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New England Rowing-Equipment Manufacturer
 

Financial summary and brief description of a New England rowing-equipment manufacturer.
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The Business
A famous manufacturer and marketer of recreational rowing shells (shorter and wider -- and a heck of a lot more stable -- than those pencils with oars you see at the Olympics), priced from $1,100 to $2,500 each. Unfortunately, the 1990 death of the founder triggered a precipitous drop in sales. (Sales were $1.3 million in 1989.)

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Financial Summary
1991 1992 1993*
Gross revenues $630,000 $767,000 $850,000

Recast earnings before $29,000 ($81,000) ($18,000)

interest, taxes, depreciation, and owner compensation *projected

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Price $550,000 (including inventory and receivables, valued at $180,000)

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Outlook Rowers are few in number (there are an estimated 100,000 in the United States) but deep in devotion. This company's famous flagship model hasn't changed much since its 1971 debut, but it does have a very loyal following. Nevertheless, there are now competitors producing what many consider to be better boats, and this company doesn't own the recreational category the way it did 10 years ago.

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Price Rationale These businesses don't get sold very often -- they either go on or go under -- so there are no industry standards for price. Insiders say they'd limit the multiple to 3.3 to project a decent return on investment. The trouble is, there are no profits here. The broker has provided a pro forma for the new owner's first year, with recast earnings of $101,000 on forecasted revenues of $935,000. That would multiply to $333,000; by adding $30,000 for the receivables, you'd get a projected price of $363,000. So where does the other nearly $200,000 come from? Well, goodwill, mostly; to get the sort of name recognition this company has, the seller argues, you'd have to spend a lot more than what's being asked.

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Pros How often do you get a chance to buy the established industry leader -- and to pretend, as you float from one tony regatta to the next, doing sales and public relations, that you really did make the varsity crew team after all?

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Cons While you're pretending. . . how do you really feel about pro formas (especially ones that promise year-one sales increases for brand-new owners)? And, hey, goodwill is nice, but if it truly exists, shouldn't it show up as profit?

-- Christopher Caggiano

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Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Country Business Inc., 207-773-1745. n

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Last updated: Aug 1, 1993




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