Western Iowa Electrical Company
Providing excellent electrical services in Western Iowa to both residential and commercial clients, this well-regarded company is ready to continue its strategic growth. This team earned over $760,000 in revenue in 2017 working on projects from lamp repairs to large remodel projects. With over $220,000 in equipment and vehicles to install solar arrays, electrify new additions, repair lighting, or wire agricultural projects, the team of 6 is a lean, but effective organization.
This electrical company completes work in their home town (50%) and within a 20-mile radius of their office (50%) due to their proximity to Interstate 80, the main thoroughfare in Iowa. Continually busy throughout the year, over 100 jobs are currently in progress or in the pipeline.
Working from a customized building, this business operates from about 7,900 square feet of space. With both heated and unheated spaces, the building contains workshops, storage areas, a reception area, an office, and a large receiving bay. The structure is located on a good-sized yard, with plenty of room for large trucks to navigate.
- Year Established: 2012
- Location: Council Bluffs, IA
- Service Area: 20-miles radius of location
- Services: Residential & commercial electrical services, electric motor repair, trenching, inspections
- Customers: Residential and commercial
- Building: ~7,900 sq. ft.: ~3,500 heated (storage, office, reception, workshops, break room) ~4,400 unheated (receiving bay, storage)
- Reason for Selling: Exploring opportunities
- Employees: 6: Journeymen (2), Apprentices (2), Administration (2 PT)
- Hours: M-F 8-4
- Seller Training Period: 90 days transition
- Growth Opportunities: Increase commercial clients, include security and fire alarm services
- Current Owner’s Responsibilities: Owner/operator
- List Price: $796,000
- Gross Sales:
- 2018: $716,375 Annualized
- 2017: $764,299
- 2016: $642,911
- 2015: $581,245
- Cash Flow:
- 2018: $241,304 Annualized
- 2017: $227,531
- 2016: $169,164
- 2015: $168,013
- Assets Included in Purchase*: $365,887
- Equipment: $84,270: ladders, trade specific tools, trailers, and lifts
- Vehicles: $136,000: Trucks (6)
- Inventory: $93,657
- A/R: $51,960
- Intangible Assets: Wide range of services, well-respected, positive social media reviews, few competitors in the area, diverse client base
*amounts may vary
Cash Flow Anaysis
|Description of Financial Statement||P&L Statement|
Jan. - Aug.
|Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$122,950||$185,028||$113,992||$109,229|
|Compensation to Owner||$30,184||$42,000||$36,000||$36,000|
|Other unrelated Salaries||$0||$0||$0||$0|
|11% Tax on total W2 Salaries||$3,320||$4,620||$3,960||$3,960|
|Cell Phone||$896||$1,344||$1,344||$1,344||$112/month for personal cell phone|
|Rent||$0||$-16,800||$0||$0||Rent is $1400/month onward going|
|Seller's Cash Flow = Total Addbacks + Net Income||$160,869||$227,531||$169,164||$168,013|
|Profit Margin||33.68 %||29.77 %||26.31 %||28.91 %|
- 32% Profit Margin
Typical Customers and Services
- Residential and commercial
- General electrical services
- Electric motor repair
Total Employees: 6
- Journeymen (2)
- Apprentices (2)
- Administration (2 PT)
- Increase commercial clients
- Include security and fire alarm services
- Increase team to increase capacity
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 2017 cash flow was used with a prescribed multiple is 3.5. With this information, the computation is as follows:
$227,531 x 3.5 = $796,359
The fair market value found above positions the business list price at $796,000.
Purchase Price: $796,000
15% Buyer Down Payment: $119,400
15% Seller Financing: $119,400
70% Bank Loan: $557,200
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $2,226.
Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $7,322.
After business expenses and loan payments, a buyer with a 15% down payment of $119,400 would retain a profit of $112,950, which results in a 95% 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 $796,000 with the terms listed above, the coverage ratio is 1.99.
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.
**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.**
- Business Summary
- Identifies important business information in an organized, quick-reference format
- Cash Flow Analysis
- The owner’s profit is the sum of business net income, any owner’s perks, & any non-onward going expenses (cash flow)
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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