Field Notes: Legacy Fire Protection Business

Can You Ignite Growth in this Florida Fire Safety Business?

In this edition of Field Notes I came across a well-established, highly rated fire protection systems company in Southeast Florida, with a history dating back to 1965. Two good points right off the bat: Longevity and an owner ready to retire. The company reported gross revenue of $4.68 million and cash flow of $318,185 in 2023. The asking price is $2.95 million, excluding the real estate valued at $1.4 million. But the asking price includes $1.54 million in FF&E and approximately $2 million in receivables. The company has a seasoned team of 24 nonunion employees and a solid customer base, primarily in government and commercial sectors. A potential ETA could get to work right away on the company’s underutilized digital marketing strategies. The transaction also includes significant payables and receivables, with financing options available for qualified buyers.However, the high asking price compared to the discretionary earnings requires a careful examination of the underlying value of the included assets and potential for operational improvement and growth.

Financial Overview

• Asking Price: $2,950,000
• Cash Flow (Discretionary Earnings): $318,185
• Gross Revenue (2023): $4,685,380
• FF&E (Furniture, Fixtures, & Equipment): $1,540,000 (included in the asking price)
• Inventory: $187,000 (included in the asking price)
• Real Estate: $1,400,000 (not included in the asking price, optional purchase or lease)
• Receivables: Approx. $2,000,000 (included in the asking price)
• Payables: Approx. $900,000

Business Operations

• Established: 1965
• Location: Southeast Florida
• Industry: Fire protection systems design, installation, and maintenance
• Employees: 24 non-union
• Facility Size: 7,500 sq ft, in excellent condition

Analysis

Valuation and Price Justification:

• The asking price is roughly 9.3 times the annual cash flow. This seems a bit steep, even after including the tangible assets like FF&E and receivables.
• The high gross revenue compared to the cash flow suggests either high operating costs or potential for cost optimization.

Strengths:

• Established business with a long history and a good reputation.
• Recurring revenue from long-term contracts with governmental agencies and municipalities.
• Diversified services including design, installation, and maintenance.
• Nonunion experienced and cross-trained staff.

Risks:

• The cash flow to gross revenue ratio is relatively low, which could be due to inefficiencies or high operational costs.
• The real estate is not included in the asking price, which adds a significant cost if purchased or an potentially massive ongoing expense if leased.
• The need for a Contractor Competency License could limit potential buyers to those who can obtain this credential. (But where there’s a will, there’s a way.)

Opportunities:

• Expanding online media presence, digital marketing and advertising could attract new customers.
• Strategic expansions into new markets or services could increase revenue.
• Optimization of operational efficiencies could improve cash flow.

Market and Location:

• Located in Southeast Florida, a region that can have high demand for fire protection services due to stringent safety regulations and the high value of real estate.

About: Silverwave Field Notes 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. The business highlighted above is represented by IAG Merger.