Business for Sale

The business: Mix a great recipe for cookie dough and an untapped market niche. Bake for six years. Out pops this $4.6-million company, which supplies gourmet food and coffee to the fund-raising community. Schools, religious organizations, and other nonprofits use this business's catalog to sell a variety of food products in much the same way that Girl Scouts sell cookies. The nonprofits take orders, collect the money, and turn it over to the company; they charge a markup to satisfy their fund-raising needs and are responsible for delivering the food to their donors. The company started out in its owners' kitchen, with plans to operate only during school-year months. Growth opportunities proved too delectable to resist. Now this easy-bake business manufactures and distributes its products to several thousand fund-raising groups on a year-round basis while also serving a network of independent contractors and wholesalers that have their own nonprofit clientele. An added sweetener: thanks to the company's C.O.D. payment requirement, cash flow has been strong enough to finance growth initiatives. During its peak season, the fall, the business satisfies demand by borrowing time on another company's industrial-baking equipment, which avoids the costs of idle capacity. The owners are now cooking up a new business venture, but their 60 or so employees (including bakers, customer-service reps, and managers) aren't ready to hang up their pot holders just yet.

Price: $3.95 million plus inventory (between $200,000 and $400,000). The owners may be willing to finance $500,000 of the sale price.

Outlook: How sweet it is! The company's marketing recipe is so effective that its sales were on track to rise by more than 15% during the current fiscal year -- until the September 11 tragedies prompted about 20% of its East Coast customers to cancel fund-raisers. If a new owner wants revenues to rise, it would make sense to stick to the basic marketing mix: three-times-a-year mailings to schools, churches, youth groups, and other nonprofits; attendance at PTA and sports-group conventions; and sales incentives for new-customer referrals. By broadening the geographic reach, a new owner could sign up more independent contractors and wholesalers as large-scale customers.

Price rationale: Positively delicious. These days, food manufacturers and distributors sell within the admittedly broad range of four to eight times EBITDA. For this company, multiply four and eight times $750,000, which represents the current fiscal year's EBITDA plus owners' compensation. Since that calculation suggests a price between $3 million and $6 million, the company appears to be priced nicely near the lower end.

Pros: Great growth prospects, cash flow, and marketplace penetration. And we saved the best bite for last. Once the current owners make it through their busy season (the fall), they work only half-time -- meaning that for most of the year, a new owner can spend some time loafing.

Cons: The deal is asset poor. It doesn't include real estate or big equipment. What's more, meeting peak demand depends on the company's special manufacturing arrangements, so a buyer should make sure that the people who help make the desserts don't up and, well, desert.

Northeastern Gourmet-Food Distributor
EBITDA* Owners'
2000 $3,816,194 $257,419 $90,615
2001 $4,598,989 $664,011 $83,650
2002** $4,600,000 $665,000 $85,000

*Earnings before interest, taxes, depreciation, and amortization.
**Projected. Fiscal year ends on July 31.

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 Al Horvath at VR Business Brokers, at 410-772-0006.


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