I have been working with the current owner of a small company over the last few months with intentions on purchasing it on Jan 1, 2009.
The business distributes, direct sells and installs wood furnaces, solar panels, wind turbines, passive solar and radiant floor heating, with two new products slated for introduction next year. Dealer network of 6 active, 6 non-active, with open potential to develop dealers throughout the west.
At first, the owner wanted to be involved for 5 years and finance half of it, Now he wants all cash up front and only wants to be involved for 6 months.
Last years sales were $ 680,000 with net profit in the $ 300,000 range.
Next year he is estimating sales of $ 230,000 due to the economy and the depressed price of oil and energy. Gross profits will be in the $ 75,000 range.
The company does not have auditable financials, he does not have to sell the business.
Sales price is $ 400,000 with $ 200,000 in good will, $ 150,000 in marketable inventory and $ 50,000 in assets.
Financing would be $ 400,000 @ 8% over 7 years, first two years interest only payments required, with $ 50,000 extra cash as working capitol.
New owner has business management experience, strong interest in entering the alternative energy market and a small network of entrepreneurs for advice.
So the question is:
With energy prices, the economy depressed and credit hard to come by, would purchasing this business (on credit) be a good investment?
Thanks for the answer Getalife.
After additional analysis and advice, an offer would be $ 225,000, max bid at $ 250,000.
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