Business for sale

The business: Are you ready to dial up a deal that has proven growth potential in the always-busy telecommunications marketplace? Then consider this seven-year-old reseller of long-distance phone services. Thanks to a cost-effective, flexible product line and sales partnerships with affinity-marketing companies, this business has quintupled its sales since 1997. But here's the real reason to phone home about this company: its recent (and highly profitable) diversification into a fast-growing conference-calling division. The company's $2 million in assets include the new division's state-of-the-art conference-calling equipment. The company also has "tariffs" (legal certification) to operate as a long-distance reseller in 48 states. The owners are ready to disconnect and go their separate ways, but their 75 employees should be there to help a new owner answer this company's call.

Price: $6 million (with bonus payments to the sellers tied to future profitability of the conference-calling division)

Outlook: Put this on your speed dial: the current owners have invested in conference-calling equipment that could enable the company to handle as much as $5 million in business each month. And unlike many of its competitors in the industry, this company is busy mainly during evening hours, when its networking partners require its services. So an owner who's willing to invest in additional marketing efforts could probably sell more daytime minutes as well.

Price rationale: In the quickly evolving telecommunications market, it's not easy to tell if a deal will ultimately connect you to the wrong number. On one hand, a $6-million price tag puts this at the high end of the overall marketplace spectrum (at just over seven times earnings). On the other hand, the company has a proven business model and has made the right kind of investments in its technological infrastructure. Expect the deal to close on the high end if a strategic partner (most likely a company with other telecommunications products) gets interested. Any potential buyer who needs to create a full-scale marketing effort will go lower on price with more wiggle room on the earn-out clause.

Pros: With a fast-growth track record, a low-cost product mix, and all that equipment ready for action, how could a new buyer fail to connect?

Cons: If you aren't ready to tackle serious competition (especially on the conference-calling front), you could find yourself with crossed wires and no service instead.

Gross revenues EBITDA* Owners'
1998 $3,570,000 $150,000 $0
1999 $8,885,000 $169,000 $200,000
2000** $14,144,000 $820,000 $260,000

*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 sellers. Inquiries should be directed to Mike Sharp at Zirkle & Co. at 801-566-2800, extension 106.

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Published on: Mar 1, 2001