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CCTV Sewer & Pipe Inspection in Hawaii

With nearly $2M in assets and a 37% profit margin in 2020!

CASH FLOW
$892,690

Specifications

  • Price
    $3,685,000

  • Revenue
    $3,179,788

  • Cash Flow
    $892,690

  • Location
    Honolulu, Hawaii

  • Service Area
    100% local

  • Equipment
    $1,561,721

  • Profit Margin
    37%

  • Employees
    12: 10 FT, 2 PT; 1 Owner + 1 Director of Operations, 1 Quality Control Supervisor, 1 Salesperson, along with CCTV and Vactor operators and field technicians

  • Intangible Assets
    Well-established in the industry, long-standing client base

With nearly $2M in assets and a 37% profit margin, this sewer and pipe inspection company in Honolulu has seen year-over-year growth in sales for 3 years! Specializing in CCTV inspections of pipelines, their top-notch equipment and vehicles allow their well-trained PACP-certified staff to meet the needs of their client base, 90% of which consists of engineers for construction companies, municipalities, or consulting engineers. They also provide manhole/corrosion inspections, smoke testing, flow monitoring, and sewer/pipeline cleaning. Over $1M worth of vehicles including 3 CCTV trucks, 3 cleaning combo trucks, and 4 pickup trucks are part of the nearly $2M in business assets, as well $500k worth of generators, hand tools, computer equipment, and camera equipment, making the bank loan over 50% collateralized. The team consists of 10 full-time employees, including 1 Director of Operations, 1 Quality Control Supervisor, 1 Salesperson, and high skilled CCTV and Vactor Operators and field technicians. The owner currently manages business development, accounting, operations, administration, and IT and is willing to stay on for 2-3 years post-sale to ensure a smooth transition.

 

The company’s average sale size is approximately $20k, with an average of 10 work orders per month. Currently, the business has $478k worth of work in their pipeline. The company was deemed essential during COVID, allowing them to increase their rates due to the increase in the need for PPE gear and adding trucks to accommodate social distancing guidelines.

 

Priced at $3,685,000, a 12.5% down payment of $460,625 returns $486,316 in the first year after debt payments – a 106% return on investment! With a well-established reputation already in place, a new owner could easily boost sales by pursuing other areas in the general industry, such as construction and storm sewer system services.

Business Highlights

Year Established: 2005

Location: Honolulu, Hawaii

Service Area: 100% local

Services: CCTV Inspections, line cleaning, manhole/corrosion inspections, flow monitoring, smoke testing

Clients: Primarily engineers for construction companies, municipalities, consulting engineers

Certifications: NASSCO PACP certified

Lease: 4,000 sq. ft. facility; 80% warehouse, 20% office

Reason for Selling: Approaching retirement

Personnel: 12: 10 FT, 2 PT; 1 Owner + 1 Director of Operations, 1 Quality Control Supervisor, 1 Salesperson, along with CCTV and Vactor operators and field technicians

Seller Training Period: 2-3 years

Growth Opportunities: Pursue more projects in the construction industry, expand services to include storm sewer systems and pipeline repairs/rehabilitation

Current Owners’ Responsibilities: Business development, accounting, operations, administration, IT

Employees

  • 1 Owner
  • 1 Director of Operations
  • 1 Quality Control Supervisor
  • Field Supervisor
  • CCTV Operators
  • Vactor Operators
  • Field Technicians

Operations

  • Average Sale Size: $20k

     

  • Average number of work orders per month: 10

     

  • Value of recurring monthly revenue: $30k

     

  • Value of work in the pipeline: $478k

     

  • Value of backlog: $680k

Profit Margin

Financial Highlights

  • 5-Year Average Cash Flow: $957,565
  • A/R: $389,990
  • A/P: $13,000
  • Working Capital: $376,990

Assets of Business

  • Assets: $1,561,720
  • Equipment: $496,529: Generators, hand tools, computer equipment, camera equipment
  • Vehicles: $1,042,916: 2 CCTV trucks, 3 cleaning combo trucks, 4 pickup trucks
  • Furniture & Fixtures: $22,275
  • Intangible: Well-established in the industry, long-standing client base

 

* Over 50% Collateralized *

Cash Flow Analysis

Description of Financial StatementP&L Statement
July 1-Dec 22, 2020 - Accrual
Tax Return
July 2019-June 2020 - Accrual
Tax Return
July 2018-June 2019 - Accrual
Tax Return
July 2017-June 2018 - Accrual
Tax Return
July 2016-June 2017 - Accrual
Notes
20212020201920182017
GROSS SALES$1,589,894$2,360,891$2,230,416$3,005,813$2,182,201
Annualized$3,179,788
Net Income Shown on Financial Statement$811,706$24,890$13,557$43,489$73,632
ADDBACKS
Compensation to Owner$240,000$507,692$571,846$524,308$516,923Owner
Other unrelated salaries$69,231$224,615$224,615$120,000$120,000Owner's wife: office admin
11% Tax on total W2 Salaries$34,015$55,846$87,611$70,874$70,062
Depreciation$0$11,725$431$528,137$49,081
Interest$938$10,433$14,854$2,583$0
Contributions/Donations$0$2,766$0$250$40
Cell Phone$1,800$3,600$3,600$3,600$3,600$300/month
Pension & Profit Sharing$0$158,138$122,656$118,746$127,64997% Personal
Meals$0$1,305$1,981$0$0
Replacement 1$-20,000$-40,000$-40,000$-40,000$-40,000
Replacement 2$-45,000$-90,000$-90,000$-90,000$-90,000
PPP Loan$-200,000$0$0$0$0
TOTAL ADDBACKS$80,984$846,120$897,594$1,238,498$757,355
Seller's Cash Flow = Total Addbacks + Net Income$892,690$871,010$911,151$1,281,987$830,987
Annualized
Profit Margin56.15 %36.89 %40.85 %42.65 %38.07 %
Average Profit Margin: 43%

Valuation

The Firm Advisors used a cash flow valuation methodology to determine the purchase price of the business.

Cash flow is the sum of business net income plus any owner perks and any non-onward expenses. Then we prescribe a multiple based on 20 parameter which valuate the health of the business. For this valuation, we used the 5-year average cash flow making the business price much more favorable to the buyer.

The formula used is as follows:

Cash Flow        x  Prescribed Multiple      =   Fair Market Value

 

With this information, the computation is as follows:

 

$957,565            x                3.85                 =    $3,686,625

Funding Example

Purchase Price:   $3,685,000

 

    12.5%Buyer Down Payment    $460,625 Must be unborrowed funds
    12.5%Seller Financing or Equity $460,625 5-year term at a rate of 4.50% = a monthly loan payment of $8,587
      75%Bank Loan $2,763,750 10-year term at a rate of 6% = a monthly loan payment of $30,683

 

  • Cash Flow: $957,565

     

  • Annual Payment:

     

    • To Seller: $103,049
    • To Bank: $368,199

       

  • Net Profit (after expenses and loan payment): $486,316

Purchase Price:

$3,685,000

$
%
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 average 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 average 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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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.