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Directional Drilling for Wireless Carriers and Utilities in Phoenix

90% of the work is for major communication carriers!

CASH FLOW
$636,230

Specifications

  • Price
    $2,300,000

  • Revenue
    $2,157,650

  • Cash Flow
    $636,230

  • Location
    Phoenix, Arizona

  • Service Area
    Primarily in the Phoenix valley area (95%) and within a 50-mile radius of the office

  • Employees
    8: 1 Supervisor, 1 drill operator, 1 drill locator, 1 excavator, 1 CDL, 1 office staff, plus laborers

  • Equipment
    $630,179

  • Profit Margin
    37%

  • Intangible Assets
    Long-term clients, positive relationships with primary contractors within wide radius of location, low overhead, many potential paths for growth

With an average profit margin of 33% over the last 5 years, the client base for this directional drilling company consists of major communication carriers and utility companies in the Phoenix area. This business is recession proof, as wireless carriers and utilities are essential. Nearly 90% of the work is done for a wide range of major communication carriers, and most work is completed by their highly skilled in-house team of eight people; subcontractors are hired as needed for larger concrete or asphalt restoration projects.  Approximately 90% of work completed is directional drilling and laying fiber optic cables.    Work is typically steady throughout the year and most projects are completed in the Phoenix valley area and within a 50-mile radius of the office. The current owner does no labor and provides bids and oversight. He is willing to stay on for up to one year to assist with the transition.

 

The business operates from a leased quarter-acre property that has plenty of room for the mobile office as well as storing equipment.  Assets include 5 trailers, 1 mini excavator, 1 Subsite TKD Locator, 2 Ditch Witch Vacuums, 2 Ditch Witch Drills, plus all of the necessary tools and equipment, along with $112,500 worth of vehicles.

 

Priced at $2,300,000, this company has a solid foundation, positive long-term relationships with primary contractors, low overhead, and many potential paths for growth.  First, a new owner could capitalize on current resources that allow the team to take on larger or additional contracts throughout the year.  Second, increased focus could be paid to building upon current work for gas utilities as this company receives many inquiries about availability for this specialization.  A third area would be to expand the restoration of concrete and asphalt associated with the current drilling contracts.  With a reasonable investment, this could be a large area for potential growth.

Business Highlights

Year Established: 2013

Location: Phoenix, Arizona

Service Area: Primarily in the Phoenix valley area (95%) and within a 50-mile radius of the office

Services: Directional drilling and trenching for underground dry and wet utilities, restoration

Clients: Major communications carriers and their primary contractors

Lease: Mobile office, water/power/ telephone, storage for equipment

Reason for Selling: Focus on family

Employees: 8: 1 Supervisor, 1 drill operator, 1 drill locator, 1 excavator, 1 CDL, 1 office staff, plus laborers

Seller Training Period: 1-2 years

Growth Opportunities: Take on additional gas work, contracts, or increase restoration work

   Current Owner’s Responsibilities: Oversight/bidding; No Labor

Financial Highlights

  • List Price: $2,300,000

  • 2020 Annualized Cash Flow: $636,230

 

Assets of Business

  • Assets: $630,179
  • Equipment: $517,679
    • 5 Trailers: $24,500
    • 1 Mini Excavator: $41,967
    • 1 Subsite TKD Locator: $17,000
    • 2 Ditch Witch Vacuums: $60,000
    • 2 Ditch Witch Drills: $343,816
    • Various tools, equipment, and office furniture & equipment: $27,852
  • Vehicles: $112,500
    • 2 International Trucks: $52,000
    • 1 2013 Dodge Ram 2500: $25,000
    • 1 2007 Dodge 3500: $15,000
    • 1 2007 Dodge Ram: $11,500
    • 1 2000 International Dump Truck: $9,000
  • Intangible: Long-term clients, positive relationships with primary contractors within wide radius of location, low overhead, many potential paths for growth

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-Oct 2020 - Cash
Tax Return
Cash
Tax Return
Cash
Tax Return
Cash
Tax Return
Cash
Notes
20202019201820172016
GROSS SALES$1,798,042$1,404,602$1,091,921$1,488,434$1,565,085
Annualized$2,157,267
Net Income Shown on Financial Statement$461,267$125,266$158,348$265,891$346,386
ADDBACKS
Cell Phone$4,000$4,800$4,800$4,800$4,800$400/month
Auto$52,977$52,219$50,218$42,914$40,28950% Personal
Travel$2,491$1,685$5,582$2,174$5,56050% Personal
Depreciation$0$245,264$146,205$30,987$43,591
Interest$0$82,701$57,554$63,719$40,874
Meals & Entertainment$8,635$6,142$5,152$6,283$6,311
Medical$50$1,908$0$0$0
Donations$772$0$0$0$0
TOTAL ADDBACKS$68,925$394,719$269,511$150,877$141,425
Seller's Cash Flow = Total Addbacks + Net Income$530,192$519,985$427,859$416,768$487,811
Annualized
Profit Margin29.49 %37.02 %39.18 %28.00 %31.17 %
  • Profit margin 2019: 39%

  • The drop in revenue from 2016-2018 is due to restructuring. They had 3 drills and got rid of one. Work was solid, but they needed more office equipment and better infrastructure, then decided to downsize. The owner was dedicating his time building his own home and wasn’t doing as many bids.

Typical Clients and Services

Clients:

  • Major communications carriers
  • Primary contractors
  • Long-term clients

Services:

  • Directional drilling
  • Trenching
    • Fiber optic cables (905)
    • Underground utilities
    • Dry utilities
    • Wet utilities
  • Restoration: concrete and asphalt

 

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

Employees

Total Employees: 8

  • 1 Supervisor
  • 1 Drill operator
  • 1 Drill locator
  • 1 Excavator
  • 1 CDL
  • 1 Office (PT)
  • 2+ Laborers as needed

Growth Opportunities

  • Expand resources to
    • Take on additional gas work
    • Additional contracts
    • Additional restoration work

Valuation Details

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 2020 Annualized Cash Flow value 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:

 

 $636,230           x                3.6                 =         $2,290,428

Funding Example

Purchase Price:   $2,300,000

 

    12.5%Buyer Down Payment    $287,500 Must be unborrowed funds
    12.5%Seller Financing or Equity $287,500 5-year term at a rate of 4.50% = a monthly loan payment of $5,360
    75%Bank Loan $1,725,000 10-year term at a rate of 6% = a monthly loan payment of $19,151

 

  • Cash Flow: $636,230

     

  • Annual Payment:

     

    • To Seller: $64,318
    • To Bank: $229,812

       

  • Net Profit (after expenses and loan payment): $342,099

Purchase Price:

$2,300,000

$
%
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:
2020 Annualized Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2020 Annualized 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.