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Branding, Marketing & Ad Agency with $800K in Profit

Multi-media creative firm with an 31% average margin!

CASH FLOW
$812,577

Specifications

  • Price
    $2,600,000

  • Revenue
    $3,222,841

  • Profit Margin
    31%

  • Location
    Portland, Oregon

  • Service Area
    National clients

  • Reason for Sale
    Exit strategy

  • Employees
    15: Creative director, marketing strategist, art directors, graphic designer, director, programming solution architect, project managers/producers, writers, video post-production editor/audio engineer

  • Lease
    4,000 sq. ft.: 7 Private offices, editing suite, with small filming area cubicles, conference room

  • Intangible Assets
    Positive reputation, large brand customers, well-educated and experienced team, creative spirit and good company culture

This creative agency and marketing firm has a well-educated and highly experienced team of 16 already in place!  This creative team harnesses the power of insight and experience to inform, teach, and inspire.  Working with large brand name companies across the country, this firm truly understands their client’s needs, creating thoughtful advertisements, marketing pieces, collateral, online and social media campaigns, as well as websites.  They also have an in-house production team that creates exceptional video content from writing scripts to editing and mixing the final film.  With over $250,000 in assets, the office is fully equipped to produce high-quality results for any project. 

 

The 4,000 square feet of office is beautifully appointed and includes private offices, an editing suite, cubicles, and a conference room.  There is also a portion of the editing suite that allows for the creation of original photography and video content.

 

The team includes art directors, graphic designers, directors, project managers/producers, creative director, writers, and a solutions architect. Innovation abounds with many staff cross-trained and encouraged to develop new skills.  The owners currently oversee most business operations.  They also contribute as writers, producers, and directors, as well as to the overall strategic vision.  Some of their duties could be assumed by the current staff, but two replacements are accounted for in the cash flow if new staff are desired. 

Business Highlights

  • Year Established: 2005
  • Location:  Portland, Oregon
  • Service Area:  Regional and national clients
  • Services: Multi-media advertising, marketing, and corporate training
  • Clients: Local companies, nationally recognized brands
  • Lease: 4,000 sq. ft.: 7 Private offices, editing suite with small filming area, cubicles, conference room
  • Reason for Selling: Retirement planning
  • Employees: 16: Creative director, marketing strategist, art directors, graphic designers, director, programming solutions architect, project managers/producers, writers, video post-production editor/audio engineer
  • Seller Training Period: 1-3 years
  • Growth Opportunities: Promotion in existing vertical segments, promotion of training capabilities cross-vertical 
  • Current Owners’ Responsibilities: Owner 1: business strategy, HR, general management, producer; Owner 2: Account management, directing, writing

Financial Highlights

  • List Price: $2,600,000
  • Gross Sales:
    • 2020-2019 TTM: $3,222,841
  • Cash Flow:
    • 5 year average: $812,577
  • Assets Included in Purchase*
    • Equipment: $250,000: Computers, software, equipment, furniture, fixtures
    • A/R: $400,000
    • Intangible Assets: Positive reputation, large brand customers, well-educated and experienced team, creative spirit and good company culture

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L StatementP&L StatementTax ReturnTax ReturnTax ReturnNotes
TTM2019201820172016
GROSS SALES$3,222,841$2,930,471$3,419,529$2,301,904$489,015
Net Income Shown on Financial Statement$619,156$271,226$848,663$545,584$489,015
ADDBACKS
Compensation to owner $265,965$303,239$328,657$294,767$368,592
11% Tax on total W2 salaries $29,256$33,356$36,152$32,424$40,545
Depreciation $16,180$0$3,796$5,021$8,698
Interest $0$164$0$1,252$438
Amortization $17$0$17$17$17
Meals/Entertainment $0$0$7,341$7,612$4,801
Life Insurance $4,758$4,758$4,758$4,758$4,758For partners
Employee Benefit Program $0$0$11,443$39,946$99,908Line item 18
Replacement $-150,000$-150,000$-150,000$-150,000$-150,000For 2 owners
Cell Phone $3,000$3,000$3,000$3,000$3,000$250/mo
Officer Disability Insurance$1,083$1,254$0$0$0
Officer Medical/Dental Insurance$25,661$32,834$0$0$0
TOTAL ADDBACKS$195,920$228,605$245,164$238,797$380,757
Seller's Cash Flow = Total Addbacks + Net Income$815,076$499,831$1,093,827$784,381$869,772
Profit Margin25.29 %17.06 %31.99 %34.08 %177.86 %
  • 5-year average profit margin: 31%
  • Q1 2020 over Q1 2019 are up by 12 times
  • A 5 year average using TTM is $812,577 cash flow
  • Anomaly is low due to loss of 1 major client. Now they have grown customer base to be much more diverse

Typical Clients

  • Large brand name companies
  • IT companies
  • Athletic brand
  • Museums
  • This firm can serve any client looking for marketing and advertising services.
  • This firm can serve any client looking for large-scale redesigning of their corporate training.

Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

Services

  • Multi-media advertising
  • Marketing
  • Corporate training

Employees

Total Employees: 16

  • Creative director
  • Art directors
  • Graphic designers
  •  Programming solution architect
  • Project managers
  • Digital producer
  • Writers

Growth Opportunities

Promotion in existing vertical segments, promotion of training capabilities cross-vertical 

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 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, the 5-year average cash flow was used with a prescribed multiple of 3.25.  With this information, the computation is as follows:

$812,577         x          3.25     =          $2,640,877

The fair market value found above positions the business list price at $2,600,000

Funding Example

Purchase Price:                          $2,600,000

12%Buyer Down Payment:      $312,000

20%Seller Financing:                $520,000

68%Bank Loan:                      $1,768,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $9,694.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $22,209.

After business expenses and loan payments, a buyer with a 12% down payment of $312,000 would retain a profit of $429,736, which results in a 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 $2,600,000 with the terms listed above, the coverage ratio is 2.12. 

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:

$2,600,000

$
%
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:
5-year avg Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
5-year avg 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
Omaha, NE 68114

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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.