Commercial Tile Contractor in Texas – All Labor Outsourced
Buyer would see a 386% ROI in the first year after debt payments!
A 10% down payment of $41,500 returns $160,187 in the first year after debt payments – a 386% return on investment! There is little to no overhead for this commercial tile contractor, as all labor is outsourced. Boasting a 30% profit margin in 2020, their client base includes General Contractors and Construction Managers, and currently the work is primarily for service stations throughout Texas. There is one part-time W2 employee (the owner’s spouse), who works approximately 10 hours/week from a home office doing estimates, purchasing, coordinating deliveries, scheduling installations with the labor force, and bookkeeping; all labor is subcontracted out. Sales could easily climb into the $2M-$3M range by actively submitting more bids, expanding the product line to include other types of flooring, pursuing work in schools, grocery stores, retail stores, and entertainment/restaurants, and by tapping into the residential market. Service station tile contracts generally run anywhere from $20k-$120k. The company currently has 10 projects on the books worth approximately $238k; the average project takes 7 days to complete.
This business is not consumer-based, so there was no COVID impact on sales – clients did not put a moratorium on construction projects. The company does advertise in the Blue Book, which gives them requests for bids via email – they currently have nearly 20 open bids, along with the 8 projects in progress.
Priced at $415,000 and with long-standing relationships already in place with General Contractors in the area, a new owner could take this business to the next level. The current owner bought the business in 2015, when sales were $250k and grew revenue to $3.5M by 2018, with at least 5 bids per day and a much larger client base, proving that this business is capable of tremendous growth. They intentionally downsized the business in early 2019 (semi-retirement) and chose to keep sales in the $600k-$700k range. The company has seen sales in $3M range in the past and could easily reach those heights again under new ownership.
Year Established: 1950
Location: Houston, Texas
Service Area: Statewide
Services: Commercial tile supply and installation
Clients: General Contractors & Construction Managers
Lease: Home office; low overhead
Reason for Selling: Retirement
Personnel: 1 PT W2 employee (10 hours/week; estimates, purchasing, scheduling installations with labor force, bookkeeping) + 1 primary subcontractor
Seller Training Period: 6 months
Growth Opportunities: Bid more work, expand the product line, implement marketing strategy, create n internet presence, tap into residential market, pursue retail, schools, grocery stores, etc.
Current Owner’s Responsibilities: Owner is absentee; spouse is PT employee
- List Price: $415,000
- 2020 Cash Flow: $213,702
- 2020 Profit Margin: 30%
- A/R: $91,202
- Work in Progress: $238k
- Intangible Assets: Great reputation for customer service, low overhead allowing for competitive pricing, long-standing relationships with GC’s
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
|Net Income Shown on Financial Statement||$187,690||$-10,195||$-13,267||$155,208|
|Compensation to Owner||$0||$0||$0||$31,000|
|11% Tax on total W2 Salaries||$0||$0||$0||$3,410|
|Meals & Entertainment||$877||$734||$187||$1,399|
|Insurance Premiums for Owners: Health, Life, Auto||$2,434||$2,434||$2,434||$0|
|Management Fee||$0||$68,500||$629,076||$422,000||Paid to owner|
|Employee Benefit Program||$17,586||$0||$0||$0||Benefits to Owner|
|Seller's Cash Flow = Total Addbacks + Net Income||$213,702||$72,140||$654,943||$623,684|
|Profit Margin||29.86 %||11.88 %||18.78 %||27.34 %|
- Owner bought the business in 2015, when sales were $250k (previous owner had intentionally downsized) and grew the business to $3.5M by 2018.
- In 2019, owner made the conscious decision to downsize the business and transition into semi-retirement. They slowed their bidding activity down and are currently working with 3-4 of their clients.
- Sales could easily be restored by submitting more bids.
- Expand the product line to include more types of flooring
- Implement marketing strategy
- Create an internet presence
- Tap into residential market
- Pursue work in different sectors – retail, schools, grocery stores, restaurants, etc.
Offer Price: $
% Buyer Cash Down at Closing: $
% Seller Carry Back via Promissory Note: $
year term at a rate of %
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Total Business Assets, Inventory, and A/R: $
Total Undercollateralized Loan: $
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The bank will require a minimum ratio of 1.5 to be lendable.
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