Fully describe the business's activities?
The business is a glue manufacturer with major corporate clients, including "blue chip" companies across the bedding, furniture and upholstery industries.
How long has the business been established?
The business has been established for 7 years.
How long has the owner had the business?
The owners started the business and have managed it since inception.
How does the business operate on a daily basis?
There is a manager who opens and closes the business and he also manages the other 4 staff members in the absence of the owners.
How are the clients attracted to the business?
Word-of-mouth mostly - big corporates have picked up that there are savings to made by by using this company's products. The big factories are increasingly price-concious and still have to use a superior product.
What Advertising/Marketing is carried out?
None really although the owners do visit clients occassionally. There is also a website which does atttract business. If a rep was employed to visit current clients and also procure new business this company would do even better than it is now.
Does the business have any contract work?
The business is arguably one of the largest suppliers of glue to the foam industry in the country. They also have numerous blue chip corporate clients on board from the bedding, furniture and upholstery industries. So although the industry does not work on a contract basis they are the preferred supplier for certain glues to these corporates. The barriers to entry works in their favour against the competition being able to easily steal clients from them.
What competition exists?
The very large glue companies are competition but just cannot compete on price and flexibility.
What are the seasonal trends?
The business flow is pretty constant except for the normal December holidays when they also close.
Is the business VAT Registered?
Yes, the business is VAT registered.
What VAT documentation is on file?
Normal VAT returns are on file.
Are there up-to-date Management Accounts available?
Yes, there are Management Accounts to 31 August 2019.
What Balance Sheet and Income Statements are available?
AFS's at February 2019 and Management Accounts to August 2019.
What percentage of the business is cash/credit?
Large client pay by EFT but there is a very nice cash element from the small distributors who also sell glue into much smaller clients.
What is the age analysis of the debtors book?
30 to 45 days for most of the big companies.
How could the profitability of the business be improved?
A rep on the road would take the business to another level. The importation of certain products which is used rather than buying from local agents would also make a difference.
What is the total staff complement?
There are 5 staff members plus the two owners.
Give a breakdown of staff/ functions/ length of service?
The staff compliment consists of 1 x manager. 1 x foreman and 3 x factory workers. The two owners meet with clients, make purchases and take orders and generally oversee the business.
Do any have management potential?
Factory manager and foreman are in place.
How involved is the Owner in running the business?
The owners spend on average about 3 to 4 hours a day in the business Monday to Friday. An easy to run business and it is ticking over very nicely so they are not there for 8 hours a day.
When does the current lease end?
The current lease ends in February 2020.
Is there an option of renewal & what period?
Yes, there is an option for renewal for 2 years .
What is the annual escalation %?
The annual escalation is 8% per annum.
What are the trading hours?
Monday to Friday: 7.30 am to 4.00 pm.
What is the square meters of the business?
285 square meters: consisting of a factory unit with a small office upstairs. Ample parking is avaible in a secure industrial park.
Is a copy of the lease available?
Yes, a copy of the lease is available.
What lease deposit and/or other surety is required?
Two months deposit is currently in place but may be negotiable with the landlord.
What are the main assets of the business?
4 x Mixer Machines, 1 x Forklift, 1 x 2.5 ton delivery vehicle, office furniture.
What is their overall condition?
Excellent. 2.5 ton vehicle is fairly new and machines are bought new and services are done on time.
Do any require repairing?
No. Maintenance is done on time.
How have they been valued ?
Net realisable value.
Which assets are on lease/HP and with whom?
The 2.5 ton delivery vehicle is on lease.
Are copies of agreements available?
Yes, a copy of the agreement is available.
Are they presently insured?
Yes, the assets and the business is insured.
Consumable products are sold therefore a constant need for replenishing of stock for their clients. Corporate blue chip clients on board. Can assist clients with special needs which the larger glue companies just cannot and will not do. Price. Service.
A lack of marketing. A rep/customer service person on the road would see a huge improvement in top and bottom line for a minimal investment.
They are about to install a wood-glue mixing machine which has already been purchased. This is a very nice market for them to tap into and they can start selling this product to current clients who are presently buying their wood glue elsewhere.
There are large companies out there but they just cannot compete on price and this business is gaining market share as a result. The barriers to entry also protect this business from smaller competitors getting into their clients.
What is the reason for the sale?
The owners wish to relocate.
Why is this a good business?
Blue chip clients. Scalability. This business is growing very nicely. Operating costs are generally low. Very good profits. Wood-glue machine about to be installed.
What is the price plus stock and the profit?
The asking price for the business is R11.3 million plus stock at cost of approximately R450 000. The business is on track to make approximately R3.6 million adjusted profit for the current financial year.
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