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Vet Service – Capitalize on Rising Livestock Demand

CASH FLOW
$387,545

Specifications

  • Price
    $1,410,000

  • Cash Flow
    $387,545

  • Revenue
    $2,458,487

  • Multiplier
    3.70

  • Valuation
    $1,433,917

  • Down Payment
    10%

  • Equipment
    $45,018

  • Account Receivable
    $239,000

  • Service Area
    Cummings County – the largest beef producing county in the US

  • Lease
    $5,000

  • Employees
    3 owner vets (will stay on), 2 non-owner vets, 2 office managers, 6 techs

  • Reason for Sale
    Planned retirement – will stay on for 3-5 years as desired by new owner

 

This established vet practice is a great way to capitalize on the growing livestock demand.  It is a dual location practice with feedlot contracts in the largest beef producing county in the country.  The dual locations are a steal at only $5K/month for rent.  All three owners split time between the two locations and are helped by two non-owner DVMs.  The owners are all willing to stay on, which is accounted for in the cash flow shown for this business. 

Specializing in large animal, this northeastern Nebraska double location vet practice has 5 DVMs. The three current owners are looking to slowly transition out of the operation over the next 3 years and are looking for an absentee owner to take interest in the business now.

With focus in the care of cattle, roughly 80% of services are focused on cow/calf and feedlot operations, including processing facilities. A large part of services involves dispensation of medication and antibiotics and comprises 1/4 to 1/3 of income. The vets also assist with swine operations, equine facilities and some small animal concerns.  Very little emergency services are provided, except for assistance during calving season.

Six feed yard technicians, helping with the examination and treatment of animals, assist the vets. Each location has an office manager to handle daily operations, including A/R, A/P and payroll, and run the facilities.  The locations include corrals to hold animals dropped off for longer-term care.


A 10% down payment of $141,000 would yield a first year’s profit of $154,846 after debt payments.

Business Highlights

  • Years in Business: 30+
  • Location:  Northeastern Nebraska
  • Service Area: Cummings County – the largest beef producing county in the US
  • Service Breakdown: 40% cow/calf, 40% feed lots, 8% small animal, 7% swine, 5% equine
  • Services: Dispensary comprises nearly 1/3 of income; very little emergency work performed, except for assistance during calving season
  • Clients: feed yards, processing, small ranches/farms; top client has spent 500K over the last 6 years (25,000 head operation)
  • Lease: $5,000/month for 2 locations
  • Reason for Selling: Planned retirement – will stay on for 3-5 years as desired by new owner
  • Employees: 3 owner vets (all will stay on), 2 non-owner vets, 2 office managers (1 at each location), 6 feed yard technicians to assist the vets
  • Growth Opportunities: Hog confinement contracts – swine is on the rise in the Midwest
  • Current Owner’s Responsibilities: 3 DVM owners

Financial Highlights

  • List Price: $1,410,000
  • 2018 Gross Sales: $3,186,883 Annualized
  • 2017 Gross Sales: $2,458,484
  • 2018 Cash Flow: $434,666 Annualized
  • 2017 Cash Flow: $387,545
  • Profit Margin: 15%
  • $494,018 worth of assets included in the purchase
    • Equipment: $45,018 – ultrasound and x-ray machines, chute, office machinery – each location has corrals for cattle/equine drop offs
    • Intangible Assets: Reputation, client list
    • Build-out: $210,000 for buildings and customizations
    • A/R: $239,000 between both locations – 59% is current & under 30 days

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnTax ReturnTax ReturnTax ReturnTax ReturnTax ReturnNotes
2018201720162015201420132012
GROSS SALES$2,655,736$2,458,487$2,365,421$2,590,362$2,876,414$2,374,553$2,428,875
Annualized$3,186,883
Net Income Shown on Financial Statement$561,646$532,568$445,659$529,352$499,343$460,271$366,296
ADDBACKS
Retirement Plan$15,000$18,000$18,000$18,000$18,000$18,000$18,0004% of 3 owners' salaries
3 New Vet Associates$-150,000$-180,000$-180,000$-180,000$-180,000$-180,000$-180,000$60,000 per Owner Vet - keep existing or hire new
11% Tax on total W2 Salaries$-16,500$-19,800$-19,800$-19,800$-19,800$-19,800$-19,800
Contributions/Donations$2,071$2,627$1,823$0$0$0$0
Rent$-50,000$34,150$48,213$58,383$120,957$75,395$41,583Ongoing rent at $5,000/mo ($60,000/yr)
Interest$5$0$0$0$0$0$0
TOTAL ADDBACKS$-199,424$-145,023$-131,764$-123,417$-60,843$-106,405$-140,217
Seller's Cash Flow = Total Addbacks + Net Income$362,222$387,545$313,895$405,935$438,500$353,866$226,079
Annualized$362,222
Profit Margin13.64 %15.76 %13.26 %15.67 %15.24 %14.90 %9.31 %
  • 15% profit margin
  • New owner can keep sellers on staff until retirement or replace with new DVM’s

Employees

  • 5 Veterinarians
    • 3 partner DVM’s
    • 2 associate DVM’s
      • Salaries of $80,000 and $75,000
  • 6 feed yard techs
    • Part-time, earning $16.50/hour
  • 2 office managers
    • Earning roughly $14/hour
  • All full-time employees are able to participate in a retirement plan
    • 4% salary match

Income Analysis

Industry Outlook

  • Number of veterinarians employed in Nebraska – 700+
  • Hourly mean wages of around $37
    • Annual mean wage of $77,410
    • Nebraska is one of the top 5 states with the highest concentration of jobs and location quotients in the industry
  • Projected national 10-year growth of 9% - faster than average

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:

2017 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.  The prescribed multiple for this business is 3.7.

For this business, the 2017 Cash Flow was used with a prescribed multiple is 3.7.  With this information, the computation is as follows:

$387,545         x          3.7       =          $1,433,917

 

The Fair Market Value found above positions the business List Price at $1,410,000.

Funding Example

Purchase Price:                    $1,410,000

10%Buyer Down Payment:   $141,000

15%Seller Financing:             $211,500

75%Bank Loan:                   $1,057,500

Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $3,943.

Bank Loan 7-year term at a rate of 6% equals a monthly loan payment of $15,449.

After business expenses and loan payments, a buyer with a down payment of $141,000 would retain a profit of $154,846, which results in an 110% 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 $1,410,000 with the terms listed above, the coverage ratio is 1.67. 

Please note that the decision of whether to extend a loan on any particular sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available. 

Purchase Price:

$1,410,000

$
%
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:
2017 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2017 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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210 N 78th St. 2nd Floor
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