Utility Drilling in Phoenix Area
This dynamic company in the Phoenix area provides underground utility directional drilling and trenching for both dry and wet utilities. Nearly 90% of the current work is from drilling for and installing fiber optic cables. They can also remove existing wiring and complete associated concrete and asphalt restoration projects when able. Customers include major communications carriers as well as correlating primary contractors. Work is typically steady throughout the year and most projects are completed within a 50-mile radius of the office. The current owner is responsible for oversight, bidding, and estimating, but rarely works in the field.
The business operates from a leased quarter-acre property that has plenty of room for the mobile office as well as storing equipment. Eight skilled team members are already in place, including a supervisor, drill operator, drill locator, mini excavator operator, and CDL driver.
Potential for growth can be found in a few areas. First, a new owner could capitalize on current resources that allow the team to take on larger or additional contracts throughout the year. Second, increased focus could be paid to building upon current work for gas utilities as this company receives many inquiries about availability for this specialization. A third area would be to expand the restoration of concrete and asphalt associated with the current drilling contracts. With a reasonable investment, this could be a large area for potential growth.
- Year Established: 2013
- Location: Phoenix, AZ area
- Service Area: 50-mile radius of the Phoenix area
- Services: Directional drilling and trenching for underground dry and wet utilities, restoration
- Clients: Major communications carriers and their primary contractors
- Lease: .24 acres: mobile office, water/power/ telephone, storage for equipment
- Reason for Selling: Focus on family
- Employees: 8: 1 Supervisor, 1 drill operator, 1 drill locator, 1 excavator, 1 CDL, 1 office, laborers
- Hours: M-F 6:00-5:00
- Seller Training Period: 90 days or negotiable
- Growth Opportunities: Expand resources to take on additional gas work, contracts, or restoration work
- Current Owner’s Responsibilities: Oversight, bidding
- List Price: $2,018,000
- Gross Sales:
- 2018: $1,091,921
- 2017: $1,488,434
- 2016: $1,565,085
- 2015: $860,404
- Cash Flow:
- 2018: $448,461
- 2017: $416,768
- 2016: $784,811
- 2015: $273,708
- Assets Included in Purchase*
- Equipment: $486,000: Drills, tools, field equipment, vehicles (5), trailers and truck bed (4), excavator (1), ditch witch (2), office equipment and furniture
- A/R: $55,000
- Intangible Assets: Long-term clients, positive relationships with primary contractors within wide radius of location, low overhead, many potential paths for growth
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$386,136||$265,891||$346,386||$181,023|
|Meals & Entertainment||$5,152||$6,283||$6,311||$11,219|
|Seller's Cash Flow = Total Addbacks + Net Income||$448,461||$416,768||$487,811||$273,708|
|Profit Margin||41.07 %||28.00 %||31.17 %||31.81 %|
- Profit margin 2018: 41%
Typical Clients and Services
- Major communications carriers
- Primary contractors
- Long-term clients
- Directional drilling
- Fiber optic cables (905)
- Underground utilities
- Dry utilities
- Wet utilities
- Restoration: concrete and asphalt
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Total Employees: 8
- 1 Supervisor
- 1 Drill operator
- 1 Drill locator
- 1 Excavator
- 1 CDL
- 1 Office (PT)
- 2+ Laborers as needed
- Expand resources to
- Take on additional gas work
- Additional contracts
- Additional restoration work
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 2018 cash flow was used with a prescribed multiple is 4.5. With this information, the computation is as follows:
$448,461 x 4.5 = $2,018,075
The fair market value found above positions the business list price at $2,018,000.
Purchase Price: $2,018,000
12.5% Buyer Down Payment: $252,250
12.5% Seller Financing: $252,250
75% Bank Loan: $1,513,500
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $4,703.
Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $19,890.
After business expenses and loan payments, a buyer with a 12.5% down payment of $252,250 would retain a profit of $153,354, which results in a 61% 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 $2,018,000 with the terms listed above, the coverage ratio is 1.52.
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.
2018 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2018 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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