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STRATEGY

Business for Sale: Rocky Mountain Furniture Manufacturer
 

Do you have back-to-nature fantasies? Then consider this fast-growing and profitable three-year-old furniture manufacturer in the beautiful Rocky Mountains.
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Business for sale

The business: Are you looking for a comfortable way to deck out your entrepreneurial fantasies? Consider this fast-growing and profitable three-year-old furniture manufacturer, which produces a complete line of individually crafted American and European "country" pieces, including dining-room and bedroom items and even office furniture. A staff of 24 (including 15 assemblers and finishers) works out of a 15,000-square-foot facility; there's no hassle about storing inventory, since each piece is custom-manufactured after a 50% down payment (with delivery usually 8 to 10 weeks later). Two of the three owners are interested in focusing their efforts on other ventures, but one (who currently manages operations) is willing to stay on as either a manager or a minority partner.

Price: $1.2 million

Outlook: This company's top-quality furniture line has already won an impressive following, despite its relatively limited distribution network. (Approximately 50% of sales come from regional retail showrooms. The rest are generated by sales reps who deal with design centers and interior decorators.) A new buyer should be able to hammer out national growth by hiring an experienced marketing team to increase the number of outlets that sell the company's furniture. Another option: launching your own retail initiative, perhaps through a direct-mail catalog or a Web site. Then you could absorb the 170% to 200% markup now tacked on by retailers who carry the line.

Price rationale: Pricing a high-end niche manufacturer like this one isn't any easier than shopping for a houseful of furniture. Valuations for manufacturers vary widely. One method -- 50% of sales -- would suggest a bottom line of about $675,000, but that seems unjustifiably low for a company that has managed in three years to boost sales by nearly 400% while dramatically increasing both EBITDA and owners' compensation. If you're worried about meeting the current price, which adds up to nearly one times revenues, consider linking part of the payout to future growth in revenues and earnings.

Pros: With a small-town lifestyle, a first-class product line, a customer base that can easily afford high-end furniture, and revenue and earnings growth that's practically off the map, who wouldn't want these owners' easy chairs?

Cons: If the economy gets so tough that even customers who once seemed recession-proof start furnishing their castles out of Kmart, you'd better redecorate your business plan to concentrate on the basics. -- Jill Andresky Fraser

Financials
Gross revenues EBITDA* Owners'
compensation
1998 $277,000 ($9,000) $50,000
1999 $662,000 $15,000 $56,000
2000 $1,352,000 $185,000 $107,000

*Earnings before interest, taxes, depreciation, and amortization.


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 Mark DeGroot at Compass Advisors, 406-282-6000.


Please e-mail your comments to editors@inc.com.

Last updated: Jul 1, 2001




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