Deal Flow: Precision Agricultural Service Business

A Precision Agriculture Prime Opportunity in the Ag-Tech World

This precision agriculture business seems to have all the right ingredients for a solid investment: a strong market position, proven cash flow, and a decent pile of assets. Sure, the asking price is a bit steep, but when you factor in the inventory, equipment, and the growth potential, it’s a no-brainer for anyone with a background in ag or ag-tech-driven services. That being said, don’t get lazy — due diligence is everything. Nail down a smart purchase agreement, especially with existing partners, and you’ve got a shot at a serious win.

Business Overview

Business Type: Full-Service Precision Agriculture Company
Location: Mississippi (serving MS, AL, NW FL)
Asking Price: $6,500,000
Cash Flow: $1,200,000
Gross Revenue: $7,000,000
EBITDA: $900,000
FF&E: $1,000,000 (included in asking price)
Inventory: $2,000,000 (included in asking price)
Established: 2016

Business Description

This full-service precision agriculture company offers equipment and expertise to help farms implement advanced agricultural technology across Mississippi, Alabama, and Northwest Florida. The business differentiates itself from larger competitors through superior customer service. Established in 2016, it has quickly grown into a leader in its market. There are limited competitors, and the current competition lacks specialization and access to similar product lines.

Financial Analysis

• Asking Price to Cash Flow Ratio: The asking price of $6,500,000 is approximately 5x the cash flow.. This seems a bit on the high side, but the specialized nature of the business and growth potential may justify the premium.
• EBITDA Margin: With an EBITDA of $900,000 and gross revenue of $7,000,000, the EBITDA margin is approximately 12.9%. This is an acceptable margin for a service-based business but could improve with economies of scale or efficiency improvements.
• FF&E and Inventory: The business includes $1,000,000 in FF&E, as well as $2,000,000 in inventory. These significant assets suggest that the business is capital-intensive, but the included inventory reduces the need for immediate capital investment post-purchase.

Operational Analysis

• Employees: The business operates with a team of 20 employees. The size indicates a moderately large operation, but potential buyers should evaluate the roles and skills of the staff to ensure they are essential to operations and growth.
• Facilities and Equipment: The business has $1,000,000 in FF&E, which likely includes precision agricultural equipment, tools, and technology essential to the company’s service offerings. The buyer should assess the condition and maintenance of these assets to determine their long-term value.
• Customer Base and Market Reach: The company serves a wide geographic area across Mississippi, Alabama, and Northwest Florida. Its focus on precision agriculture and superior customer service provides a niche advantage, making it less vulnerable to competition.

Growth Opportunities and Risks

Opportunities:

• Geographic Expansion: There might be significant growth potential by expanding into new territories. As demand for precision agriculture grows, the company could capture more market share in other regions.
• Service and Product Expansion: The business could diversify its offerings by adding complementary products and services, such as advanced data analytics, to further differentiate itself from competitors.
• Increased Adoption of Precision Agriculture: The global trend toward precision farming and sustainable agriculture practices will continue to drive demand for the company’s services.

Risks:

• Capital-Intensive: Precision agriculture businesses require substantial investment in technology, equipment, and inventory. Managing inventory turnover and cash flow could be challenging if market demand fluctuates.
• Market Dependency: The company’s success is tied to the agricultural industry in its service areas. Economic or environmental factors affecting local farms could impact the business.
• Key Personnel: The seller has indicated that some partners are interested in staying with the company as part-owners or employees, but there’s potential risk if these individuals were to leave the business after the sale.

Valuation Considerations

• Growth Potential: The company is well-positioned for both organic growth and expansion into new markets. Buyers with experience in scaling operations or expanding into new regions could unlock significant value.
• Support and Training: The seller has offered strong post-sale support, which includes the option of retaining some partners. This continuity can help ease the transition and ensure operational stability, which is particularly valuable in a technical and specialized industry like precision agriculture.

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.