Opportunities
Furniture Manufacturing Sold to Wholesalers & Dealers
Due to aging seller it’s priced at a low multiple of 2.75!
Specifications
This business is priced at a low multiple of 2.75 with a fully collateralized loan! A 10% down payment of $68,000 returns $159,364 in the first year after debt payments – a 234% return on investment. With $650k in assets and $1.7M in backlog, this specializes in designing and producing office furniture for dealerships selling to mid to high-end offices nationwide. Products include reception stations, conference/boardroom tables, case goods, and custom storage. Established for over 20 years in Eastern Pennsylvania, they have seen year-over-year growth in sales since 2017. The highly skilled team includes 6 product/project engineers, 24 shop personnel (1 shop foreman, 2 department supervisors, 3 craftsmen, 4 machine operators, 3 crafts-people assistants, 2 sanders, 4 assembly, and 5 general labor), 1 bookkeeper, and 3 purchasing/customer service staff, plus several contracted independent territory sales reps. Four of their shop/department leaders have a combined total of over 120 years of experience. The two owners currently serve as President and Vice-President of the company; one oversees engineering & production, the other manages the sales division. The company operates out of a 30,000 sq. ft. manufacturing plant and 1,000 sq. ft. of office space.
All furniture is offered in veneer, wood, laminate, metal, glass, or stone, allowing ample opportunity for their clients to custom order exactly what they need for their office. Strong relationships with dealers in the area is an invaluable asset to this company. Hiring more sales reps, expanding to more dealers, and working to create a larger presence in locations like New York and Boston would certainly lead to continued growth.
Business Highlights
- Year Established: 20+ years
- Location: Bucks County, Pennsylvania
- Service Area: Primarily covers New York to D.C.
- Services: Commercial furniture design & manufacturing
- Products: Reception/admin stations, conference/boardroom tables, case goods, custom storage
- Clients: Furniture dealerships for mid to high-end offices
- Lease: 30,000 sq. ft. manufacturing plant + 1,000 sq. ft. of offices
- Reason for Selling: Retirement/exit planning
- Personnel: 34: 24 shop personnel, 6 product/project engineers, 3 purchasing/customer service staff, 1 bookkeeper + contracted independent territory sales reps
- Seller Training Period: 1-5 years, if desired
- Growth Opportunities: Hire more sales reps, expand to other dealers, create a larger presence in New York
- Current Owners’ Responsibilities: 1 owner oversees sales, 1 owner oversees engineering/production
Financial Highlights
- List Price: $680,000
- Gross Sales:
- 2019: $5,188,473
- 2018: $4,848,813
- 2017: $3,329,873
- Cash Flow:
- 2019: $247,051
- Assets Included in Purchase*
- Equipment: 2 CNC machines: $100,000+, 1 Edge bander: $95,000, 1 wide belt sander: $60,000, 1 enclosed finishing booth: $50,000, 1 late model compressor, 2 sliding table saws, 2 overhead routers, numerous hand tools
- Vehicles: 1 van ($22k), 1 late model forklift ($16k), 1 24-ft. truck (lease)
- Inventory: $350,000
- Backlog: $1.7M
- Intangible Assets: Solid reputation, word-of-mouth advertising, strong relationships with dealers in the area
*amounts may vary, assets may be depreciated, replacement cost, or fair market value
Cash Flow Analysis
| Description of Financial Statement | Tax Return | Tax Return | Tax Return | Tax Return | Notes |
| 2019 | 2018 | 2017 | 2016 | ||
| GROSS SALES | $5,188,473 | $4,848,813 | $3,329,873 | $3,709,747 | |
| Net Income Shown on Financial Statement | $57,503 | $-16,931 | $18,936 | $25,254 | |
| ADDBACKS | |||||
| Compensation to Owner | $0 | $0 | $0 | $0 | |
| Other unrelated Salaries | $75,000 | $75,000 | $75,000 | $75,000 | 2nd Owner has been replaced |
| 11% Tax on total W2 Salaries | $8,250 | $8,250 | $8,250 | $8,250 | |
| Depreciation | $67,027 | $47,138 | $43,936 | $35,057 | |
| Interest | $32,226 | $43,996 | $30,750 | $27,509 | |
| Meals | $0 | $1,265 | $0 | $316 | |
| Owner's Life Insurance | $5,095 | $1,275 | $2,543 | $3,819 | |
| Auto | $1,755 | $5,722 | $1,278 | $7,439 | Mich |
| Auto | $195 | $46 | $1,224 | $2,343 | Tom |
| Owner's Employee Benefit | $0 | $0 | $13,564 | $13,542 | |
| TOTAL ADDBACKS | $189,548 | $182,692 | $176,545 | $173,275 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $247,051 | $165,761 | $195,481 | $198,529 | |
| Profit Margin | 4.75 % | 3.42 % | 5.87 % | 5.35 % |
- Profit Margin 2019: 5%
Clients
- Furniture dealers for mid to high-end offices (law firms, pharmaceutical companies, financial groups, etc.)
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Services/Products
Services:
- Commercial furniture design & manufacturing
Products:
- Reception/admin stations
- Conference/boardroom tables
- Case goods
- Custom Storage
Personnel
- 2 owners
- 1 owner manages sales division, 1 owner oversees engineering/production
- 24 shop personnel
- 1 shop foreman
- 2 department supervisors
- 3 craftsmen
- 4 machine operators (CNC and edge-banders)
- 3 crafts-people assistants
- 2 sanders
- 4 assembly
- 5 general labor
- 6 project/product engineers
- 1 bookkeeper
- 3 purchasing/customer service staff
- Contracted independent territory sales reps
Growth Opportunities
- Hire more sales reps
- Expand to more dealers
- Create a larger presence in major locations like New York and Boston
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, the 2019 cash flow was used with a prescribed multiple of 2.75. With this information, the computation is as follows:
$247,051 x 2.75 = $679,390
The fair market value found above positions the business list price at $680,000.
Funding Example
Purchase Price: $680,000
10%Buyer Down Payment: $68,000
10%Seller Financing: $68,000
80%Bank Loan: $544,000
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $1,268.
Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $6,040.
After business expenses and loan payments, a buyer with a 10% down payment of $68,000 would retain a profit of $159,364, which results in a 234% 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 $680,000 with the terms listed above, the coverage ratio is 2.82.
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.
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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