32% Profit Margin - Commercial Surveillance Systems Installation
Low buy in for ownership that just requires general oversight!
This surveillance system installation company serves primarily commercial clients – apartment complexes, HOA’s, hotels, strip malls, restaurants, and hospitals! At a down payment of only 10%, a new owner would only be responsible for general oversight as the current owner lives out of the country 4 months of the year. Demand for surveillance systems is high in San Francisco – 51% of retail storefronts are currently unoccupied due to the pandemic, which means they want and need security and surveillance. With many opportunities for growth, a new owner could increase installation of temperature scanning cameras and video monitoring, expand to vertical markets (fire alarm installation, smart home systems, etc.), and add government & municipal contracts to further sales growth. Recently, this business has expanded services to add thermal monitoring for COVID. The company is focusing on recurring monthly revenue, which currently covers payroll expenses, prompting them to look for more service-based contracts, making sure each system has proper maintenance.
They are increasing installation of temperature scanning cameras and video monitoring, expanding to vertical markets (fire alarm installation, smart home systems, etc.) and adding government and municipal contracts would be perfect opportunities for revenue growth.
- Boasting a 32% profit margin already in 2021, they are well-known in Northern California
- 80% of sales is in the San Francisco Bay area, 15% regionally, and 5% of their business is nationwide.
- Highly experienced team with everyone on the team having a 4+ year tenure
- Uses advanced tech like secure wireless camera networks, license plate capturing cameras and Point of Sale surveillance systems
The owner currently handles general oversight of the business and lives out of the country 4 months out of the year. The team is standardizing their service contracts to include both remote support and hands-on support, with an obvious preference for services they can provide remotely. Their camera systems offer real-time surveillance and video monitoring to ensure real-time protection.
- Year Established: 2008
- Location: San Francisco Bay Area, California
- Service Area: San Francisco Bay Area (80%), Regional (15%) and National (5%)
- Services: Installation of surveillance systems
- Clients: Primarily commercial: apartment complexes, HOA’s, hotels, strip malls, restaurants, hospitals, etc.
- Building: 500 sq. ft. office space – low overhead
- Reason for Selling: Semi-retiring – lives out of the country part-time
- Personnel: 5FT: 1 Owner, 1 Operations Manager, 2 cable installers, 1 IT staff + 1 PT bookkeeper
- Seller Training Period: 6-12 months
- Growth Opportunities: Increase installation of temperature scanning cameras and video monitoring, expand to vertical markets (fire alarm installation, smart home systems, etc.), add government & municipal contracts
- Current Owner’s Responsibilities: Oversight; lives out of the country 4 months out of the year
- List Price: $448,000
- Gross Sales:
- 2019: $564,886
- 2018: $423,204
- Cash Flow:
- 2019: $184,994
- Assets Included in Purchase*
- Equipment: Drills, drivers, hammer drills, ladders, crimpers, wire cutters, pliers, screwdrivers, stapling equipment, conduit benders, cable testers, camera testers, laptops
- Vehicles: 2013 Ford Transit
- Intangible Assets: Well-known in the area, word-of-mouth referrals, well-established relationship with local law enforcement
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
|P&L Statement||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$12,958||$-14,813||$38,793||$20,823||$11,127|
|Compensation to Owner||$15,000||$60,000||$60,000||$60,000||$60,000||Business can run without a replacement|
|11% Tax on total W2 Salaries||$1,650||$6,600||$6,600||$6,600||$6,600|
|Dues/Subscriptions||$0||$119||$120||$120||$2,400||$200/month for gym membership|
|Meals & Entertainment||$7||$200||$486||$151||$257|
|Auto Expense||$243||$7,184||$12,928||$12,182||$11,293||50% personal $6,050 Tesla lease, fuel for the Subaru (paid off), Auto Insurance|
|Miscellaneous||$0||$0||$20,000||$1,096||$20,000||Money paid to self|
|Home Remodel||$0||$0||$0||$20,000||$0||In COGS - one-time expense|
|Seller's Cash Flow = Total Addbacks + Net Income||$30,738||$80,484||$184,994||$132,110||$127,249|
|Profit Margin||31.62 %||25.12 %||32.75 %||31.22 %||29.64 %|
- Profit Margin 2019: 33%
- Healthcare offices
- Grocery stores
- Warehouses & Industrial Parks
A/R is automated, allowing customers to make payments on a recurring basis.
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Installation and Maintenance of Surveillance Systems
- Recently added cameras that are powered by solar-charged batteries and communicate with 4G cellular. This incorporates the cell service into the plan which is a necessary expense that they mark up and pass through the customer. Solar batteries need little attention and they would come onsite to do that work, but since they are charged with solar, the team does not need to do much maintenance. It is monitored remotely.
- Partnering with an IT firm that provides high-definition video monitoring and costs $1k/month; that IT firm then monitors the clients’ videos.
- 1 Owner
- 1 Operations Manager/Estimator
- 1 full-time IT Technician
- 2 Cable Installers
- 1 PT Bookkeeper
- Subcontractors as needed
*This company is being set to run remotely. The owner currently has little-to-no customer contact. His Operations Manager writes bids which he will look over only if required.
- Increase service contract sales
- Expand into vertical markets (fire alarm installation, smart home systems, etc.)
- Video monitoring
- Temperature scanning cameras (COVID-19)
- Adding government and municipal contracts
The Firm 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 prescribed multiple is determined 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 multiplier.
For this business, a 3 Year Average (2018-2020) Cash Flow was used with a prescribed multiple of 3.4. With this information, the computation is as follows:
$132,529 x 3.4 = $450,599
The fair market value found above positions the business list price at $448,000.
Purchase Price: $448,000
|10%Buyer Down Payment||$44,800||Must be unborrowed funds|
|15%Seller Financing or Equity||$67,200||5-year term at a rate of 4.50% = a monthly loan payment of $1,253|
|75%Bank Loan||$336,000||10-year term at a rate of 6% = a monthly loan payment of $3,730|
- Annual Payment: $59,797
- To Seller: $15,034
- To Bank: $44,763
- Net Profit (after expenses and loan payment): $72,732
Numbers above result in a 162% return on investment in the first year.
A lender is required to have a 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $448,000 with the terms listed above, the coverage ratio is 2.22.
*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.
3 year average (18-20)
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
3 year average (18-20)
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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