Mike Andes breaks down a $940k pool company with $1.5M revenue and $370k profit. After accounting for real estate value, missing rent, a general manager salary, and debt service, the actual profit drops below $100k. The numbers look better than they are.
$940,000
$1.5 million
$370,000
$375,000
$40,000–$50,000 per year
This pool company is asking $940,000 for their business. That is $1.5 million in annual revenue, and they say it profits $370,000. Now, I like this business because it's a growing industry. 25 plus years they've been in business and it's pretty profitable. Now. A couple things to take note of is the fact that they value their real estate at $375,000, which is not included in the asking price. What that means is it's very likely their profit and loss statement doesn't account for renting that land. So you really got to take off 40, $50,000 per year off off of that profit number. Another couple things you're going to want to ask is, does that $370,000 include the owner's pay or are you just buying yourself a job? Like, if you go get a general manager, you're probably going to have to pay him $120,000 to run this large of a business without you being there. Now, if you also get debt on that $940,000 asking price, you're going to be looking at 130, $140,000 in loan payments. So that whittles that 370 down pretty quickly, down to under $100,000 if you're getting debt on this deal.
