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BUYING A SMALL BUSINESS

Hush Money

For sale: a manufacturer of sound isolation booths and acoustics products in southern Oregon.
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The business: A couple started this acoustics business in 1999. She designed sound isolation booths, and he built them in the back room of an auto body shop he owned. Today they sell a range of sound-baffling products to recording artists, voice-over talent, the government, and manufacturers.

The company crossed the million-dollar mark in 2004, and the owners say the business is on pace to gross $1.5 million this year. The couple owns other businesses that they would prefer to concentrate on, so they are looking for a buyer who can take this company to the next level. But that's not to say that they're sitting idly by, waiting for a sale. They are in the early stages of building a new facility (adjacent to their present site) that would make it possible for the business to double production. Depending on the timing of a deal, they'll build to a buyer's specifications.

Government purchases represent about 15 percent of sales, a figure that a new owner could increase, especially if he or she has federal contracting know-how. The company could also expand in the audiology market. Currently there are seven employees. The sellers say they will help a new owner during a transition period. They've also prepared extensive manuals on how to operate the business and the manufacturing plant.

Price: $2 million. Assets include equipment, $70,000 in inventory, and three acres of land. The owners would consider financing up to $500,000 of the purchase themselves.

Price rationale: The business is established but relatively small, which means that a buyer would have to sustain fast growth for several years to justify paying the asking price.

Pros: The firm has no debt and could expand in the government and audiology markets. Location is also a plus. A state agency may help finance the deal, and a buyer who hunts and fishes will love the area.

Cons: The region's labor pool is limited, especially when it comes to senior managers. "You don't find an M.B.A. anywhere in our 3,500-population town," says one of the owners.

The bottom line: It's a promising business, provided that a buyer is patient. In order to realize a good rate of return, a new owner will have to focus on long-term growth.

Company financials:

Gross
Revenue
EBITDA* Owners'
Comp
2003 $928,986 $153,605 $55,278
2004 $1,194,093 $182,738 $80,000
2005 $1,087,715 $92,216 $80,000

*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 Frank Triantos of Affiliated Business Consultants at 800-617-4204.

Last updated: Sep 1, 2006




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