Business For Sale: A Tennessee Sawmill
Tim and Kim Hanback own and operate Berry Brothers Sawmill, whose primary business is making wooden crossties for the railroad industry. The business, located in Cypress Inn, Tennessee, is doing well, but Tim Hanback is changing careers: He is becoming a minister. The company's main customers are half a dozen contractors hired by railroads to replace existing track and ties. The mill also sells lumber to pallet makers and wood chips to paper mills.
Berry Brothers buys hardwood -- oak, maple, and cherry -- from private landowners and timber companies within 100 miles. The sawmill operations consist of three buildings totaling 10,000 square feet and sitting on five acres. (The land itself is not for sale.) The company employs seven full-time workers.
Tim Hanback, part owner since 1995, bought out his father-in-law in 2007. The Hanbacks then invested in an automated saw, which reduced labor costs. That has helped the mill ratchet up cash flow over the past two years. But now, Tim wants to devote himself full time to his church. If it weren't for that higher calling, the Hanbacks insist, they wouldn't be selling. Despite the recession, railroads are still upgrading tracks, and business is still strong. Says Tim: "I can't cut enough ties to keep up."
Price Rationale: The $850,000 price tag is high at seven times cash flow; similar businesses generally sell for about four times cash flow. The price is based on what the owner sees as growing demand and the potential for doubling sales within the next few years with investments in new equipment.
The Pros: The crosstie business should remain healthy: Nationwide, some 80 million to 100 million ties will need to be replaced over the next five years. The federal stimulus package could also goose demand. Tim Hanback says he would be available to consult on a part-time basis.
The Cons: Revenue has been flat for three years, and expansion is limited by geography. "It's hard to ship wooden ties more than 500 miles, so mills tend to sell in their backyards," says Robert Fowler, president of VR Mergers and Acquisitions-St. Louis, which specializes in railroad businesses.
The Bottom Line: Berry Brothers serves a stable market and stands to benefit from government stimulus.
Inc. has no stake in the sale of the business featured. The magazine does not certify the accuracy of financial or other information provided by the seller. Inquiries should be directed to broker Kurt Seraphine at Kurt.Seraphine@crye-leike.com or 615-309-7100.
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Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.