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Manufacturing of Envelopes with $1.2M in Assets – Essential Business

635 reoccurring clients per month!

CASH FLOW
$614,601

Specifications

  • Price
    $2,400,000

  • Revenue
    $5,585,539

  • Cash Flow
    $614,601

  • Equipment
    $532,500

  • Location
    Massachusetts

  • Service Area
    National, with 70% of clients in New England

  • Reason for Sale
    Retirement planning

  • Employees
    25: 2PT & 23FT includes 3 FT Client Service Managers, 1 HR and Accounting, 1 Driver, 2 PT Assistants, 18 Production

  • Intangible Assets
    Long-term client relationships

This essential envelope manufacturing and cold web printing business has 635 clients – the vast majority of them reoccurring! Established in 2002 and located in Massachusetts, their strategic acquisition of other companies in the industry has helped diversify services and customer base, yet still allow for quick turnaround on projects.

Services include envelope manufacturing as well as cold web and business form printing. There is a spike in sales from September to November each year, due to increased direct mail marketing for the holiday season.  At other times of the year, the business has a balanced client base for direct mail marketing and financial services businesses and well as printer envelope converting.

Clients include direct marketing, financial industry and printers, with many repeat clients. The largest customer in 2019 made up less than 10% of sales.  Currently 60 jobs are in the pipeline with additional quotes completed.

Most customers pay Net 30 with smaller customers able to order to pay online with a credit card.  There is minimal bad debt, with none in 2019.  A few clients are Net 60 or COD.

Growth opportunities include continuing strategic acquisition plan that the business has followed over the past several years and engage in direct selling efforts rather than work through reselling merchants and brokers (as the number of brokers in the industry is getting smaller). 

Business Highlights

  • Year Established: 2003
  • Location: Massachusetts
  • Service Area: National, with 70% of clients in New England
  • Clients: 700 clients with an average 7 new clients/mo.  Vast majority are return clients
  • Services:  Envelope manufacturing and cold web printing
  • Building: 25,000 sq. ft facility
  • Reason for Selling: Retirement Planning
  • Personnel: 25: 2PT & 23FT includes 3 FT Client Service Managers, 1 HR and Accounting, 1 Driver, 2 PT Assistants, 18 Production
  • Hours of Operation: 1st shift 6am-3pm, Partial 2nd shift 2:30pm-12am
  • Seller Training Period: 6 months - owners are willing to stay on if needed.
  • Growth Opportunities: Direct sales rather than broker marketing; continue strategic acquisition strategy
  • Current Owner’s Responsibilities: Owner 1: Company Management; Owner 2: Strategic Marketing

Financial Highlights

  • List Price: $2,400,000
  • Gross Sales:
    • TTM: $5,585,539
    • 2019: $5,494,023
  • Cash Flow:
    • TTM: $614,601
    • 2019: $480,623
    • 2018: $597,954
    • 2017: $457,640
  • Assets Included in Purchase*
    • Equipment: $532,500 Includes 4 pieces of converting equipment; 4 offset printers; 8 color cold web printers; 2 digital envelope presses; 3 folders
    • A/R: $525,000
    • Inventory: $203,350
    • Intangible Assets: Long-term client relationships

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

Cash Flow Analysis

Description of Financial StatementP&L Statement
March 2019-Feb 2020
P&L StatementTax ReturnTax ReturnNotes
2019-2020201920182017
GROSS SALES$5,585,539$5,494,023$5,671,094$5,249,094
Net Income Shown on Financial Statement$70,887$40,741$79,794$9,191
ADDBACKS
Compensation to Owner$489,310$496,319$559,962$507,115
11% Tax on total W2 Salaries$53,824$54,595$61,596$55,783
Depreciation$88,270$0$24,534$25,936
Interest$19,792$0$22,068$9,615
Meals & Entertainment$3,026$8,888$0$0
Contributions$904$945$0$0
Replacement$-150,000$-150,000$-150,000$-150,000$75k for each
Auto$9,589$9,300$0$0
Auto Lease$10,609$11,598$0$0
Owner's Life Insurance$7,780$7,752$0$0
Travel$160$485$0$0
Amortization$10,450$0$0$0
TOTAL ADDBACKS$543,714$439,882$518,160$448,449
Seller's Cash Flow = Total Addbacks + Net Income$614,601$480,623$597,954$457,640
Profit Margin11.00 %8.75 %10.54 %8.72 %
  • 11% Profit Margin

Clients

  • Direct marketing
  • Financial Industry
  • Insurance and Banking
  • Real estate and law offices
  • Printers

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

Services

  • Envelope Manufacturing
  • Envelope Printing
  • Web Printing
  • Business Form Printing
  • Specialty Items
  • Shipping and Storage
  • Online Services

Personnel

  • 3 FT Client Service Managers
  • 1 HR/Accounting
  • 1 Drive
  • 2 PT Assistants
    • 1 supports HR/Accounting functions
    • 1 supports Marketing 
  • 18 Production

Growth Opportunities

  • Direct selling rather than work through reselling merchants and brokers
  • Strategic acquisition strategy

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 three-year average cash flow was used with a prescribed multiple of 4.25.  With this information, the computation is as follows:

$564,393         x          4.25     =          $2,398,670

The fair market value found above positions the business list price at $2,400,000.

Funding Example

Purchase Price:                             $2,400,000

12.5%Buyer Down Payment:          $300,000

12.5%Seller Financing:                   $300,000

75%Bank Loan:                             $1,800,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $5,593.

Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $23,655.

A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $2,400,000 with the terms listed above, the coverage ratio is 1.61. 

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:

$2,400,000

$
%
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:
3 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:
3 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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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.