Established Suffolk County Commercial Electrical Contractor
Full acquisition analysis: financials, market context, valuation, risk assessment, and 100-day integration plan.
View Original Listing ↗At a Glance
Founded in 1991, this electrical contracting business serves supermarket chains (60% of revenue) and commercial/retail clients across Long Island with 70% renovation/conversion work and 30% new construction. The company employs 24 full-time staff and operates from an 1,800 SF leased facility. The business returned to market after a failed transaction, raising questions about deal structure, transferability of supermarket contracts, and licensing complexity.
Key Strengths
- 33+ year operating history with established supermarket chain relationships providing recurring revenue base
- Strong cash flow conversion: $1.31M SDE on $6.3M revenue (21% margin) suggests efficient operations
- Diversified service mix (construction, renovation, maintenance, fire alarm, voice/data) reduces project-type concentration
- 24-person workforce provides capacity for growth without immediate hiring pressure
- Geographic concentration in high-income Suffolk County (median HH income $131K, 82% homeownership) with aging housing stock
Key Questions
- Why did the previous transaction fail? Was it financing, buyer qualification, discovered liabilities, or contract transferability issues?
- What percentage of revenue comes from the top 5 supermarket accounts? Are these contracts transferable or does owner have personal relationships?
- Who holds the Master Electrician licenses? Are key license holders willing to stay post-acquisition?
- What is the project backlog and average contract duration? How much revenue is recurring maintenance vs. one-time projects?
- What vehicles and equipment are owned vs. leased? What is replacement CapEx requirement?
- Are there any outstanding liens, prevailing wage disputes, workers comp claims, or permit violations?
- What is employee tenure and compensation structure? Any union workforce or labor agreements?
- How are supermarket contracts sourced—direct relationships, GC subcontracts, or broker network?
Reconstructed P&L
| Line Item | Amount | % Revenue | Benchmark |
|---|---|---|---|
| Revenue | $6,296,467 | 100.0% | Reported |
| COGS (Materials) | –$2,203,763 | 35.0% | Industry avg: 35.0% |
| Direct Labor | –$2,203,763 | 35.0% | Industry avg: 35.0% |
| Gross Profit | $1,888,941 | 30.0% | Calculated |
| Vehicle / Fleet | –$188,894 | 3.0% | Industry range: 2-5% |
| Insurance (GL, WC, Auto) | –$157,412 | 2.5% | Industry range: 2-4% |
| Office / Admin / Software | –$125,929 | 2.0% | Industry range: 1-3% |
| Marketing | –$62,965 | 1.0% | Industry range: 0.5-3% |
| Rent / Facilities | –$125,929 | 2.0% | Industry range: 1-4% |
| Other Overhead | –$94,447 | 1.5% | Industry range: 1-3% |
| Depreciation | –$25,186 | 0.4% | Industry range: 0.3-0.5% |
| Net Profit (before owner comp) | $1,108,179 | 17.6% | Calculated |
| Owner Salary Add-back | $180,000 | 2.9% | Est. $180K for $6M+ revenue |
| Depreciation Add-back | $25,186 | 0.4% | Non-cash expense |
| Seller's Discretionary Earnings (SDE) | $1,313,365 | 20.9% | Reconstructed |
| EBITDA (owner at market rate) | $1,133,365 | 18.0% | Reconstructed |
| EBITDA (Est.) | $1,133,365 | 18.0% | Benchmark: 15–20% healthy |
| Estimated SDE | ~$1,313,365 | 20.9% |
SBA Financing Model
Estimated SDE of ~$1,313,365 can support SBA 7(a) debt service on a $4,000,000 acquisition. Assuming 10% down ($400,000) and a 10-year term at ~10.5% SBA rates, annual debt service is approximately $582,919. Estimated pre-tax income to owner: ~$730,446+ after debt service.
Cash Flow Reality Check
Cash Conversion Cycle
Working Capital Recommendations
- Establish $500K revolving credit facility: Negotiate seasonal working capital line with local bank or SBA 7(a) lender at prime + 2.5-3.0%. Draw during May-August peak to fund material purchases and labor for concurrent supermarket projects. Required to avoid cash constraints during 20-25% seasonal revenue spikes.
- Implement progress billing and retainage management: Shift payment terms from net-30 completion billing to 30-60-10 progress billing (30% deposit, 60% at substantial completion, 10% retainage). Reduces AR days from 35 to target of 25-28 days, freeing $150-200K in working capital. Particularly important for multi-month supermarket renovation projects.
- Negotiate 2/10 net 30 terms with material suppliers: Leverage $6.3M annual purchasing power to secure early payment discounts from primary electrical distributors. Even capturing 1.5% discount on 50% of material spend ($2.2M × 50% × 1.5% = $16.5K annual savings) improves cash flow and offsets higher seasonal borrowing costs.
- Create 90-day forward cash flow forecast: Build rolling 13-week cash flow model tracking project billings, material purchases, payroll, and debt service. Update weekly with AR collections and new project awards. Provides early warning of cash constraints and enables proactive line of credit draws or payment term negotiations.
How Sticky Is the Revenue?
Customer Concentration (Est.)
Revenue Retention Estimate: 75-85% annual retention on supermarket core clients based on high switching costs (approved vendor status, store layout knowledge, emergency service requirements) and multi-year maintenance relationships. Commercial/retail segments likely 50-60% retention as more project-driven.
Estimated percentage of revenue retained after an ownership transition, based on industry benchmarks and business characteristics.
Churn Risk Factors
What's This Business Worth?
| Method | Low | Mid | High |
|---|---|---|---|
| EBITDA Multiple | $3,396,845 | $3,966,595 | $4,536,345 |
| SDE Multiple | $3,940,095 | $4,596,825 | $5,253,555 |
| Revenue Multiple | $3,148,233 | $3,777,880 | $4,407,527 |
Premium Factors
Discount Factors
Market & Comparable Transactions
Suffolk County electrical contracting market is highly fragmented (63% of firms have ≤5 employees) with strong fundamentals: median home values of $578K (up 7.2% YoY), 82% homeownership, and 67% of homes built pre-1980 driving upgrade demand. Electrician employment projected to grow 9% through 2034 with severe labor shortages (30% of union electricians near retirement). PE-backed consolidators like Pye-Barker Fire & Safety actively acquiring platforms. New York's local licensing system (each municipality sets own requirements, no state reciprocity, 7+ years experience required for Master license) creates significant regulatory complexity and competitive moat for established operators.
| Comparable | Revenue | Multiple | Location |
|---|---|---|---|
| Suffolk County electrical contractor, established multi-location, fully staffed residential and commercial services | Not disclosed | Not available | Suffolk County, NY |
| Commercial electrical contractor serving Long Island with 50+ years of history, residential and commercial operations | $5M+ estimated | 6.0x-8.0x EBITDA (estimated mid-market range) | Nassau/Suffolk Counties, NY |
| Regional electrical platform with commercial/industrial focus and data center exposure | $3M-$10M range | 6.0x-8.0x adjusted EBITDA | New York Metro (Long Island/Westchester) |
Bull Case
Supermarket chains provide sticky, recurring revenue with high switching costs—once an electrician is approved and understands store layouts/systems, clients rarely change contractors. The 70% renovation/conversion mix suggests maintenance relationships rather than transactional project work. Suffolk County demographics (median HH income $131K, aging housing stock) support pricing power. Labor shortages and complex licensing create barriers to entry. At 5.8x EBITDA, deal prices below market (6-8x range) and could attract strategic buyers seeking Long Island platform. SBA financing delivers $730K cash-after-debt with strong margin for error. Consolidation trend creates exit optionality.
Bear Case
Back-on-market deals often hide material issues—prior buyer may have discovered contract non-transferability, licensing problems, undisclosed liabilities, or key employee departure risks. Supermarket vertical is consolidating (fewer chains, more leverage) which could pressure margins. 60% concentration in single vertical plus likely concentration in top 5-10 accounts creates existential client loss risk. New York's licensing complexity means buyer MUST secure commitment from licensed personnel or hold licenses themselves—Master Electrician requirement (7+ years experience, 2 in NY) is non-negotiable. Limited FF&E ($15K) and older fleet may require immediate CapEx. At $4M ask (3.5x EBITDA), seller may be pricing in risks that justify discount.
Who You're Up Against
| Company | Type | Est. Revenue | Threat Level |
|---|---|---|---|
| Big Sky Electric | Independent | $3-8M | Established local competitor with strong consumer brand presence (high Yelp rankings). Likely focuses residential and light commercial. Limited direct threat to supermarket vertical but competes for skilled labor. |
| PKJ Electrical | Independent | $2-5M | BBB A+ rated local operator covering Nassau/Suffolk. Competes for commercial projects but unlikely to have deep supermarket relationships. Potential acquisition target for geographic expansion. |
| GLS Electric (Est. 1968) | Independent | $5-12M | Long-tenured competitor with design-build and security integration capabilities. Competes directly in commercial/retail segments. May have overlapping supermarket clients. Poses moderate competitive threat. |
| M & I Electric | Independent | $4-10M | Strong consumer brand (400+ five-star reviews) suggests focus on residential and light commercial. Competes for labor and potentially smaller commercial projects. Limited direct threat to core supermarket business. |
| Pye-Barker Fire & Safety | PE-Backed | $100M+ (fire/electrical combined) | Regional consolidator with fire alarm, electrical, and security services. Actively acquiring platforms across Northeast. May compete for larger commercial accounts and could pursue acquisition of target company. Represents both competitive threat and potential exit opportunity. |
Competitive Advantages
Moat Assessment
Moderate moat driven primarily by supermarket client switching costs and regulatory complexity. Once approved as vendor and familiar with store systems, supermarket chains rarely change electrical contractors unless forced by service failures or ownership issues. The lengthy Master Electrician licensing requirement (7+ years experience, 2 in NY) and municipality-specific licenses create barriers to new entrants. However, moat is fragile—it depends on retaining licensed personnel and maintaining client relationships post-acquisition. If key employees depart or contracts prove non-transferable, competitive advantages evaporate quickly. The business lacks true proprietary technology, long-term contracted revenue, or network effects that would constitute a durable economic moat. Labor availability and client relationships are defensive, not offensive moats.
Risk Scores & Due Diligence
Due Diligence Priorities
- 1. Supermarket contract transferability and concentration analysis: Obtain list of top 10 clients with revenue by account, contract terms, award basis (bid vs. relationship), and transferability provisions. Verify whether contracts are with individual store locations or corporate entities. Understand owner's personal relationships and whether contracts survive ownership change.
- 2. Licensing and key employee retention: Identify all Master Electrician license holders, their tenure, compensation, and willingness to stay post-acquisition. Verify all required municipal licenses in Suffolk County jurisdictions where business operates. Assess buyer's path to licensure if key personnel depart.
- 3. Root cause analysis of previous deal failure: Interview broker and seller to understand why prior transaction collapsed. Review prior LOI terms, buyer profile, and identified issues. Check for undisclosed liabilities, permit violations, prevailing wage disputes, or workers comp claims that may have surfaced.
- 4. Financial validation and working capital requirements: Review 3 years of tax returns, audited financials if available, job costing records, and WIP schedules. Validate gross margin by project type. Analyze AR aging and DSO trends. Confirm working capital calculation and any seasonal funding needs.
- 5. Fleet and equipment condition assessment: Inspect all vehicles and equipment. Review maintenance records and replacement schedules. Assess immediate CapEx needs given low FF&E value ($15K). Verify ownership vs. lease status of all assets.
- 6. Quality of earnings and add-back verification: Validate reported $1.45M cash flow. Scrutinize owner salary, perks, personal expenses, one-time costs. Confirm no related-party transactions or sweetheart deals inflating margins. Review health insurance, 401k, bonuses to assess true labor costs.
What Needs to Transfer
Potential Deal Breakers
- Master Electrician license holders unwilling to sign retention agreements or stay post-acquisition
- Supermarket chain contracts contain non-assignable clauses without client waiver
- Undisclosed OSHA violations, prevailing wage disputes, or workers comp claims creating material liability
- Municipal licenses suspended, expired, or in violation status in key jurisdictions
100-Day Integration Playbook
- Execute retention agreements with Master Electrician license holders and project managers with 10-20% bonuses tied to 12-month stay
- Conduct joint client visits with seller to all top 10 accounts, emphasizing continuity and introducing new ownership
- Verify all required licenses are current and in good standing across Suffolk County municipalities
- Implement weekly cash flow monitoring and AR collection protocols to maintain working capital discipline
- Review all active projects, WIP schedules, and change orders to identify any problem jobs
- Assess fleet condition and prioritize any immediate vehicle replacements or repairs
- Implement modern electrical contractor software (ServiceTitan, FieldPulse, or Jobber) for dispatching, job costing, and customer management
- Standardize estimating and bidding processes to improve win rates and margin consistency
- Establish KPI dashboard tracking gross margin by project type, AR days, labor utilization, and customer acquisition cost
- Create employee training program focused on new code requirements, safety protocols, and customer service
- Optimize inventory management to reduce carrying costs while maintaining service levels
- Launch targeted business development to healthcare facilities, schools, and municipal accounts to diversify beyond supermarkets
- Expand preventive maintenance contract offerings to increase recurring revenue and smooth cash flow
- Add LED retrofit and energy efficiency services to capture utility rebate opportunities
- Pursue EV charging station installation capability as commercial/retail adoption accelerates
- Evaluate acquisition of 1-2 smaller electrical firms to gain talent and expand geographic footprint into Nassau County
- Develop succession plan and cross-train to reduce key person dependency on licensed staff
- Expand into higher-margin segments (data centers, industrial automation, renewable energy) where labor shortage drives pricing power
- Build repeatable acquisition playbook to roll up additional Long Island electrical contractors
- Professionalize financials with monthly GAAP-compliant close and audited statements to support institutional exit
- Target $10M+ revenue scale within 36 months to attract strategic or PE buyers at premium multiples (7-9x EBITDA)
Value Creation Waterfall (3-Year Outlook)
Our Verdict
Verdict: Conditional — Proceed to LOI
CONDITIONAL PROCEED with heightened caution. This is a fundamentally sound business—strong cash flow, established market position, attractive industry dynamics—but the back-on-market status is a red flag that cannot be ignored. At $4M ask (3.5x EBITDA), the deal appears undervalued relative to market comps (6-8x), which paradoxically increases suspicion that seller knows something buyers don't. The supermarket concentration, licensing complexity, and limited disclosed information create asymmetric risk. A buyer should only proceed if: (1) they can definitively determine why the prior deal failed and confirm those issues are resolved or irrelevant, (2) they secure binding retention agreements with licensed personnel BEFORE closing, (3) they obtain written confirmation from top 5 clients that contracts transfer, and (4) they negotiate price down to $3.5-3.7M reflecting deal risk. For the right buyer—ideally a licensed electrician or existing electrical contractor seeking Long Island platform—this could be a compelling acquisition at a discount. For financial buyers or first-time acquirers, the operational complexity and licensing dependency make this a pass.
Recommended Next Steps
- Submit IOI at $3.5M (3.1x EBITDA) with 45-day exclusivity, citing back-on-market risk and need for extensive diligence
- Request detailed client list with 3-year revenue history by account, contract documentation for top 10 clients, and copy of all active MSAs
- Conduct licensing audit: obtain names and credentials of all Master Electrician license holders, verify standing with local municipalities, and assess retention risk
- Interview seller about prior transaction failure—understand buyer profile, deal structure, identified issues, and current status
- Engage electrical industry consultant to assess competitive position, validate supermarket relationships, and benchmark pricing/margins
- Review 3 years of tax returns, interim P&Ls through most recent quarter, detailed trial balance, job costing reports, and AR/AP aging
- Inspect all vehicles and equipment, obtain maintenance records, and budget replacement CapEx requirements
- Consult with NY-licensed electrician or PE-backed electrical platform about licensing transfer process and key person retention strategies
- Structure deal with 15-20% seller note subordinated to SBA loan, contingent on revenue/EBITDA maintenance and client retention through first 12 months
Suggested Offer Structure
$3.5M cash at close (3.1x EBITDA), structured as $350K buyer equity + $3.15M SBA 7(a) loan, with $200K seller note (6% interest, 3-year term) contingent on retention of top 5 clients and licensed personnel through Year 1. Offer contingent on satisfactory resolution of prior deal failure issues and binding retention agreements with key employees.
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Related Resources
Sources
BizBuySell Listing #2302684 · Suffolk County property and demographic data · Electrical contractor industry benchmarks (RSMeans, BLS) · New York State licensing requirements and local municipal codes · Electrician labor market analysis and workforce projections · Comparable transaction data from Long Island electrical contractors