Business for Sale: A Blue-Sky Deal
Business for Sale
The business: Growth prospects have never been brighter at this 22-year-old manufacturer of custom-designed skylights, which has grown to more than $2 million in annual sales by letting light into homes, museums, symphony halls, upscale commercial buildings, and more. The California company ended last year with its strongest sales quarter since its current owners bought the business, in 1995. Some 60% of its revenues come from jobs in-state, where construction has remained steady throughout the economic downturn. Furthermore, the energy crisis has driven up demand for skylights, which pay for themselves in energy savings. The manufacturer's state-of-the-art products also protect furniture and carpeting against fading from sunlight. But don't stay in the dark on the deal's one possible downside: the company has seven active competitors, including three that are also based in California. Most of the competition is noticeably bigger than this company is -- although some rivals focus solely on mass-produced skylights. The owners of the business are selling because they intend to move overseas. Their 22 staffers, including two installation crews and four sales and marketing professionals, appear willing to stay and help a new owner illuminate a variety of new growth opportunities.
Price: $675,000. With 60% down, the owners will consider financing a portion of the deal.
Outlook: The company has a proven track record in a business that seems well positioned, given the frequency of power outages on the West Coast, and benefits from the popularity of natural-light architecture. The big challenge for a new owner will be figuring out how to balance growth efforts between residential sales (say, a $1,000 skylight for a bedroom) and lofty projects (like a $385,000 contract to install a huge 10,000-square-foot skylight in the roof of a landmark building). The current owners rely on a three-pronged approach to selling skylights: yellow-pages advertising in ritzy residential areas, listings in Sweet's Directory (the construction industry's buyers' guide), and leads from a national service that flags promising building projects across the United States. If a new owner decides to focus on the bigger jobs, sales and profits will rise faster than they have in the past, likely requiring a move from the current leased space (about 7,000 square feet) into a facility twice as large. Don't worry about adding marketing staff, though. The current owners just hired someone to land high-end jobs in the $100,000-plus range.
Price rationale: This is a nicely priced business. Small manufacturers with $1 million to $5 million in annual revenues tend to sell for three to four times discretionary cash flow these days. The sum of EBITDA and owners' compensation for this company equals cash flow of $213,561, so the suggested sales price falls between $641,000 and $854,000. The company's actual selling price will probably hinge on the type of buyer it attracts: if the large players in the industry decide to pursue the company as a strategic acquisition, they would surely raise the ceiling on the price.
Pros: A favorable price, chic and useful products, and a sales history suggesting a recession-proof business all make this a gleaming opportunity.
Cons: Energy conservation may fizzle as suddenly as it sizzled, and the volatility of the construction industry will always be with you. If you can't cope with the uncertainties or with all those bids, try something simpler -- perhaps a sunroom off the back of your house.
|EBITDA*|| Owners' |
*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 Jack Sanders at Spectrum Corporate Resources, at 949-588-7500.
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