Business for Sale: A Dallas-area home theater business, priced at $1.9 million.
"Dallas is known for its conspicuous consumption," says this month's seller. "Here, the wardrobe of choice is Gucci, Fendi, and everyone wants to live in a 'Dallas Palace." And one thing every Dallas Palace needs is a state-of-the-art home entertainment complex--which this business designs and installs. Nationally, the average home theater costs about $25,000. This business operates at the high end of the market. Its lush media rooms run more than $67,000 on average, and some systems go much higher.
Referrals produce 75 percent of sales, and partnerships with several interior designers and homebuilders bring in most of the rest. The service side of the business (including installation and integration work) produces about 65 percent of gross sales and 70 percent of income. Sales of flat-screen TVs, audio systems, speakers, and other equipment account for the rest.
The company specializes in theater systems that are integrated into an entire house, with a single remote control able to operate not only a projection screen and lights but also speakers in every room, security alarms, window shades, and heating and cooling systems. Once the company even networked an irrigation system into a home media package.
The Asking Price $1.9 million, including approximately $570,000 worth of inventory. The company pays $5,100 per month to lease a 4,500-square-foot retail show room. The owner says he will provide a buyer with transitional services for a month after the deal closes. He will also finance up to 10 percent of the sale price.
Price Rationale A certified valuation in October 2006 pegged the value of this company at $1.8 million. However, both revenue and cash flow for the year came in lower than the owner's forecast, according to the written valuation, and one large sale accounted for a big chunk of revenue. Given all that, the price tag should come down.
The Pros Founded in 1983, this is an established service business located in a good regional market. Plus, demand for luxury-priced media rooms is projected to grow by between 15 and 20 percent annually over the next five years, according to Bill Ablondi of Parks Associates, a research firm in Dallas.
The Cons Although the owner says his four employees are seasoned, the business depends heavily on him. Replacing him with a qualified general manager will be crucial--and not particularly easy. Home theater integrators everywhere struggle to hire qualified personnel, and that can limit their growth, says Ablondi.
The Bottom Line The company enjoys longtime employees and a lot of referral business--two signs of stability. And trends in the consumer electronics industry, where manufacturers have conditioned consumers to upgrade every three years, should ensure repeat business. The key to this deal will be negotiating the price.
Inc. has no stake in the sale of the business featured. The magazine does not certify financial or other information provided by the seller. Inquiries should be directed to Gregory Isaacs, Sterling Business Advisors (214-553-1166 or Gregory@sterlingbusinessadvisors.com).
Inc. also publishes paid business listings in the back of the magazine.