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BUYING A SMALL BUSINESS

Hey, Sailor, Wanna Get Lucky?
 

Boat-making biz seeks new captain.
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Business for sale

The business: What better way to raise anchor on the entrepreneurial lifestyle than as the owner of this thriving manufacturer of high-performance sailboats? There's global demand for this company's three basic designs, which sell to well-heeled aficionados at prices ranging from $50,000 to $200,000, depending on the model and enhancements. The company, which was founded in 1984, sold more than 80 custom-ordered boats last year through a network of about 30 authorized boat dealers with exclusive territories. Put this on your sea chart: assets include $1.9 million worth of inventory, machinery, and patents. And the slight dip in this year's EBITDA is due to additional product-development expenses -- a good sign of future growth. Although the current owner spends much of his time overseas, this company's on-site management and production operations, based on the West Coast, are positively shipshape and include a team of 50 full-timers headquartered in a leased facility with about 30,000 square feet of production space. The owner is selling because he wants to give up his international commute. But his high-quality team of managers and production staffers probably won't sail off into the sunset.

Price: $4 million to $5 million

Outlook: The U.S. economy and stock market continue to encounter choppy waters, so the buyer of any luxury business, including this one, could face some immediate challenges. Still, it seems likely that there's plenty of clear sailing ahead, since this manufacturer's exceptional reputation for producing top-performing (even record-breaking) sailboats has secured it a strong following, especially among the racing community. Another plus: this company is sheltered from cash-flow pressures by its policy of shipping its custom-made boats only after full payment has been made. Its marketing operations are currently outsourced, but if a new buyer wanted to put more wind in the sails, he or she could gear up internally and aggressively pursue more sales through international boat shows, company-sponsored races, dealer co-op advertising, and the Internet.

P rice rationale: Timing is everything. And the timing of this deal, which otherwise seems fairly priced at around five times EBITDA, is far from perfect. Today business buyers are spooked by luxury deals, since it's tough to predict how far this downturn will go. Meanwhile, banks have cut back on the amount they'll lend in any sale situation. Here's one expert's assessment: as long as the economy stays shaky, this deal will go through only if the seller cuts his sale price to $3 million or -- on a higher-priced deal -- provides 50% of the financing or a significant earn-out contingency.

Pros: If you're looking for a lifestyle play, you'll seldom find profits and sales that are as appealing as these. (In fact, they look almost as good as the sailboats themselves!)

Cons: This company is a big-ticket item. If you need to saddle yourself with a lot of debt, look for an alternative deal that will keep you out of stormy waters.

West Coast Sailboat Manufacturer
Gross
Revenues
EBITDA* Owner's
Compensation
1999 $5,100,000 $711,000 $115,000
2000 $5,900,000 $966,000 $115,000
2001** $6,100,000 $850,000 $115,000

*Earnings before interest, taxes, depreciation, and amortization. **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 John Bates at Spectrum Corporate Resources, at 949-588-7500 or bates@spectrumbusiness.com.


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Hey, Sailor, Wanna Get Lucky?


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Last updated: Sep 1, 2001




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