An overview of a tent-rental company offered for sale. Includes the price, how the business was valued, the outlook of future sales, and the pros and cons of the purchase.
The Business: If life should be a party but your current existence is a grind, consider staking your claim on this tent-rental company. With nearly 20 years in business and about 50 loyal, repeat customers, it serves the middle range of the special-events market (wine festivals, boat shows, and other commercial events) rather than cost-conscious June brides and other party-giving consumers. Fees for its tents (it has 700,000 square feet worth) typically range from $5,000 to $45,000 an event, with most of the company's cash flow tied to peak rental months of May through October. Its key assets? You guessed it: tents, tents, and more tents--2,500 in all, from small to huge. Each has a life expectancy of 2 to 15 years, depending on how often and under what conditions it's used. The company also owns six trucks, which help transport its products from a central warehouse to the seven states it now serves. The current owner? Well, he's ready to fold up his own tent and retire, but his general manager and most other key staffers should be ready to party on.
Price: $1,100,000. Seller financing is available with $250,000 down.
Outlook: The best reason to get under this big top may just be the company's growth potential. Its current owner set it on a fast-growth course during the mid 1990s, mainly by aggressively pursuing new customers, including churches, colleges, and government agencies. The company's sales have increased by 64% since 1995, and to make this new growth more profitable, the company recently started manufacturing tents. The owner estimates that his new do-it-yourself approach could add about $50,000 to current profits. As for future growth, a buyer could branch out into new states (especially southern ones, which might help improve the current cash-flow imbalance by increasing the bookings season) and add new products to the limited rental list of tents, tables, chairs, and so forth.
Price Rationale: Equipment-rental companies currently sell in the range of 95% to 100% of sales, which means this company is worth $1.09 million to $1.15 million. The kinds of factors that a prospective buyer should look at include the age of the equipment (pretty good here, since these tents average about four years in age and the company makes 3% to 5% of its revenues by selling its older equipment) and debt load (a big plus, since this rental business is debt free, despite its erratic cash-flow pattern).
Pros: Enough tents to keep Lawrence of Arabia happy, loyal customers, and a proven growth record. Let the party begin!
Cons: There's always the risk of an unexpected shower (which, for this company, will probably take the form of local competitors, of which there are plenty, trying to underbid you). To stay dry, keep up those cost-control initiatives and, above all else, look for ways to broaden your market. -- Jill Andresky Fraser
*Before interest, taxes, depreciation, and owner's compensation. **Projected
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 Marc Dosik, VR Business Brokers, at 410-772-0006.