Denver Metro Trailer Dealer
This full service trailer dealership with 8 employees is over 10 years old and is well known and well established in their market. The company sells, repairs and services all types of cargo and utility trailers. They can perform any kind of repair or modification to almost any trailer.
The Seller had a year end 2020 backlog of 153K which was significantly less than the 2021 year-end backlog of 322K. The difference is big enough that it needed to be properly adjusted. The other change is that we are going to eliminate any add back for Covid like paying employees who are home, the drop in revenues/earnings during the hard shutdown in March to June 2020, etc. This leaves just a supply chain impact on inventory which is easy to properly adjust to. In other words, we are eliminating any add back that can’t be properly monetized and verified.
The result of 2021’s increase in revenues, earnings, and backlog brought the revenues up to over 3M, the earnings up to 275,354, and now makes this the lowest multiple of the 4 trailer companies that I have represented in the past. This company is being offered at 540K which is less than 2X the 275K earnings which is a very low multiple for a trailer dealer especially one that is growing.
I also wanted to address a question that I get frequently: Isn’t the sales price actually going up instead of down with the rebuilding of the inventory? The answer is no. Inventory should be thought of as more valuable than cash being left in the business for the following reasons: You will own the trailers at their cost post-closing and the Seller will have paid the freight and the assembly for you. In addition, this allows you to finance the purchase of the inventory through a SBA bank loan or similar. When you sell a trailer, you will recover the cost of the trailer PLUS 25%, which is this dealer's standard mark up for new trailer sales. If the inventory levels were low, you would sell fewer trailers and make less money. Having a good selection of trailers in stock is key to increased sales and growing the company. Plus, upon the sale of the company in the future, you (the new owner) will be selling the inventory to a new buyer, just as we are. Jeff
The company has seen steady growth on both the top and bottom lines for many years. Their earnings during 2020-21 were temporarily affected by Covid’s impact on the supply chain, which led to longer lead times to get new trailer inventory from the manufacturers. About the same time as Covid began, trailer sales escalated rapidly. As a result, manufacturers were inundated with orders from dealers and they couldn't keep up with demand. In addition, they also began to experience supply chain issues with their parts and materials vendors. Within six months, all dealers were almost completely out of new trailer inventory and lead times kept rising which peaked in early Sept 2021 when 70% of new orders were taking 6 months to be delivered. As of early January 2022, only 30% of new orders are on a delay, the lot has gone from empty to having just over 300K in new trailer inventory, and the back log which peaked at just over 500K in early Sept is down to 322K. There are 100K in trailers which have deposits and have been delivered but not picked up yet based on the holidays and recent weather. In other words, 2021 should have seen better earnings if these trailers were picked up in December when they were delivered. This ensures that 2022 will get off to a great start in January with a big month.
This trailer dealership adapted very successfully to this temporary condition by taking non-refundable deposits from customers for trailers they had on order - this approach worked very well because all competing dealers were also virtually out of stock. This allowed them to keep the sales pipeline full, even though those deliveries would not occur until a future date. A large percentage of those sales with deposits have now been delivered to customers and paid for. They are now taking fewer deposits, with the majority of new trailer sales coming from inventory that is now on the lot. They also learned how to modify their ordering process to anticipate future trailer inventory needs. This has resulted in a full pipeline of trailers on order that is now providing a steady flow of arriving new trailer inventory.
Today, the majority of new trailer sales are made from inventory on the lot. They have gone from virtually no available trailer inventory six months ago to over $300K in inventory that are currently available for sale on any given day. Except for custom trailer orders, which are a small part of the company's trailer sales, this has significantly negated the effect of the longer lead times and supply chain issues of the past year. The new owner will benefit significantly going forward by being able to just take over those full pipelines of future orders and sales. The business will also have an advantage over many other dealers who have not been able to maintain their inventory levels.
The 2021 full year revenues were 3.04M dollars with 275K in properly adjusted earnings. 2020 revenue was 3M dollars with earnings of 236K. The Covid add back is footnoted in the “adjusted earnings spreadsheet”. Prior to Covid, the business consistently trended higher year-over-year because they enjoy a high percentage of recurring revenues from a large established customer base. At the new, lower sales price of 540K dollars, it is priced at less than 2 times earnings, plus the cost of inventory, which is currently estimated to be 300K in trailers and 187K in parts, accessories and steel. The actual amount of inventory will fluctuate daily as inventory is sold and new inventory arrives.
The owner is past normal retirement age and wants to retire. Since the beginning of Covid, he has worked primarily from home. But his very competent staff has effectively managed the day-to-day affairs of the business in his absence.
They have one of the best selections of trailers in Colorado, along with an extensive inventory of parts and accessories.
The business continues to grow and thrive on repeat and referral business. They have hundreds of commercial customers who regularly come in for parts and service, as well as to purchase new trailers. The owner estimates that at least 50% of their revenues comes from current and past customers, along with referrals from their wide customer base. There are also thousands of trailers throughout Colorado with their company name decals on them. Although the owner has been intimately involved in the business since its inception, he is not "the face of the business". This solidly established customer base will insure that a change of ownership will have little impact on the business, as long as the new owner continues to provide the same quality of sales and service that their customers have come to expect.
The buyer will also get 93,650 in current value of equipment, tools, furniture, computers, surveillance system, phone system, forklift, box truck, etc.
This company has a 4.7 Star Rating on Google, with more than 100 reviews, which is excellent. It is rated A+ by the BBB. They are also a member of the "North America Trailer Dealers Association" (NATDA). They have a great website which is hosted by a company that specializes in serving trailer dealers. All of their trailer inventory is posted on the website. This fine company has an excellent reputation.
Awesome Location: The property is in a great location in Denver. The building and 1 acre of property has been leased since 2010. It has a 9,200 square foot building that is very functional for the business operations, with a 1,500 sq ft showroom, plenty of storage, 3 large offices, a break room, and a very large shop for service and repair of trailers. Security cameras are in place and there is plenty of parking.
Jeff C Eisnaugle
Business Broker Colorado