Opportunities
Home Remodeling, Additions, and Finish Carpentry Services
Project Manager, Office Manager, and team of laborers already in place!
Specifications
A solid team is already in place for this home remodeling company! With year-over-year sales growth since 2017, this well-established business specializes in kitchen and bath remodels, additions, finish carpentry, and custom cabinetry design and installation. Serving Lincoln and surrounding communities for nearly 30 years, this highly skilled design staff offers an unmatched experience from beginning to end. Clients include remodeling homeowners looking for a tune-up or additions, and residential/commercial contractors looking for interior finishes in a newly built home. An office manager is already in place, handling all incoming phone calls and e-mails from new and existing clients, as well as quoting, invoicing, scheduling, and ordering. A project manager runs the jobs on site, and 6 experienced laborers make sure the work is top notch from start to finish.
Home remodeling and additions account for 50% of their revenue, 40% is finish carpentry, and 10% custom cabinetry. Assets include $78,000 worth of portable equipment, shop equipment, and hand tools used by three crews of laborers.
Growth opportunities are endless. Adding another project manager would allow the company to take on more jobs. The demand for home remodeling and additions has increased in recent months due to lower interest rates on home loans and construction loans. Priced at $570,000, a 10% down payment of $57,000 returns $109,787 in the first year after debt payments – a 193% return on investment.
Clients
- Residential/commercial contractors
- Remodeling homeowners
Income Analysis
Average Sale Size/Range:
- Remodels/Additions: $80k-$130k
- Interior Finish: $8k-$12k
- Custom Cabinetry: $30k
Business Highlights
Year Established: 1992
Location: Lincoln, Nebraska
Service Area: Lincoln and surrounding communities within 30-mile radius
Services: Home remodeling & additions, finish carpentry, custom cabinetry
Clients: Remodeling homeowners & residential/commercial contractors
Lease: 3,500 sq. ft.
Reason for Selling: Retirement planning
Personnel: 9: 1 owner, 1 office manager, 1 project manager, 6 laborers
Seller Training Period: 6 months - 1year
Growth Opportunities: Add another project manager to take on more remodels.
Current Owner’s Responsibilities: Works 30 hours/week; meeting with staff, initial meetings with clients and project manager, visiting job sites at various stages of the project for quality assurance
Financial Highlights
- List Price: $595,000
- 2020 Annualized Cash Flow: $214,402
*amounts may vary
Cash Flow Analysis
| Description of Financial Statement | P&L Statement Jan-Oct 2020 - Accrual | P&L Statement Accrual | Tax Return Cash | Tax Return Cash | Notes |
| 2020 | 2019 | 2018 | 2017 | ||
| GROSS SALES | $893,892 | $988,376 | $718,094 | $615,674 | |
| Annualized | $1,072,670 | ||||
| Net Income Shown on Financial Statement | $33,036 | $-44,776 | $100,880 | $2,975 | |
| ADDBACKS | |||||
| Compensation to Owner | $28,750 | $57,500 | $14,000 | $62,170 | |
| 11% Tax on total W2 Salaries | $3,163 | $6,325 | $1,540 | $6,839 | |
| Interest | $1,035 | $2,150 | $3,780 | $4,688 | |
| Meals & Entertainment | $345 | $1,161 | $689 | $698 | |
| Auto-Personal Use | $12,012 | $22,439 | $23,075 | $11,612 | 100% Personal |
| Travel | $0 | $0 | $426 | $1,255 | 100% Personal |
| Director's Fee | $0 | $0 | $28,000 | $0 | Paid to Owner |
| One-Time Building Expense | $100,327 | $107,377 | $0 | $0 | |
| TOTAL ADDBACKS | $145,632 | $196,952 | $71,510 | $87,262 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $178,668 | $152,176 | $172,390 | $90,237 | |
| Annualized | |||||
| Profit Margin | 19.99 % | 15.40 % | 24.01 % | 14.66 % |
Clients
- Remodeling Homeowners
- Residential/Commercial Contractors
Services
- Kitchen/bath remodels
- Home additions
- Finish carpentry
- Custom cabinetry
Personnel
- 1 owner
- 1 office manager
- 1 project manager
- 6 laborers
Growth Opportunities
- Add another project manager to allow company to take on more remodels
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 2-year average 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:
$183,289 x 3.15 = $577,360
Funding Example
Purchase Price: $570,000
| 10%Buyer Down Payment | $57,000 | Must be unborrowed funds |
| 10%Seller Financing or Equity | $57,000 | 5-year term at a rate of 4.50% = a monthly loan payment of $1,063 |
| 80%Bank Loan | $456,000 | 10-year term at a rate of 6% = a monthly loan payment of $5,063 |
- Cash Flow: $183,289
- Annual Payment:
- To Seller: $12,752
- To Bank: $60,750
- Net Profit (after expenses and loan payment): $109,787
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: 2-year average cash flow |
$ |
| Annual Debt Service: | $ |
| RATIO: |
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
|
Cash Flow: 2-year average 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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