Modern Security Automation for Commercial Clients
Reoccurring revenue and more than $12MM in backlog
Reoccurring revenue and more than $12MM in backlog. The revenue mix is 40% reoccurring maintenance, 60% new clients/installs with new client projects turning into long-term maintenance contracts. These specialty contractors focus on power, automation, and data/security installations with associated maintenance, leveraging their $748,000 assets to earn over $10,000,000 in 2018. The team works with large companies including data centers, manufacturers, distribution centers, manufacturers as well as municipalities and schools.
Projects often include large-scale security system installation, industrial machine installation and maintenance, complete electrical installation, data center electrical work, and the installation of building automation with related controls. The team can also take on general contracting work but have chosen to focus on data/security and automation in recent years. Seven of the over fifty employees work at the office focusing on administrative tasks, while the rest are union employees who work on-site. The well-rounded crews include project managers as well as supervising managers. The owners currently focus on estimations, project management and business oversight and are not in the field.
The $748,000 in assets includes Shop tools, furniture, fixtures, electric benders, tugger, high voltage tester, 2014 John Deer tractor, off road ATV, conduit bender a track loader, 9 Ford trucks, 6 Chevy Trucks, 2 trailers, 1 load haul and 1 GMC truck. The company has shown good growth over the years and the transition to electrical focused services has benefited this company. A continued dedication to automation, data centers, and security could generate future growth.
Operations are headquartered at the 5,500 square foot facility that features a large warehouse with open and rack storage as well as an office with six private offices, a conference room, and a break room.
- Year Established: 2007
- Location: Missouri
- Service Area: Missouri and Kansas
- Services: Specialized electrical and low voltage work including automation, security, infrastructure, and industrial projects; general contracting
- Clients: Large companies, municipalities, venues, manufacturers, distribution centers, schools
- Lease: 5,500 sq. ft.: Large warehouse with open and rack storage; Office: 6 Private offices, conference room, break room
- Reason for Selling: Retirement planning
- Employees: 50+: 7 Administrative, 43 union field crew including project managers and supervisors
- Seller Training Period: Owners are willing to remain a part of the team for up to one year
- Growth Opportunities: Expand automation projects as well as data center and security work
- Current Owners’ Responsibilities: Estimates, project management and business oversight
- Revenue Mix:40% reoccurring maintenance, 60% new clients/installs. New client projects turn into maintenance
- List Price: $6,150,000
- Gross Sales:
- 2019: $12,555,295 Annualized
- 2018: $10,653,512
- 2017: $11,051,806
- Cash Flow:
- TTM: $1,203,009
- 2019: $1,375,134 January – October
- 2018: $1,010,306
- 2017: $1,122,958
- Assets Included in Purchase*
- Equipment: $146,000: Shop tools, furniture, fixtures, electric benders, tugger, high voltage tester, 2014 John Deer tractor, off road ATV, conduit bender and a track loader
- Vehicles: $601,000: 9 Ford trucks, 6 Chevy Trucks, 2 trailers, 1 load haul and 1 GMC truck. However, owners will keep 2018 Chevrolet and the 2019 GMC
- Secured Work: $12,000,000
- Intangible Assets: Positive reputation, relationships with large companies, understanding of specialized work
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
January - October
|Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$938,266||$-474,128||$543,686||$560,203||$560,675|
|Compensation to Owner||$294,493||$334,892||$334,892||$333,392||$297,008||Owner 1|
|Other unrelated Salaries||$228,216||$255,360||$255,360||$294,206||$214,608||Owner 2|
|11% Tax on total W2 Salaries||$57,498||$64,928||$64,928||$69,036||$56,278|
|Meals & Entertainment||$12,944||$0||$6,040||$8,721||$4,149|
|Owner's Employee Benefit Program||$0||$0||$0||$26,000||$26,000||Owner 1|
|Owner's Employee Benefit Program||$0||$0||$0||$26,000||$26,000||Owner 2|
|Replacement||$-166,666||$-200,000||$-200,000||$-200,000||$-200,000||Owner Replacement $100k each|
|Seller's Cash Flow = Total Addbacks + Net Income||$1,375,134||$1,203,009||$1,010,306||$1,122,958||$990,336|
|Profit Margin||13.14 %||10.86 %||9.48 %||10.16 %||13.43 %|
- Distribution centers
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Specialized electrical and low voltage work:
- Building automation
- Industrial projects
- Fiber cabling
- Fire alarms systems
- General contracting
Total Employees: 50+
- 5 Administrative
- 43 union field crew:
- Project managers
- Electricians (inside wiremen and data techs)
- Owners (2)
- Note a -$100,000 replacement in cash flow
- The owners would be willing to stay for one year. They would be willing to stay longer than a year if the new owner would allow for part time work.
- Owner 1: Works on short term projects, mostly works with ongoing customers and existing companies, bidding
- Owner 2: Works on long term projects such as data centers, building automation, HVAC etc.
- A new owner does not have to be MBE certified
- Expand automation projects
- Work to increase data center
- Build security work revenues
- Continue specialization in these areas to gain larger projects with trusted companies throughout the region.
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 multiple is prescribed 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 multiple.
For this business, a 3-year average cash flow was used with a prescribed multiple is 4.9. With this information, the computation is as follows:
$1,261,141 x 4.9 = $6,179,591
The fair market value found above positions the business list price at $6,150,000.
Reasoning behind above average multiple include:
- Consistently over $1M in cash flow
- $10,000,000+ in revenue
- Development of 50+ managers and employees
- $12M in secured work
Purchase Price: $6,150,000
10% Buyer Down Payment: $615,000
15% Seller Financing: $922,500
75% Bank Loan: $4,612,500
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $17,198.
Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $51,208.
After business expenses and loan payments, a buyer with a 10% down payment of $615,000 would retain a profit of $440,264, which results in a 72% return on investment in the first year.
At a proposed purchase price of $6,150,000 with the terms listed above, the coverage ratio is 1.54.
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.
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: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
3 year avg
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
3 year avg
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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