This business is currently under a Letter of intent as of 9 27 19 until Dec 1st. If it doesn’t close with this buyer, I will reach out. Jeff
Two major changes have occurred. 1) For several permanent reasons, their profit margin has increased significantly in 2019. I valued this based on their 2018 properly adjusted earnings which were 514K. Their 9 month year to date earnings were 624K through September 30th which annualizes to 832K. They now expect 2019’s earnings to finish above 800K which makes this company undervalued at the current sales price even with the increase in rent coming. 2) Their landlord is going to raise their lease rate to a current market rate when it expires in 2020. The amount that they are currently paying is below market. The company leases 3 of the 5 warehouse units in the same building. The Sellers can easily consolidate the 3rd warehouse storage into the first 2. This would result in an increase of 60K per year in rent. In short, their earnings are up 100K and they now know their rent will rise by 60K next year. We have decided to leave the price the same. The price will be raised as of the 1st of the year if this is not under contract by then. The increase of earnings of more than 200K more than offsets the 60K increase in rent.
This is a 21 year old company that sells windows, pre-hung doors, millwork, and hardware. They have a door and window assembly shop. The sales team is a very experienced group helps with planning and design from blueprint to the order process. The customer base is 30% light commercial and 70% custom residential remodeling and building.
The earnings for the year to date 9 months ending September 30th were 624K from revenues of 6.1M. This annualizes to 832K for the year. 2018’s earnings were 514K on revenues of 8.2M. This company is being offered at less than 1 ½ X their trailing 12 month earnings and only 2.28 times their 2018 earnings.
The company’s revenues come from long term customers that pay in a timely manner. They have approximately 80% in recurring revenue from long term customers. They also have a full pipeline of signed work. You must see the video interview in the data room above to fully understand how good this opportunity is.
The sales price is 1,175,000 plus a negotiated value for their inventory which is currently estimated to be around 90K. The sales price includes their FF & E including a lot of equipment. All offers will be countered back to full price.
The two active owners will assist with the transition and training.
Location: Denver, CO