Fully describe the business's activities?
The main business is the design, production, distribution & installation of trade marketing campaigns. They are predominantly active in the retail sports & leisure apparel and footwear sector with brands such as Adidas, Converse, Hi-Tech, Superga, Kappa and Fila. They have just been approved by Under Armour as a supplier. This business is setting itself up to do exceptionally well into the future. Manufacturing for these campaigns is mostly outsourced and managed through a proven network of digital print, Perspex, steel & wood fabrication suppliers. All graphic design, project management and logistics planning is done by an in-house team, and installations are achieved across RSA and sub-Saharan Africa through a combination of in-house as well as sub-contracted teams. This activity is supported by their factory where they import aluminium extrusions from China in full lengths and cut them to size on order for signage and graphic applications. They also offer approximately 50 cubic meters of warehouse space for the above brands where they warehouse display stock for future re-use.
How long has the business been established?
Since July 2014.
How long has the owner had the business?
Since July 2014.
How does the business operate on a daily basis?
Client relationships are managed by the owner but supported by design & project management staff who are in direct contact with clients on pending and current projects. Campaign planning, liaison with installation teams nationally & liaison with retail stores and mall management for permit applications, etc are all managed by trained project management staff. Supplier quotes and purchase orders are managed by a trained admin clerk. Graphic design and client presentations is handled by an experienced in-house designer, who also manages the print-ready artwork and sub-contracted print activities with external printers. A factory team of 3 process orders for the cutting of aluminium frame systems. This team also functions as an in-house installation team, supported by external sub-contracted teams as required. Client invoicing, supplier & staff salary payments are done by the owner.An external accounting practice is used to manage salaries, PAYE, VAT and compliance issues.
How are the clients attracted to the business?
Through their website, direct sales and marketing and by referral from retailers.
What Advertising/Marketing is carried out?
A combination of referral and sales calling.
Does the business have any contract work?
The owner is in negotiation with Adidas and the holding group for Converse with a view to securing SLA agreements, but at present no contracts exist with these clients.
What competition exists?
Most competitors focus on digital print or signage as their primary activity, and installations are an after-thought. Their primary focus has been to professionalise national installations, to the extent that in some cases the production elements are done by a client-appointed 3rd party. This has meant they have very few competitors trying to replicate their business model. The competitors they do encounter are therefore digital printing businesses who also offer installations.
What are the seasonal trends?
Historically their quietest months have been September, December & January, accounting for approximately 12% of annual turnover. The busiest months historically have been June, July & August, accounting for approximately 35% of annual turnover.
Is the business VAT Registered?
Yes, the business is VAT registered and a VAT registration and SARS VAT clearance certificate is available. The business is also a registered importer & exporter with a SARS importers & exporters code.
What VAT documentation is on file?
All relevant and supporting documentation
Are there up-to-date Management Accounts available?
Yes. Management accounts and AFS for each year up to the 2017/18 financial year.
What Balance Sheet and Income Statements are available?
2017/18 are available.
What percentage of the business is cash/credit?
99% of sales are on credit accounts.
What is the age analysis of the debtors book?
They maintain a very tight debtors book. They have had no bad debts in the past 24 months and all accounts are no more than 30 days.
How could the profitability of the business be improved?
The activities currently outsourced could be significantly more profitable if they were in-house activities. First amongst these would be digital print and installation teams.
Is Seller finance available and for what amount?
The R 8M selling price, which is linked to an annual turnover of R 11.5M, is part of a structured deal whereby an additional R1.5 M will become payable if the business achieves a turnover of R 15M within 12 months from the effective date. This would be equivalent to a 25% growth. No additional payment will be required for a growth of 10% over the 12 months, equivalent to a turnover of R 12.65M. The buyer would pay a prorata amount for growth between R12.65M amd R 15.0M
What is the total staff complement?
7 permanent staff including the owner and 1 casual cleaning staff.
Give a breakdown of staff/ functions/ length of service?
Office: 1. Owner â 2014/07 2. Project co-ordinator â 2015/02 3. Applications supervisor â 2016/08 4. Office administrator â 2016/09 5. Graphic designer â 2016/12 6. Factory manager â 2017/02 7. Technician â 2017/05
Do any receive special perks or incentives?
Staff Provident fund where the company contributes 50% up to a maximum of 5% of the memberâs salary, matched by the employee contribution.
Are they on contract?
Do any have management potential?
Yes, the project administrator and factory manager in particular are experienced, reliable and responsible with good attitudes and can take on new responsibilities. The other staff are all capable and trained and willing to grow.
How involved is the Owner in running the business?
While hands-on and involved daily in the business, the team is experienced and engages with suppliers and customers alongside the owner, which has meant that the owner has been able to be away for 2 or 3 weeks at times without the business losing any momentum or experiencing problems. The functions that the owner hasnât shared with staff relate to quoting and invoicing clients, banking, payment of staff and suppliers and financial & SARS administration. The functions that the owner has limited involvement in are the operational planning and executing of installations where the staff are fully trained and the owner deliberately remains at arms length. The owner is prepared to give an extended hand over period of up to 6 months, the latter 4 being at full remuneration.
When does the current lease end?
Is there an option of renewal & what period?
Yes â a 2 year lease.
What is the annual escalation %?
What are the trading hours?
Week days 07:00 â 17:00
What is the square meters of the business?
Is a copy of the lease available?
Do you require a licence?
We have a CIPC registration but no other trading licence is required.
What lease deposit and/or other surety is required?
The current rent is R18,630 incl VAT and they have a R29,000 deposit held by the landlord. No surety is in place. They also have a deposit of R17,830.35 with Eskom because the business premises has 3-phase power.
What are the main assets of the business?
A full Asset list is available
Are any items not included in the sale?
What is their overall condition?
Do any require repairing?
How have they been valued ?
Fair market value
Which assets are on lease/HP and with whom?
None. All finance agreements have been settled and other assets were purchased cash.
Are they presently insured?
All assets are insured with a Santam commercial policy.
Long-standing relationships with international brands who have ongoing branding and trade marketing activities. A consistent record from 2014 to date that delivers a positive cash flow and a profitable business. An uncomplicated business model with staff who are well trained and understand their roles. Proven systems in the business built to ensure consistency and to deliver customer joy.
An over-reliance on sub-contractors â while this scalable approach has kept overheads down, it may constrain growth and price flexibility.
A proven business model in the retail apparel and footwear sector now needs to be extended into new industry sectors where their experience and skill-set in trade marketing can be applied into new opportunities. The aluminium manufacturing operation is very competitive but is small scale and while they are currently growing sales here, this has huge potential.
Digital signage is a growing phenomenon in retail worldwide, and at some stage may impact on the need to have teams physically installing campaigns in stores. Due to a slower economy 2018 retail sales have slowed markedly across many industries, with fewer new store openings and renovated stores than 2016/17.
What is the reason for the sale?
Owner wishes to retire to operate a B&B business closer to family in another part of South Africa due to personal and health reasons.
Why is this a good business?
The business has a consistently positive cash flow and strong profits, and is aligned with strong brands who invest in their trade marketing activities on a regular basis. They have just taken on another major customer in sports apparal and are on the point of signing a contract with their major customer thereby securing their position as its sole supplier. There are opportunities to leverage the business with these clients by broadening the products and services offered, as well as opportunities to increase margins through bringing key activities in-house. The business has built real-world experience with very credible brands and is well positioned to grow into other industry sectors where existing systems and know-how can be scaled up.
What is the price plus stock and the net profit?
Price : An initial price of R 7.2M, including stock, with an additional amount becoming payable after 12 months dependant on turnover achieved - to be discussed. Stock : R 280 000 Net Profit : 260 000/month
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