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Airport Based IT Support & Access Management

Low overhead – all work completed on-site with a 45% profit margin!

CASH FLOW
$465,424

Specifications

  • Price
    $920,000

  • Revenue
    $797,012

  • Location
    Chicago, Illinois

  • Service Area
    Chicago Department of Aviation

  • Profit Margin
    45%

  • Employees
    Owner + 3 FT Employees

  • Intangible Assets
    Extremely low overhead, incumbent IT contractor to the Chicago Department of Aviation, on-site service, extremely reliable, great customer service, innovative ideas for customers

  • Reason for Sale
    Retirement

  • Down Payment
    10%

This business provides excellent tech support as a subcontractor for Chicago Airports, and has very low overhead – all work is completed on-site, so no office or the related expenses are needed!  They provide IT support, access management support, and telephony support under lengthy contracts. Employees for this company work at O’Hare International Airport, Midway International Airport, and a downtown office for the Chicago Department of Aviation.  All locations are in the Chicago metropolitan area. 

 

There are three separate contracts for three separate contractors for three separate services.

 

  • Contract 1 has been in place since February 2020 and is up for renewal in 5 years. There are two technicians on this contract.
  • Contract 2 has been in place for 6 years. It is serviced by two employees.
  • Contract 3 has been in place for 14 years and will be extended in the fourth quarter of 2020. This contract does not require a full-time employee; the business dedicates one of the four full-time employees to place orders for equipment as needed.

 

This company was not impacted by Covid-19. In fact, their workload increased. This business has been a provider to the Chicago Department of Aviation for over 15 years. Having weathered administrative changes, they are an incumbent provider and have a deep knowledge of the systems and infrastructure used by their client as well as the distinct ability to focus on and address the detailed needs of this large and complex organization. 

 

Priced at $920,000 this is a Midwestern company that is in a position to grow with the technology by increasing into additional spaces and also increase their contract sizes. The ROI will be 182.36% in the first year. Increasing staff to take on additional contracts would lead to continual growth of the company.

Business Highlights

  • Year Established: 2005
  • Location:  Chicago, Illinois
  • Services: IT Support (9%), Access Management Support (85%), Telephony Support (6%) under lengthy contracts for the Department of Aviation
  • Building: Employees work on-site at clients’ offices
  • Reason for Selling: Retirement 
  • Personnel: Owner + 3 FT Employees
  • Seller Training Period: 1 year
  • Growth Opportunities: Increase contract amount or duties in next RFP, increase staff to take on additional contracts, grow with the technology into additional spaces
  • Current Owner’s Responsibilities: Some desktop support, business development

Financial Highlights

  • List Price: $920,000
  • Gross Sales:
    • 2020: $797,012 Annualized
    • 2019: $642,626
    • 2018: $479,840
  • Cash Flow:
    • 2020: 465,424 Annualized
    • 2019: $290,573

     

  • Assets Included in Purchase:
    • Intangible Assets: Extremely low overhead, incumbent IT contractor to the Chicago Department of Aviation, on-site service, extremely reliable, great customer service, innovative ideas for customers

*amounts may vary, assets may be depreciated, replacement cost, or fair market value 

Cash Flow Analysis

Description of Financial StatementP&L StatementP&L StatementTax ReturnP&L StatementTax ReturnNotes
20202019201820172016
GROSS SALES$199,253$642,626$479,840$591,212$397,457
Net Income Shown on Financial Statement$115,875$282,407$71,638$416,060$162,699
ADDBACKS
Meals & Entertainment$421$4,909$4,579$0$7,916
Commissions$0$0$1,055$0$117,900Paid to Owner
Auto-Personal Use$60$3,257$9,229$0$15,151Personal
TOTAL ADDBACKS$481$8,166$14,863$0$140,967
Seller's Cash Flow = Total Addbacks + Net Income$116,356$290,573$86,501$416,060$303,666
Profit Margin58.40 %45.22 %18.03 %70.37 %76.40 %
Profit Margin 2019: 45%

Services

  • Desktop Support
    • Supports proprietary Financial Management Systems (FMS)
    • Supports aviation software
    • Supports Microsoft Office and standard Microsoft programs
    • This project is managed and completed by the owner

       

  • Access Management Support
    • Provide employees and dignitaries access to secured areas throughout the airports
    • Support the security camera system

       

  • Telephony System Support
    • Voiceover IT phones

Growth Opportunities

  • Increase contract amount or duties in next RFP cycle

 

  • Increase staff to take on additional contracts

 

  • Grow with the technology into additional spaces

 

  • Diversify client base

Valuation Details

 

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, the 2019 Cash Flow was used with a prescribed multiple of 3.2. With this information, the computation is as follows:

$290,573            x                3.2                 =    $929,833

The fair market value found above positions the business list price at $920,000.

 

Funding Example

Purchase Price:                             $920,000

    10%Buyer Down Payment:          $92,000

    15%Seller Financing:                 $138,000

75%Bank Loan:                         $690,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $2,573

Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $7,660

After business expenses and loan payments, a buyer with a 10% down payment of $92,000 would retain a profit of $167,775, which results in a 182.36% return on investment in the first year.

A lender is required to have a minimum 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $93,000 with the terms listed above, the coverage ratio is 2.37.

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 is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.

Purchase Price:

$920,000

$
%
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:
2019 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2019 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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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.