charges 1.15 times the hourly wage to cover wages and taxes

Hourly Wage  x  Cover Charge  =  Expense

10  x  1.15  =  11.50

Charge to Employer  -  Expense  =  Profit

15  -  11.50  =  3.50

  • As the cover charge for ESSG is included in the charge to the employer, the staffing company will profit $3.50/hour that an employee works in the above scenario
  • The seller tries to earn profits around the $3.50/hour range, ensuring that whatever is over the bill rate and ESSG’s charges is workable

Fast Placement Rates

  • Employee is paid $10/hour
  • Employer is charged $20/hour
  • In this example, the staffing company would earn $8.50/hour that an employee works under Fast Placement

Rates are dependent on the workers’ compensation rate, which is determined by the number of accidents times the State of Nebraska rate.

Rates are paid by the staffing company per $100 of payroll

  • For example, a rate of 1.08 would equate to $108 in workers’ comp expense for the staffing company to cover
    • Using the example above, an employer would be charged $14.30 to cover an employee earning $10/hour, with the staffing company still profiting $3.50 per working hour
    • Please note, a spike in the rate leads to fewer jobs being listed with the staffing company, as an employer would end up being overcharged to cover the staffing company’s workers’ comp rates

Job Seeker Process

  • Candidates apply for positions
    • Apply through company website or through job posting on Indeed and NE Works
    • Seller also uses college job boards and job fairs to recruit
    • Social media has become a large part of finding candidates, with the company becoming actively involved and posting jobs on Facebook and LinkedIn
  • After the initial screening, candidates provide references
  • Interviews are conducted, as well as assessment testing as needed per job requirements
  • Candidates also sign and complete administrative documents via eDocs
    • Set up of direct depositing, payroll cards, etc.

Employees

  • The seller currently has fully-staffed offices in each location
  • Each office has 2 Staffing Specialists, one of whom is also bilingual
    • Interviews candidates and handles onboarding
  • The seller also employs and Operations Manager to oversee all locations
    • Negotiates contracts, oversees offices, visits clients, handles training and evaluations
  • There is also a part-time accountant working 3 days/week handling preparation and sending of documentation to ESSG
  • An 1099-contracted appointment setter makes calls and sets up a majority of appointments
  • The seller mainly handles internal payroll, month end, quarterlies, depositing and getting unemployment verbiage to ESSG
    • The seller does not meet with clients any longer, leaving that up to the Operations Manager

Growth Opportunities

  • Expand into rural communities
    • Largely untapped market for many agriculture and smaller businesses that would be ideal for utilizing staffing companies for temporary/seasonal work
  • Increase community involvement
    • This can be achieved through local Facebook groups
    • Current owner has already started this and has even created informational videos regarding the staffing process
  • Market the Referral Program
    • Company currently uses a Referral Program that rewards a referring party with a gift card per number of hours the referred party works
  • List jobs in more skilled areas
    • CNC, welding, accounting, etc.
    • These positions are not only increasing in demand, but also have higher compensation

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          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. The average multiplier is 3.

The Cash Flow for 2016 is $187,569, and the prescribed multiplier is 3.5.

With this information, the computation result as follows:

$187,569         x          3.5       =          $656,491

The List Price for the business is set at $654,000.

Funding Example

Purchase Price:                       $654,000

10%Buyer Down Payment:     $65,400

10%Seller Financing:               $65,400

80%Bank Loan:                      $523,200

Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $1,219.

Bank Loan 7-year term at a rate of 5.25% equals a monthly loan payment of $7,456.

After business expenses and annual loan payments of $104,109, a buyer would retain a net operating income (profit) of $83,460.  A 10% down payment of $65,400 results in a 127% 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 $654,000 with the terms listed above, the coverage ratio is 1.8.  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.  

Click to download NDA form

Print, sign and send to:

210 N 78th St. 2nd Floor
Omaha, NE 68114

Or fax to:

f 402.939.0857

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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.