Environmental Services for Commercial Clientele
Passive ownership with 37 skilled employees in Washington!
Passive ownership with 37 skilled employees in Washington! Located in the Seattle, Washington area, these specialists in the environmental industry have earned a 25% profit margin in 2018 and continue to experience year-over-year growth. Asbestos removal (40%), interior demolition (40%), as well as mold and lead remediation (20%) are the main services offered by this company. Commercial clients account for 80% of annual contract revenues, with residential projects producing 20%. Clients include The Federal Government, Washington State Universities and schools, local municipalities, and health care facilities. Day-to-day operations are led by a tenured vice president with management oversight of two administrative assistants, three estimators with project management experience, three operations managers, seven supervisors and the workforce. The owner currently leads in a consultant capacity mentoring and developing leadership staff while also ensuring bonding and insurance.
With a total of 9,300 square feet of space, the headquarters has ample room to further expand operations. The office is 2,800 square feet and features five private offices, a reception area, a large conference room used for meetings, training, and environmental records storage. The warehouse and shop span 6,500 square feet of indoor space allowing for staging, tool and inventory storage, and warehouse management. An expansive paved lot and gravel yard of two acres house all heavy equipment, vehicles, disposal containers, and trailers. Assets comprise all equipment necessary for safe testing, handling, and removal of hazardous materials.
Strong revenue generating initiatives could be achieved by increasing the workforce to take on contracts currently sacrificed, driving growth of the container rental business, and utilizing targeted advertising to generate new contacts.
- Year Established: 1988
- Location: South of Seattle, Washington
- Service Area: Western Washington including Pierce, King, Kitsap, and Snohomish Counties
- Services: Asbestos abatement (40%), interior demolition (40%), and lead and mold remediation (20%)
- Clients: Commercial clients (80%) including federal and state governments, municipalities, schools, health care facilities, residential (20%)
- Lease: 9,300 square feet including office with 2,800 square feet (five private offices, a reception area, a large conference room used for meetings, training, and environmental records storage), a warehouse and shop spanning 6,500 square feet of indoor space allowing for staging, tool and inventory storage, and warehouse management. An expansive paved lot and gravel yard of two acres which house all heavy equipment, vehicles, disposal containers, and trailers
- Reason for Selling: Retirement
- Employees: 37: Vice president, 3 estimators with project management experience, 3 operations managers, 8 supervisors, 2 shop techs, 2 administrative assistants, truck driver, 15 workers, and 2 AHERA building inspectors
- Growth Opportunities: Build demolition business, positive reputation draws many potential customers and additional projects can be taken on
- Current Owners’ Responsibilities: Consultant
- Seller Training Period: Up to two years
- List Price: $5,100,000
- Gross Sales:
- 2020 Annualized: $5,020,214
- 2019: $5,453,564
- 2018: $5,077,159
- Cash Flow:
- 2020 Annualized: $956,120
- 2019: $1,112,023
- 2018: $1,171,575
- Assets Included in Purchase: $1,673,324
- Equipment and Vehicles: Safety equipment, tools, job site materials, project equipment, 3 vans, 12 trucks, 2 semis
- Inventory: Project materials
- Secured Work: 3 years with school contract at $1.6MM annually, 5 years left on public school contract, $1.5MM with another school
- Pipeline: $2MM contract in downtown building, several projects at military bases, large projects with local general contractors
- Industry experts in their field of work, well-regarded by clients, long-term customers and contracts in place, many certifications
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
Jan. - June
Jan. - Dec
|Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$356,706||$-106,827||$284,856||$0||$93,336|
|Compensation to Owner||$302,379||$996,800||$525,000||$274,038||$650,001||Owner|
|Other unrelated Salaries||$80,940||$140,000||$153,149||$140,625||$172,500||H|
|11% Tax on total W2 Salaries||$42,165||$125,048||$74,596||$45,613||$90,475|
|Meals & Entertainment||$0||$0||$756||$1,341||$1,174|
|Owner's Insurance||$9,000||$18,000||$18,000||$18,000||$18,000||Within employee benefits - health and medical for owner|
|Rent Adjustment||$2,287||$40,795||$53,980||$65,575||$42,579||Onward going rent of $87,000/year|
|Replacement||$-50,000||$-100,000||$-100,000||$-100,000||$-100,000||Replace owner duties|
|Membership and Dues||$3,763||$11,386||$14,059||$15,202||$13,793||For personal condo|
|Seller's Cash Flow = Total Addbacks + Net Income||$823,560||$1,112,023||$1,171,575||$747,635||$1,072,384|
|Profit Margin||32.81 %||20.39 %||23.07 %||16.34 %||24.71 %|
- Profit Margin: 33%
Commercial clients (80%)
- The Federal Government
- The Washington State Government
- Health care facilities
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Asbestos abatement (40%)
- Demolition (40%)
- Lead and mold remediation (20%)
Total Employees: 37
- Vice President
- 3 Estimators/project managers
- 3 Operations managers
- 8 Supervisors
- 2 Shop techs
- 2 Administrative
- Truck driver (One full-time driver, but three individuals have their CDL.)
- 15 Workers
- 2 AHERA building inspectors
Subcontractors are hired for large demolition projects and concrete cutting work.
- Build demolition business
- Hire staff to increase capacity
- Positive reputation draws many potential customers and additional projects can be taken on
- Post either on the website or social media about the work completed
- Targeted advertising
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 multiple.
For this business, a 2018-2019 average cash flow was used with a prescribed multiple is 4.6. With this information, the computation is as follows:
$1,141,799 x 4.6 = $5,252,275
The fair market value found above positions the business list price at $5,100,000.
Purchase Price: $5,100,000
12.5%Buyer Down Payment: $637,500
12.5%Seller Financing: $637,500
75%Bank Loan: $3,825,000
Seller financing 5-year term at a rate of 4.5% equals a monthly loan payment of $11,885.
Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $42,465.
After business expenses and loan payments, a buyer with a 12.5% down payment of $637,500 would retain a profit of $489,596, which results in a 77% return on investment in the first year.
A lender is required to have a minimum 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $5,100,000 with the terms listed above, the coverage ratio is 1.75.
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.
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