The Business: You may want to hit the road, Jack, with this fast-growing Texas-based moving company. Its market niche--handling national and international household relocations for the U.S. military--sees profits that are 10% to 15% higher than those earned in the general residential-moves market. Revenues from the company's 3,000 or so moves each year are supplemented by storage fees for its 30,000-square-foot warehouse. The business's assets include multiple tractor-trailer combinations and a valuable Interstate Commerce Commission permit that allows it to transport materials throughout the continental United States. The two owners, who bought this 33-year-old business in 1996 and nearly doubled its revenues with an aggressive sales campaign, are ready to, well, move on--but their 19 staffers should stay put.
Outlook: U-Haul, eat your heart out. The current owners steered this company into the fast lane by avoiding the competition for residential households. Along the way, the owners managed to boost profit margins from about 15% to 25% by charging customers high-octane rates, enough to cover the 75 or so days it typically takes the company to collect accounts receivable from the military. The owners estimate that this company could handle a 25% increase in business without making new investments in either staff or equipment.
Price Rationale: With a well-priced business, as with a well-packed suitcase, it's amazing how nicely everything fits. In the current market environment, moving companies tend to sell within a range of 1.7 to 2.5 times their discretionary (or recast) earnings. With this company, that suggests a range of $551,680 to $811,295, based upon 1998's earnings (which it probably makes sense to rely on, given how fast this mover is growing). With that range, the $600,000 price tag feels about right, given the company's upside (high profit margins, strong customer ties) and downside (its slow collection cycle). The current owners intend to use $400,000 from sale proceeds to pay off a Small Business Administration loan; if you need capital, you should be able to get a similar loan at today's lower rates.
Pros: With an inexpensive price tag, high profit margins, and plenty of room for future growth, this business could make you a real mover and shaker.
Cons: If you're not prepared to think outside as well as inside the box--which in this business means keeping your steady customers very, very happy--get packing. --Jill Andresky Fraser
|Gross Revenues||Recast Earnings***|
*Transition year during which new owners bought this company. Financial results are estimated, based upon the consolidation of former and current owners' results for partial year 1996.
***Before depreciation, interest, taxes, and owners' compensation
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 Jeff Jones of Certified Business Brokers at 713-680-1200.