Our client is a well established retail flooring company serving affluent homeowners, general contractors and other commercial accounts in the San Francisco Bay Area for over 30 years. The company operates from a highly visible store and a large warehouse. It has a very loyal, repeat customer base. The Company has a great reputation, with sterling Yelp reviews, based on its long history of customer satisfaction.
The Company has highly experienced and long tenured salespeople and in-house installers, as well as a store manager and installation supervisor, making it an easy-to-operate business for a new owner. There is just one working owner. Sales of just over $5,577,154 in 2018 grew 9.7 percent from sales of $5,083,511 in 2017, while the Sellers Discretionary Cash Flow increased to $761,896, compared to $694,756 in the prior year. The EBITDA for 2018 was $650,506. Growth could be achieved simply by increasing the store hours to match those of local competitors, and by soliciting more over-the-counter business from general contractors (25% of sales). Major growth could be achieved by opening a second location.
The business has been pre-approved for an SBA loan with a 15 percent down payment ($400,000) from the Buyer. The Sellers took the guesswork out of the process by engaging GCF Valuation, an SBA-approved appraisal firm, for a certified valuation of the business. GCF valued the business at $2,860,000. GCF projects that earnings will grow 3 percent in 2019, with discretionary earnings of $784,753 and EBITDA of $670,022. Based on this projection, a buyer will realize a 46.7 percent return on his or her down payment, after taxes and debt service, in the first year post-sale.