Deal Flow: It’s a Sign! (Company)

Explore this Existing Franchise Sign and Graphics business with a Strong Market Presence

Signs, signs, everywhere signs…. Seriously though, in today’s Deal Flow, I’ve come across a sign and graphics franchise that looks like a promising opportunity for a hungry acquisition entrepreneur. Yes, it’s a franchise, so your first question is probably asked, “Should I even consider buying an existing franchise?” Luckily, I wrote about that: Should You Buy an Existing Franchise?

The company has a well-established market presence and strong cash flow; with lots of repeat customers. The asking price seems reasonable given the inclusion of inventory and FF&E. You’ll want to read the franchise agreements carefully and analyze local market conditions to ensure the business continues to thrive under your ownership.

Business Overview

Business Type: Existing Sign and Graphics Franchise
Location: Buncombe County, NC
Asking Price: $1,000,000
Cash Flow: $265,346
Gross Revenue: $1,800,000
EBITDA: $297,495
FF&E: $645,000 (included in asking price)
Inventory: $25,000 (included in asking price)
Rent: $7,800 per month
Established: 1995

Business Description

This sign and graphics company, operating since 1995, is a franchise with two exclusive territories in a desirable Southeastern US community. The business produces a wide range of commercial sign products, including digitally printed, illuminated, and architectural signs. The company has a strong reputation and a diverse client base that includes retailers, defense contractors, healthcare providers, and government clients. They operate out of a 4,600-square-foot manufacturing facility and a smaller 1,800-square-foot sales and light production location.

The business is equipped with state-of-the-art technology, including large format printers, CNC routers, laser engravers, and other advanced equipment, allowing it to produce a wide variety of high-quality products. Nearly 70% of the business comes from repeat customers, with the remaining 30% acquired through a comprehensive online marketing program.

The franchise system the company belongs to ranks among the top 20 in the country and provides extensive support, including training, marketing, and ongoing assistance. The owner manages the business, supported by a team of 10 employees. The owner is selling to pursue other business interests. Not a favorite reason for the acquisition entrepreneur, but the business has been around a long, long time.

Financial Analysis

1. Asking Price to Cash Flow Ratio: The asking price is approximately 3.77 times the cash flow ($1,000,000 / $265,346). This is within the typical range for businesses in this industry, which often sell for 3 to 5 times cash flow.
2. EBITDA Margin: With an EBITDA of $297,495 and gross revenue of $1,800,000, the EBITDA margin is approximately 16.5%. This appears healthy.
3. FF&E: The inclusion of $645,000 in FF&E is a significant asset, providing you with a well-equipped operation capable of producing a wide range of signage products. The high level of investment in equipment adds value to the business.
4. Rent and Facilities: The rent is $7800 per month for a 4,600-square-foot manufacturing and retail location. The lease runs through January 2029, offering some stability for you as the new owner.

Operational Analysis

1. Client Base and Market Position: The company has a strong market position in a growing community with high demand for sign and graphics services. The diverse client base, including defense contractors and government, provides stability and reduces your dependence on any single customer or sector.
2. Technology and Capabilities: The business is equipped with advanced digital production technology, enabling it to offer a wide range of products and services.
3. Employee Structure: The business employs 10 people, including a sales staff of 5. The team structure allows the current owner to focus on management while the sales staff drives revenue. The owner’s direct involvement in only 2% of sales suggests the business is not overly dependent on the owner.
4. Franchise Support: The franchise provides extensive support, including training and ongoing assistance, which can be a significant advantage for you as a new owner, especially if you have limited experience in the sign industry.

Opportunities and Risks

Opportunities:

• Expansion Potential: The business is already equipped to handle increased production, and the market’s growth in the Southeastern US provides ample opportunity for expansion. Current resources could support doubling the sales volume, according to the seller.
• Repeat Business: With 70% of revenue from repeat customers, there’s a solid foundation of loyal clients. Expanding marketing efforts could capture more of the remaining 30% market share.

Risks:

• Franchise Constraints: Operating as part of a franchise can have both advantages and limitations. You should thoroughly understand the franchise agreement, including any fees, restrictions, and obligations.
• Market Competition: The business has a strong market position, but competition in the sign industry can be brutal. You’ll need to maintain the business’s technological edge and customer service reputation to stay ahead of your competitors.
• Dependence on Local Economy: The business’s performance is linked to the local economy in its exclusive territories. Economic downturns or shifts in the local business environment could impact demand for sign services.

What do you think? Check it out and let me know!

About: Silverwave Deal Flow combs through and analyzes thousands of businesses available for sale that may be of interest to entrepreneurs looking to acquire an existing business. We are not affiliated with the business listed for sale unless otherwise disclosed.