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Technology Development & Consulting Firm

CASH FLOW
$852,863

Specifications

  • Price
    $2,600,000

  • Cash Flow
    $852,863

  • Revenue
    $5,852,783

  • Location
    Atlanta

  • Valuation
    $2,627,829

  • Service Area
    Mostly Atlanta, but some nationwide

  • Account Receivable
    $450,788

  • Employees
    40 – Recruiting/Sales, Resource Manager, 2 in Billing/Payroll; about 35-40 Software & Aerospace Engineers (some W2, some 1099)

  • Intangible Assets
    Relationships, reputation, contacts

Located in Atlanta, this technology development and consulting firm has Fortune 500 clients focused in the high tech and aerospace industries. Specializing in placing skilled engineers on site to build custom applications and software, notable clients have included 3M, Intel, Gulfstream, Scientific Games and more. The seller is currently working on securing contracts in the defense arena that should prove to be a great growth opportunity.

Having made a name for itself over the past 25 years, the company continues to grow and now works with between 35 – 40 engineers on nationwide projects. However, the majority of clients require service in the Atlanta area. Engineers will travel where the client needs them, including oversees, which occurs roughly 5% of the time.

Growth exists in bidding more contracts. The seller had a large infrastructure build contract in 2015 that bumped gross sales to over $7M. Seeking out more of those opportunities, as well as government contracts, will provide great income streams. 

Business Highlights

  • Years in Business: 25
  • Location and Service Area: Atlanta
  • Services: Software development, PLM software, software configuration management, software QA/testing, telephony engineering
  • Industries: High Tech, Aerospace, Manufacturing, Media & Information Services, Telecommunications, Healthcare, Defense
  • Lease: Small office space is rented – employees are able to work from home but come into the office 2 to 3 days per week
  • Reason for Selling: Retirement
  • Employees: 40 – Recruiting/Sales, Resource Manager, 2 in Billing/Payroll; about 35-40 Software & Aerospace Engineers (some W2, some 1099)
  • Seller Training Period: Negotiable
  • Growth Opportunities: Bid more contracts
  • Current Owner’s Responsibilities: Manages accounts, employee oversight, oversees financials.

Financial Highlights

  • List Price: $2,600,000
  • Gross Sales:
    • 2017 - $5,021,533 Annualized
    • 2016 - $5,852,783
    • 2015 - $7,238,047*
    • 2014 - $4,979,256 
  • Cash Flow:
    • 2017 - $583,356 Annualized
    • 2016 - $852,863
    • 2015 - $492,578
    • 2014 - $446,262 
  • Assets Included in Purchase:
    • Equipment: Office furniture and fixtures
    • Intangible Assets: Relationships, reputation, contacts
    • A/R: $450,788

*2015 Gross Sales were higher to due assisting a client with infrastructure building – when that was complete, ongoing service was minimal

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - October
Tax ReturnTax ReturnTax ReturnNotes
2017201620152014
GROSS SALES$4,184,611$5,852,783$7,238,047$4,979,256
Annualized$5,021,533
Net Income Shown on Financial Statement$432,131$794,850$386,575$445,960
ADDBACKS
Charitable Contributions$13,581$0$0$0Seller contributions
Personal Expense$0$0$48,000$0Seller's retirement expenses
Meals & Entertainment$458$293$283$3025% personal
Compensation to Owner$36,000$52,000$52,000$0
11% Tax on total W2 Salaries$3,960$5,720$5,720$0
TOTAL ADDBACKS$53,999$58,013$106,003$302
Seller's Cash Flow = Total Addbacks + Net Income$486,130$852,863$492,578$446,262
Annualized$583,356
Profit Margin11.62 %14.57 %6.81 %8.96 %

 

  • While sales were back down from an all-time high, 2016 had a 73% increase in Cash Flow

Industries

  • High tech
  • Aerospace
  • Manufacturing
  • Media & information services
  • Telecommunications
  • Healthcare
  • Defense

While capable of working in many industries, the majority of clients come from the high tech and aerospace arenas.

The seller is also working on a defense contract that should prove to be a growing revenue stream.

Clients

  • Notable clients include:
    • CSC
    • Scientific Games
    • Gulfstream
    • Intel
    • 3M
    • Toyota Boshoku
    • Ogletree Deakins
    • General Dynamics
    • Mission Systems
  • Government and aerospace projects can last for a significant period of time (3 to 7 years)
  • Most clients require work for 1 year
  • Invoices turn around every 2 weeks

Software Services

Software Development

  • Analysis, Design, Development, Testing, C#, ASP.Net, C, C++, Java/J2ee, webMethods, SAP, Oracle-EBS, EDI, XML, mobile platform development, UNIX/Linux, Windows, Oracle, SQL Server.

PLM Software

  • Product Lifecycle Management Solutions: Catia, SmarTeam, Enovia, Matrixone and Teamcenter.

Software Configuration Management

  • CM Assessment, Recommendation and Implementation of CM Tool sets, ClearCase/ClearQuest, Harvest, Serena.

Software Quality Assurance/Testing

  • Software Quality Assurance, writing of test cases and test plans, analysis and implementation of automated test tools.

Telephony Engineering

  • Asterisk VoIP v1.4-1.6. Dialogic voice, fax, and T1/E1/ISDN cards; Aculab ISDN-PRI E1/T1 telephony cards; VoIP with hardware (Dialogic and Aculab) and software SIP/H.323

Consulting Services

Product Development

  • From idea to design to proof-of-concept (POC) to production

Custom Application Development

  • Custom-built to client specifications using three-stage engagement methodology

Software Quality and Testing

  • Measure or test for compliance or effectiveness

Employees

  • Talent Acquisition
    • Recruiting and sales
  • Resource Manager
    • Onboarding
  • Billing & Payroll (2)
  • 35 – 40 Engineers
    • Mix of W2 employees and 1099 contractors
    • Average salary is $130,000
    • Software Engineers and Aerospace Engineers

Seller manages accounts and customers; ensures service requests are delivered; oversees relocation, worksite and reimbursement needs; oversees financials and runs monthly reports.

Employees that aren’t on site are capable of working from home and in the company office.

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 (average is 3).

The 3-Year Average Cash Flow for 2014, 2015, & 2016 is $597,234. The prescribed multiplier is 4.4

With this information, the computation result follows:

$597,234         x          4.4       =          $2,627,829

 

The List Price for the business is set at $2,600,000.

Growth Opportunities

  • Hire more employees
    • A buyer should consider hiring more skilled employees to take on more contract bids
    • While the figures most likely will fall into the six figures, higher paid employees capturing more contracts should still profit nicely
  • Bid more contracts
    • The seller is currently securing a contract with a defense company
    • Seeking out more contracts in many industries would help to diversify income streams

Funding Example

Purchase Price:                    $2,600,000

15%Buyer Down Payment:   $390,000

10%Seller Financing:             $260,000

75%Bank Loan:                   $1,950,000

Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $4,847.

Bank Loan 7-year term at a rate of 5.25% equals a monthly loan payment of $27,791.

After business expenses and loan payments, a buyer with a 15% down payment of $390,000 would retain a profit of $461,208, which results in a 118% 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 $2,600,000 with the terms listed above, the coverage ratio is 2.18. 

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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