Location: Ratcliff, KY
Gold Nugget Army Surplus Store is located in Ratcliff, Kentucky and is listed for sale at $395,000. This price apparently includes $200,000 worth of inventory. We completed a financial forecast of this company, including an income statement, balance sheet, cash flow analysis and a bankruptcy forecast. These have all been forecasted out for ten years.
There are some key indicators for this business that we feel are necessary to point out. First and foremost, the way that revenue is generated is very sporadic and not very reliable. It is based solely on the sales of random items that the previous owner has accumulated over the years. These items range from old army badges, to used tents and sleeping bags, to old army vehicles. In order to determine an average per item to get a general idea of the business’s revenue, we went to Gold Nugget’s website and averaged together the prices of 100 listed items. We then assumed that, based on other businesses similar to this company, the cost of goods sold would be about 50% of total sales per year.
The internal rate of return of the business (IRR) and the weighted average cost of capital (WACC) were both approximately 8.6%.
We concluded that the selling price for this business is reasonable and fair, however, we do not feel that it would be a worthwhile investment with revenue being so unpredictable. We also feel that the company’s location in Ratcliff is too far out to bring in significant business. In order to make this company profitable, it would be best to relocate the business and determine some way to stabilize and standardize the items being sold along with their prices.