Denver Metro Trailer Dealer
The result of the latest 12 months revenues and earnings to 4 30 2022 brought the revenues up to 3.47M, the earnings up to 320K which now makes this the lowest multiple of the 4 trailer companies that I have represented in the past. This company is being offered at 560K which is now only 1.75 times the earnings plus inventory. This is a very low multiple for a trailer dealer that is growing.
I have removed the 2020 add backs in my adjusted earnings spreadsheet for Covid for paying employees who were home because of Covid and removed the add-back for the drop in revenues/earnings during the hard shutdown from mid-March to June 2020. 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.
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: The more variety of trailers you have in stock, the more trailers you will sell. You will own the trailers, post-closing, at their cost 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 an SBA bank loan or similar. When you sell a trailer, you will recover the cost of the trailer PLUS 25% profit, which is this dealer's standard markup for new trailer sales. In addition, you will recover the freight cost that the seller has already paid, which can be anywhere from 200 to over 2000 dollars per trailer. If the inventory levels were low, you would sell fewer trailers and make less money. One reason the company is enjoying increased sales today is that the owner has done an excellent job of keeping a steady supply of new trailers on order. The owner has done a good job of anticipating future demand and ordering trailers 6 months in advance resulting in a great selection of trailers currently in stock which has been key to the increasing sales and record revenues.
This seller wants to retire. He has a very successful and solidly established business that is ready for a new owner to step in.
DENVER METRO FULL-SERVICE TRAILER DEALER
Over 15 years old, well-established full-service trailer dealership with 7 employees plus the owner. The company sells, repairs and services all types of trailers. They can perform any kind of repair or modification to almost any trailer.
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. Within six months of Covid, all dealers were almost completely out of new trailer inventory and lead times kept rising which peaked in early Sept 2021 when most of the new orders were taking over 6 months to be delivered. Now that the lot is full of inventory again, a much smaller percentage of new sales need to be “ordered” which has returned them to record profits. These record profits are happening while the lead times are still averaging 6 months for new trailer orders that are not in stock. The owner has very effectively continued to order trailers to ensure a steady flow of new units coming in each month. As of April 2022, the lot has gone from empty 9 months ago to having 365K in new trailer inventory and 149K in parts and accessories IN STOCK. Plus, the backlog from customers deposits on new trailers which peaked at just over 130K in deposits in early Sept 2021 is down to 39K with 35K being normal. In other words, things are slowly returning to normal because he has learned how to order in advance of sales, keeping in mind the 6 month lead times for delivery of most new trailers.
Today, the majority of new trailer sales are made from inventory on the lot. Except for custom trailer orders, which are a small part of the company's trailer sales, this has significantly negated the impact of the long 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 trailing 12 months to March 31st has 3.275M in revenue with 274K in earnings with very little add backs for the supply chain. The 2021 full-year revenues were 3.04M dollars with 243K 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. The sales price of 560K dollars is priced at a little over 2 times the earnings, plus the cost of inventory, which is currently estimated to be 365K in new trailers, 12.5K in used inventory, and 149K in parts, accessories, and steel. The actual amount of inventory will fluctuate daily as inventory is sold and new inventory arrives.
The owner is retiring and is eager to transfer the reins to a new owner. 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. He works remotely from home most days.
They sell a wide range of trailers for construction, farming, motorsports, and recreation, plus most types of commercial and personal uses. They have a wide selection and variety of trailers and an extensive inventory of parts and accessories and, in addition to parts sold through the service department, they enjoy a substantial amount of over-the-counter trailer parts sales.
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 come from current and past customers, along with referrals from their wide customer base. There are also thousands of trailers throughout Colorado with their 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 150 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. The company has an excellent reputation in the marketplace which is very valuable to the new owner.
A bank will only require 10% to 20% matching from a qualified buyer, depending on the buyers’ experience. This means that a buyer may qualify with no more than 125K in liquidity. Also, a qualified buyer should be able to floor a substantial amount of the trailer inventory through several flooring companies. Any existing floor plan will be paid off at the closing so the SBA will have the ability to lien 100% of the revenue-generating inventory as they require.
The buyer will be required to obtain a Colorado "Franchised New Car Dealer" license to operate the business. This is obtained through the Colorado Motor Vehicle Dealer board.
Jeff C Eisnaugle
Business Broker Colorado