Deal Flow: Steel Fabrication & Material Sales Business

A Golden Opportunity in Steel Fabrication and Material Sales

This week’s Deal Flow is a steel fabrication and material sales business with a solid financial foundation, consistent revenue growth, and a reasonable acquisition cost. The low down payment and SBA financing makes it attractive. Your success after acquisition is going to depend on an effective transition plan, the ability to maintain the company’s reputation, and your ability to leverage increased marketing and sales efforts for growth opportunities.

Business Overview

Business Type: Steel Fabrication & Material Sales
Location: Orlando, FL (Orange County) (Relocatable)
Asking Price: $765,000
Cash Flow: $499,512
Gross Revenue: $1,466,152
FF&E: $150,000 (included in asking price)
Inventory: $20,000 (included in asking price)
Rent: $6,800 per month
Established: 1994

Business Description

This steel fabrication and material sales business has been established since 1994 and operates within a 75-mile radius of Orlando, FL. The company specializes in metal fabrication (steel, aluminum, stainless steel) and provides installation services. It has built a solid reputation and primarily relies on word-of-mouth referrals, with no active advertising. The business has shown consistent revenue growth, increasing from $782,418 in 2020 to $1.466 million in 2023.

Financial Analysis

1. Asking Price to Cash Flow Ratio: The asking price is approximately 1.53 times the cash flow ($765,000 / $499,512). This is an attractive multiple, indicating a potentially good deal for the buyer.
2. Gross Revenue: $1,466,152 with a cash flow of $499,512 shows a profit margin of approximately 34.1%. Strong margins suggest efficient operations and cost controls.
3. FF&E and Inventory: The inclusion of $150,000 in FF&E and $20,000 in inventory is valuable, particularly for an acquirer looking to maintain or expand operations without immediate additional capital expenditure.

Operational Analysis

1. Lease and Real Estate: The business operates out of a 12,000 SF warehouse with a lease expiring on 12/31/2027. The rent of $6,800 per month seems reasonable given the size of the facility and its location. The lease term provides stability for the next few years.
2. Employees: The business has 4 employees. The small team size is advantageous for managing overhead, but it may also mean the business is highly dependent on key personnel.
3. Relocatability: The business being relocatable adds flexibility for a buyer who may want to move the operation closer to different markets or reduce costs by relocating to a more affordable area. It could also help when it comes time to renegotiate the lease.
4. SBA Pre-qualification: The business is SBA pre-qualified with a down payment of $73,590, which includes $30,000 in working capital. This low down payment makes the acquisition more accessible and financially appealing.

Opportunities and Risks

Opportunities:

• Growth Potential: The business has shown consistent revenue growth, and there is significant opportunity for further expansion, especially by investing in marketing and advertising, which the current owner has not pursued.
• Geographical Expansion: Given that the business services a 75-mile radius, there could be opportunities to expand into new regions or markets beyond the current service area.
• Increased Sales Efforts: The reliance on word-of-mouth suggests that a more aggressive sales strategy could drive substantial growth.

Risks:

• Dependence on Reputation: The business’s success is heavily reliant on its established reputation and word-of-mouth referrals. A change in ownership may impact this, so you’ll need a tight and effective transition plan.
• Market Conditions: The steel and metal fabrication market can be sensitive to economic cycles, particularly in sectors like construction and infrastructure. Market downturns could impact revenue.
• Small Workforce: With only 4 employees, the business may be vulnerable to disruptions if any key employees leave.

Valuation Considerations

The asking price of $765,000 is attractive, however, it’s essential to:

• Verify Financials: Conduct thorough due diligence to confirm the accuracy of the financial statements, especially the cash flow figures.

Consider Growth Potential: The lack of advertising presents a clear opportunity for growth, but it also means that the business may be more reliant on the existing owner’s relationships and reputation.

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.