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High Efficiency Heating and Cooling in PA

Installation and maintenance for residential customers!

CASH FLOW
$310,546

Specifications

  • Price
    $1,390,000

  • Revenue
    $988,581

  • Profit Margin
    31%

  • Location
    Southcentral Pennsylvania

  • Service Area
    Pennsylvania counties including: Adams, Cumberland, Dauphin, Franklin, Lancaster, Lebanon, York, and more

  • Equipment
    $183,000: Power tools, hand tools, office equipment, showroom displays, equipment, 1 car, 3 vans, 1 truck, 1 trailer

  • Lease
    6,000 sq. ft.: Offices, showroom, warehouse, storage

  • Intangible Assets
    Positive reviews, well-established company, well-trained and efficient team

  • Employees
    5: 1 Sales, 3 service technicians, 1 office

Serving the Southcentral Pennsylvania area, this dynamic HVAC company focuses on energy efficient solutions for customers and is busy year-round.  Services include the installation and maintenance of high efficiency heating/cooling, solar energy, geothermal systems, and associated products like water heaters or humidifiers.  This company also consults with customers so that they are well-informed when making decisions that suit their needs best.  Customers are both residential and commercial and are located in York, Lancaster, Adams, Lebanon, Dauphin, or Franklin counties. The owner currently oversees sales and daily operations and consults with staff on challenging projects. 

 

Operations are managed from a 6,000 square foot stand-alone building that features plenty of warehouse space and storage for all necessary tools, equipment, and inventory.  Amenities also include private offices, a reception area, and a drive-in, 10-foot roll-up door.  All employees work from this location including the sales representatives and three service technicians.  Some duties are subcontracted through reliable community partners. 

 

Earning nearly $1MM annually, this company has a positive reputation and many returning customers.  Continued growth could be earned by expanding the service area to include additional counties, engaging on social media to build the quantity of positive reviews, or networking to generate new commercial clients. 

Business Highlights

  • Year Established: 2009
  • Location:  Southcentral Pennsylvania
  • Service Area:  Pennsylvania counties including: Adams, Cumberland, Dauphin, Franklin, Lancaster, Lebanon, York, and more
  • Services: Installation (74%) and maintenance (3%), of high efficiency heating/cooling (8%), solar energy, geothermal systems, and associated products
  • Clients: Residential (95%) and commercial
  • Building: 6,000 sq. ft.: Offices, showroom, warehouse, storage
  • Reason for Selling: Retirement
  • Employees: 5: 1 Sales, 2 service technicians, 1 office
  • Seller Training Period: 90 days
  • Growth Opportunities: Expand the service area, build commercial client base, boost social media engagement or reviews, bring excavation in-house
  • Current Owner’s Responsibilities: Oversight of sales and installation as well as consulting 

Financial Highlights

  • List Price: $1,390,000
  • Gross Sales:
    • 2018: $988,581
    • 2017: $933,864
  • Cash Flow:
    • 2018: $310,546
    • 2017: $371,795
  • Assets Included in Purchase*
    • Equipment: $52,000: Power tools, hand tools, office equipment, showroom displays and equipment
    • Vehicles: $131,000: 1 car, 3 vans, 1 truck, 1 trailer - pre-depreciated
    • Pipeline: Booked two months out
    • Intangible Assets: Positive reviews, well-established company, well-trained and efficient team

*amounts may vary, assets may be depreciated, replacement cost, or fair market value 

Cash Flow Analysis

Description of Financial StatementTax ReturnTax ReturnTax ReturnTax ReturnNotes
2018201720162015
GROSS SALES$988,581$933,864$1,274,406$1,047,803
Net Income Shown on Financial Statement$153,270$240,902$75,622$77,327
ADDBACKS
Compensation to Owner$70,000$70,000$75,622$77,327
11% Tax on total W2 Salaries$7,700$7,700$8,318$8,506
Depreciation$34,263$26,557$33,949$53,292
Simple IRA$2,927$4,775$2,593$0Paid for owner benefit
Cell Phone/WiFi$2,100$2,100$2,100$2,100Personal expense
Repairs$36,050$15,900$54,800$0One-time repairs on property
Fuel$3,120$3,120$3,120$3,120Personal expense
Trash Pick-up$204$204$204$204Personal expense
Meals & Entertainment$912$537$422$441Personal expense
TOTAL ADDBACKS$157,276$130,893$181,128$144,990
Seller's Cash Flow = Total Addbacks + Net Income$310,546$371,795$256,750$222,317
Profit Margin31.41 %39.81 %20.14 %21.22 %
  • Profit Margin 2018: 31%

Clients and Services

Clients:

  • Residential
  • Commercial

    Selection of Services

  • High efficiency heating/cooling
    • Air conditioners
    • Furnaces
    • Heat pumps
  • Solar energy
  • Geothermal systems
  • Associated products
    • Water heaters
    • Humidifiers
    • Dehumidifiers

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

Employees

Total Employees: 5

  • 1 Sales
  • 3 Service technicians
  • 1 Office administration

Growth Opportunities

  • Expand the service area
  • Build commercial client base
  • Boost social media engagement or reviews
  • Bring excavation in-house
  • Complete energy audits

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 3-year average cash flow was used with a prescribed multiple is 4.2.  With this information, the computation is as follows:

$331,088         x          4.2       =          $1,390,570

The fair market value found above positions the business list price at $1,390,000.

Funding Example

Purchase Price:                             $1,390,000

12.5% Buyer Down Payment:          $173,750

12.5% Seller Financing:                   $173,750

75% Bank Loan:                             $1,042,500

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $3,239.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $13,700.

After business expenses and loan payments, a buyer with a 12.5% down payment of $173,750 would retain a profit of $127,818, which results in a 74% return on investment in the first year.

A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $1,390,000 with the terms listed above, the coverage ratio is 1.63. 

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.

Purchase Price:

$1,390,000

$
%
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:
2018 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2018 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.