Opportunities
Commercial HVAC, Plumbing & Sheet Metal Fabrication w/ 70 Employees
Year-over-year sales growth since 2017!
Specifications
This HVAC and plumbing company in Northern California has seen year-over-year sales growth since 2017%! Serving the Sacramento area since 2003, they complete HVAC (70%) and plumbing services (30%). With an on-site fully automated sheet metal fabrication shop, the company is capable of manufacturing ductwork up to 14 gauge, plumbing and piping, as well as architectural sheet metal and flashings. There are 70 employees on staff, including controllers, foremen, project managers, assistants, and a field/shop work force. The owner has built a solid customer base with a focus on serving schools, government institutions, and commercial office buildings, and many customers have been with this company for over fifteen years. The owner currently focuses on lead generation, some estimations, bonding, and general oversight of the business.
Operations are managed from a large 14,000 square foot location in the Sacramento Valley area. The office has 2,000 square feet of space with a reception area, private offices, and staff spaces. The remaining 12,000 square feet is dedicated to warehouse, storage, and the fabrication shop.
Priced at $7,750,000, there is huge potential for continued growth and success. The industry in Northern California always has room for expansion and the company could take on additional available work in the region. Another area for development could be found in adding a service department and considering the implementation of maintenance and inspection contracts.
Business Highlights
- Year Established: 2003
- Location: Sacramento Valley California
- Service Area: Northern California
- Services: HVAC (70%) and plumbing (30%)
- Clients: Educational institutions, government institutions, commercial office buildings
- Lease: 22,000 sq. ft.: 2,000 sq. ft. office, remaining is warehouse and storage, large roll-up doors
- Reason for Selling: Strategic roll up/ industry consolidation
- Personnel: 70: Controllers, foremen, project managers, assistant, field and shop workforce
- Seller Training Period: Two years
- Growth Opportunities: Consider maintenance and inspections contracts, expand service area
- Current Owner’s Responsibilities: Oversight, no labor or bidding
Financial Highlights
List Price: $7,750,000
- Cash Flow:
- 2019: $1,674,771
- Assets Included in Purchase:
*amounts may vary, assets may be depreciated, replacement cost, or fair market value
Cash Flow Analysis
| Description of Financial Statement | P&L Statement Jan-July Accrual | P&L Statement | Tax Return | Tax Return | Tax Return | Notes |
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| GROSS SALES | $7,436,741 | $11,496,912 | $8,564,656 | $7,328,072 | $6,361,133 | |
| Annualized | $12,748,699 | |||||
| Net Income Shown on Financial Statement | $2,128,000 | $1,543,340 | $512,536 | $824,829 | $341,519 | |
| ADDBACKS | ||||||
| Depreciation | $0 | $12,400 | $8,767 | $5,032 | $7,203 | |
| Interest | $2,513 | $33,289 | $16,864 | $-402 | $2,520 | |
| Meals & Entertainment | $211 | $27,762 | $16,804 | $22,649 | $12,152 | |
| Non-Business Telephone | $280 | $480 | $480 | $480 | $480 | $40/month |
| Auto-Personal Use | $1,750 | $3,000 | $3,000 | $3,000 | $3,000 | $3,000/year |
| Insurance Premiums for Owners: Health, Life, Auto | $14,000 | $24,000 | $24,000 | $24,000 | $24,000 | $2,000/month |
| Other | $0 | $0 | $8,553 | $0 | $0 | One time investment expense |
| Rent | $17,500 | $30,000 | $30,000 | $30,000 | $30,000 | |
| Contributions/Donations | $0 | $500 | $0 | $0 | $0 | |
| TOTAL ADDBACKS | $36,254 | $131,431 | $108,468 | $84,759 | $79,355 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $2,164,254 | $1,674,771 | $621,004 | $909,588 | $420,874 | |
| Annualized | ||||||
| Profit Margin | 29.10 % | 14.57 % | 7.25 % | 12.41 % | 6.62 % |
- Profit margin: 15%
Clients
- Educational institutions
- Government institutions
- Commercial office buildings
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Services
Personnel
Total Personnel: 70
- Controllers
- Foremen
- Project managers
- Assistant
- Field workforce
- Shop workforce
Growth Opportunities
- Add service department
- Consider maintenance and inspections contracts
- Expand service area
- Take on additional available work
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, a 2019 cash flow was used with a prescribed multiple is 4.65. With this information, the computation is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
With this information, the computation is as follows:
$1,674,771 x 4.65 = $7,787,685
Funding Example
Purchase Price: $7,750,000
| 12.5%Buyer Down Payment | $968,750 | Must be unborrowed funds |
| 12.5%Seller Financing or Equity | $968,750 | 5-year term at a rate of 4.50% = a monthly loan payment of $18,060 |
| 75%Bank Loan | $5,812,500 | 10-year term at a rate of 6% = a monthly loan payment of $64,531 |
- Cash Flow: $1,674,771
- Annual Payment:
- To Seller: $216,725
- To Bank: $774,368
- Net Profit (after expenses and loan payment): $683,678
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: | % |
Attachments
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