Telecommunications Planning, Design, and Integration w/ 47% Margin
As premier consultants in the planning, design, implementation and systems integration of public and private telecommunications networks, this firm is continually growing into new spaces and building a loyal client base. The knowledgeable and well-trained staff specialize in fiber optic networks, data communications, radio systems and Wi-Fi, control center systems, SCADA, Positive Train Control (PTC), Communication Based Train Control (CBTC), real-time passenger information systems with GPS, public address systems, and telephone/call center systems. With the ability to work in both the public and the private sectors, the scope of projects can include conceptualizing, analytics, planning, design, implementation, testing, and commissioning.
For 2018, this business has developed and secured contracts for clients that include transit agencies, railroads, and Port Authorities. Many long-time customers are well-known transit agencies that are very recognizable to the public.
The staff is highly trained and very knowledgeable. Staff members work at the main office located near Philadelphia and many work remotely from Boston, Pittsburgh, Chicago, New York, and New Jersey. There are two principles, one who handles the day-to-day administrative and technical management of the firm and one who oversees the technical aspects of this business by managing select projects. Depending on the project, the principles may be responsible for billable hours. Many duties of the principles can be assumed by the current staff such as marketing, resource allocation, and contract management.
- Year Established: 1993
- Location: Pennsylvania
- Service Area: National clients with the potential for international clients
- Clients: Transit agencies, Railroad and Port Authorities
- Services: Planning, design, implementation and systems integration of public and private telecommunications networks
- Building: 4,000 sq. ft.: Offices, kitchen (2) restrooms (3 - standard and full). The building (7,000 sq. ft.) is for sale or lease outside the sale of the business.
- Reason for Selling: Retirement
- Employees: Professional and Technical: (8), PT Office Manager (1), PT Engineer (1) PT Co-op Student (1)
- Seller Training Period: 6 months transition, 1 principle willing to stay on for 1-2 years
- Growth Opportunities: Expand into airports, smart cities, utilities, increase marketing to grow client base, develop international clients
- Current Owner’s Responsibilities: Owner 1: Business development, administrative and technical management Owner 2: Business development, technical oversight and project management
- List Price: $3,400,000
- Gross Sales:
- 2018: $2,357,096 Annualized
- 2017: $3,267,937
- 2016: $1,908,325
- 2015: $1,672,192
- 2014: $2,324,141
- Cash Flow:
- 2018: $615,508 Annualized
- 2017: $1,541,254
- 2016: $413,933
- 2015: $338,729
- 2014: $599,936
- Assets Included in Purchase*
- Furniture, Equipment, & Software: $169,347
- Radio testing equipment: $30,000
- A/R: $730,393
- 2018 Projection: $3,500,000
- Intangible Assets: Superior reputation (25+ years), long-standing relationship with clients, wealth of technical experience, knowledgeable and close-knit staff
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
Jan - June
|Tax Return||Tax Return||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$145,253||$1,106,567||$44,497||$-61,898||$206,435||$119,150|
|Compensation to Owner||$102,752||$212,972||$198,641||$208,252||$208,159||$208,297||Owner 2|
|Compensation to Owner||$105,664||$225,931||$204,255||$217,571||$216,918||$218,401||Owner 1|
|11% Tax on total W2 Salaries||$22,926||$48,279||$44,319||$46,841||$46,758||$46,937|
|Personal Auto Insurance||$500||$8,259||$6,188||$7,000||$6,127||$5,441|
|Meals & Entertainment||$1,365||$4,173||$3,910||$2,956||$4,755||$4,640|
|Rent - Florida||$0||$26,400||$26,400||$26,400||$26,400||$26,400||Not needed|
|Replacement of 1 Owner||$-75,000||$-150,000||$-150,000||$-150,000||$-150,000||$-150,000||Replacement of Owner 2's billable hours|
|Personal Cleaning & Pest||$1,800||$3,600||$3,600||$3,600||$3,600||$3,600||$3,600/year for home pest control & cleaning|
|Seller's Cash Flow = Total Addbacks + Net Income||$307,754||$1,541,254||$413,933||$338,729||$599,936||$524,853|
|Profit Margin||26.11 %||47.15 %||21.69 %||20.26 %||25.81 %||23.04 %|
- Yearly sales and cash flow fluctuate due to contracted payment schedules.
- $200,000 added back in 2017 to pay one principle to remain on staff or to replace one principle
- Transit Agencies
- Port Authorities (including Airports)
- Departments of Transportation
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Planning, design, implementation and systems integration of public and private telecommunications networks
- Systems Expertise
- Systems Integration and Interfacing
- Fiber optic and data communications networks
- VHF, UHF, and Microwave Radio Systems
- Wi-Fi networks
- 4G/5G voice/data networks
- Positive Train Control (PTC)
- Communications Based Train Control (CBTC)
- SCADA, Security, and Safety Systems
- Video and Passenger Information Systems
- Professional and technical staff
- 8 FT
- 1 PT
- Many work remotely
- Office Manager
- 1 PT
- Co-op Student (engineering student working on their second 6-month internship)
- 1 PT
- Positive Train control
- High Speed Rail
- Communications Based Train Control
- Radio systems
- DAS & 4G/5G cellular services
- Public/private partnerships
- Leveraging existing capabilities, experience, and contacts
- Continue expansion into airports
- Smart cities
- Expand into utilities
- Increase marketing to grow client base
- Develop international clients
- Increase sub-contracting opportunities
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 4.98. With this information, the computation is as follows:
$683,741 x 4.98 = $3,405,030
The Fair Market Value found above positions the business List Price at $3,400,000.
Purchase Price: $3,400,000
15% Buyer Down Payment: $510,000
15% Seller Financing: $510,000
70% Bank Loan: $2,380,000
Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $9,508.
Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $31,277.
After business expenses and loan payments, a buyer with a 15% down payment of $510,000 would retain a profit of $1,051,839, which results in a 206% 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 $3,400,000 with the terms listed above, the coverage ratio is 3.15.
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.
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: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
2017 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2017 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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