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BUYING A SMALL BUSINESS

Business for Sale: Want to Get Into the Spy Game?

Looking for an opportunity that will tap into your inner James Bond? Check out this manufacturer and distributor of surveillance products.
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Business for Sale

THE BUSINESS: Are you afraid that in this economy it's a mission impossible to find an affordable company that's hooked into a recession-proof growth industry? Then consider this five-year-old business that manufactures and distributes surveillance products -- in hot demand during these anxious times by everyone from security-conscious property managers to law-enforcement agents to nanny-watching parents. The bulk of this company's sales and profits come from more than 30 basic products -- most of them video-related. The products have hundreds of possible variations based on specific surveillance needs. The company also distributes a long list of associated items, including VCRs, monitors, lenses, and such specially designed items as eyeglasses that come equipped with a tiny video camera in the nose bridge. A big plus: inventory turns over about 10 times annually, thanks to robust relationships with dealers and about a dozen distributors, including several of the country's largest suppliers of closed-circuit-television systems. The current staff of nine, which includes five product assemblers and a small marketing team, should continue as company operatives. However, the two owners are ready to come in from the cold.

PRICE: $450,000, plus the value of inventory, which fluctuates between $50,000 and $75,000

OUTLOOK: Get smart. Going undercover isn't just for the movies anymore. This company is well positioned to serve the swelling ranks of consumer and corporate snoops, thanks to a savvy shift in its marketing strategy. Rather than selling mainly through dealers, as it did in the 1990s, it now increasingly relies on manufacturers' representatives to forge relationships with key distributors. Since its marketing coverage is still spotty in certain regions, a growth-oriented buyer will want to negotiate new relationships in the Midwest and elsewhere. Another important goal: figure out how to boost sales from the company's Web site.

PRICE RATIONALE: Manufacturers sell according to a range of valuation methods, but by any measure, this deal looks well priced. One method sets prices at 40% of annual revenues. That suggests that this company could sell for as much as $520,000. Another common strategy would be to calculate three to four times discretionary cash flow (which equals EBITDA plus owners' compensation). In this case, that adds up to a range of $371,325 to $495,100.

PROS: If you can't be James Bond, you can still make a pretty good living selling spy tools to all those 007 wanna-bes.

CONS: Sexy as cloak-and-dagger operations may seem, you'll crash and burn if you don't keep your sights focused on mundane matters like supplier costs and marketing plans.

West Coast Manufacturer and
Distributor of Surveillance Products
Gross
Revenues
EBITDA* Owners'
Compensation
1999 $1,499,720 $85,468 $74,000
2000 $1,224,341 $43,998 $65,071
2001 $1,300,000 $73,775 $50,000

*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 Jim Levy, at Spectrum Corporate Resources, at 323-960-1129; jlevy@spectrumla.com.


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