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Layout, Install, & Procurement: Corporate Furnishings

A 12.5% down payment of $384,375 returns $436,761 in the first year after debt payments!

CASH FLOW
$886,441

Specifications

  • Price
    $3,075,000

  • Revenue
    $16,283,679

  • Cash Flow
    $886,441

  • Equipment
    $451,057

  • Inventory
    $7,358

  • Account Receivable
    $378,539

  • Location
    Harrisburg, Pennsylvania

  • Service Area
    Primarily within Pennsylvania w/ small percentage in Maryland and Delaware

  • Intangible Assets
    Well-established name for over 30 years, strong and loyal client base, word of mouth advertising

 

A 12.5% down payment of $384,375 returns $436,761 in the first year after debt payments! With clientele comprised of educational facilities (65-70%), corporations (25-30%), and senior living facilities (5-10%) this contract furniture dealer and installation business had over $16MM in revenue in 2019%! Well-established for over 30 years in Harrisburg, PA, this company is known for their creations of innovative spaces. With three impressive showrooms in the Harrisburg area, their vast array of products include seating, desks, tables, classroom furniture (for K-12 and higher education), architectural space (walls, glass enclosures, panels, screens, flooring & rugs) and work tools (whiteboards, podiums, ergonomic office tools, lighting). The current owner works 25+ hours a week!

 

A highly experienced team is in place and includes 6 designers, 2 project managers, 1 business manager, 3 installers, 7 sales staff, and one person in customer service/office administration. They work both in the office and remotely, partnering with numerous manufacturers to bring their clients exactly what they’re looking for in a creative work environment. Sample showroom pieces comprise their low inventory.

 

Year-over-year growth since 2017 proves they have a strong client base and remarkable word of mouth advertising. Adding online sales, increasing social media presence, and optimizing the SEO are all areas that would add tremendous growth to the company. 

Business Highlights

  • Year Established: 1989
  • Location: Harrisburg, Pennsylvania
  • Service Area: Pennsylvania, Maryland, and Delaware
  • Clients: Educational facilities (65-70%), general commercial (25-30%), senior living facilities (5-10%)
  • Services: Furniture dealer: layout and installation
  • Lease: 3 showrooms: Location 1: 5,000 sq. ft. showroom/office + 10,000 sq. ft. warehouse + 4 docks; Location 2: 1,200 sq. ft. showroom; Location 3: 4,000 sq. ft. showroom
  • Reason for Selling: New ventures
  • Personnel: 20: 6 Designers (5 FT, 1 PT), 2 Project Managers, 1 Business Manager, 3 installers, 7 sales staff, 1 admin
  • Seller Training Period:  1 year
  • Growth Opportunities: Add online sales, social media, optimize SEO
  • Current Owner’s Responsibilities: Works 25+ hours/week

Financial Highlights

  • List Price: $3,075,000
  • Gross Sales:
    • 2019: $16,283,769
    • 2018: $13,700,427
    • 2017: $7,073,730
  • Cash Flow:
    • 2020: $1,674,022 annualized
    • 2019: $886,441
  • Assets Included in Purchase*
    • Equipment: $105,353: Racking, office equipment
    • Vehicles: $345,704: Forklift, three 24-foot box trucks
    • Inventory: $7,358 (Very low – no inventory other than sample showroom pieces)
    • A/R: $378,539
    • WIP: $1,100,000
    • Intangible Assets: Well-established name for over 30 years, strong and loyal client base, word of mouth advertising

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

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-May 2020
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
20202019201820172016
GROSS SALES$3,829,740$16,283,679$13,700,427$7,073,730$9,141,546
Annualized$1,674,022
Net Income Shown on Financial Statement$654,449$664,028$268,823$231,395$211,671
ADDBACKS
Compensation to Owner$53,134$154,558$268,823$231,395$211,671
11% Tax on total W2 Salaries$5,844$17,001$29,570$25,453$23,283
Depreciation$5,515$81,516$104,502$24,491$22,071
Interest$1,757$8,155$9,893$979$3,152
Meals & Entertainment$1,897$7,865$10,621$8,591$12,451
Contributions/Donations$600$0$0$0$0
Officer's Life Insurance$1,582$3,797$3,797$3,797$3,797
Owner's Auto$2,500$18,569$12,221$9,181$9,922
Travel$1,064$2,309$7,643$2,165$1,840
Country Club$2,500$8,643$12,014$13,608$11,121
Replacement$-33,333$-80,000$-80,000$-80,000$-80,000
TOTAL ADDBACKS$43,060$222,413$379,084$239,660$219,308
Seller's Cash Flow = Total Addbacks + Net Income$697,509$886,441$647,907$471,055$430,979
Annualized
Profit Margin18.21 %5.44 %4.73 %6.66 %4.71 %
Year-over-year growth since 2017!

Clients

  • Education (K-12 and Higher Ed)
  • Corporations
  • Healthcare Facilities

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

Services

  • Furniture supply, design, and installation

Personnel

  • 6 Designers
    • 5 FT, 1 PT
  • 2 Project Managers
  • 1 Business Manager
  • 3 Installers
    • More subcontracted out for larger projects
  • 7 Sales Staff
  • 1 Admin

Growth Opportunities

  • Add online sales
  • Increase social media presence
  • Optimize SEO

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 2019 cash flow was used with a prescribed multiple of 3.5.  With this information, the computation is as follows:

$886,441         x          3.5       =          $3,102,544

The fair market value found above positions the business list price at $3,075,000.

 

Funding Example

Purchase Price:                             $3,075,000

12.5%Buyer Down Payment:          $384,375

12.5%Seller Financing:                   $384,375

75%Bank Loan:                             $2,306,250

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $7,166.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $30,307.

After business expenses and loan payments, a buyer with a 12.5% down payment of $384,375 would retain a profit of $436,761, which results in a 114% 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 $3,075,000 with the terms listed above, the coverage ratio is 1.97. 

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:

$3,075,000

$
%
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:
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: %

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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.