How to Properly Evaluate and Sell Your Landscaping Company

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Selling Your Landscape Company in South Florida

Commercial or residential landscaping companies seem to be everywhere in Florida. Competition is fierce but profits can be very high for many companies with a large enough route that is run properly.

Five Star Business Brokers Has Many Years of Experience Selling Landscaping Routes

Five Star Business Brokers of South Florida has been involved in dozens of deals involving landscaping routes, and buyers frequently inquire about purchasing one. Many buyers are existing companies wishing to enlarge themselves, local entrepreneurs just starting out in the industry, overseas buyers seeking to obtain a VISA, or buyers from out of the area wanting to establish a successful business. Some landscaping companies are operated by the owner with perhaps only one other helper while others have several crews with many employees.

Three Key Factors When Evaluating Your Landscaping Company Prior to Sale:

  • Regular monthly service billing
  • Physical equipment included in the sale
  • Quality of the customers.

Regular Monthly Billing of the Lawn Care Route

First, one must determine the regular monthly service billing of the route. This simply means how much the company bills its customers (either residential or commercial) each month for basic service (with no ‘extras’).  Some buyers simply stop right here with their evaluation process once they know the regular monthly billing. That is because they have their own equipment and staff in order to service the route, so they are only want to buy the ‘customer list’ from the seller.

Expert Business Brokers Help Compute Owners Net Owner Benefit 

In such a case, a savvy buyer – with the assistance of Five Star Business Brokers of South Florida – will be able to compute their net owner  benefit (see https://fivestarbusinessbrokers.com/interpreting-an-owners-salary/for more on owner benefit). once the regular monthly billing is known. Further, one can typically compute the net owner benefit (without any extras) by comparing the regular monthly billing with the company’s payroll, fuel, vehicle costs, and supplies.

Extra Services are Great But Not Mandatory When Selling Your Landscaping Route

The term ‘extras’ in the landscaping industry refers to extra work requested by the customer that is not a part of their regular monthly service (such as extra tree trimming, planting, or other projects). The more extras the better, but these can be quite variable and most buyers usually stick with using the regular monthly service billing when determining the fair value of the business.

Landscape Equipment Value A Key Component of Setting the Sales Price for Service Routes

  • Physical equipment typically includes trucks, trailers, and the equipment used to perform the work (such as mowers, trimmers, and tools).
  • One must carefully examine the age and condition of the equipment in order to best estimate the current depreciated value.
  • Normally, the value of the equipment will be added to at least one year’s worth of annualized owner benefit in determining the value of the business. However this multiple can vary greatly as is the equipment necessary to service the current business.
  • For example, if a landscaping route has 300 homes all within the same gated subdivision, then that route does not need as many vehicles or trailers or equipment than another landscaping route that services 300 homes spread out between Jupiter and Boca Raton.
  • So the first route would be priced at a higher multiple of annualized earnings (plus physical equipment value) to reflect the closer customer concentration while the second route would be priced at a lesser multiple of annualized earnings (plus physical equipment value).
  • Additionally, Five Star Business Brokers of Palm Beach County has been involved in many such sales where the seller had too much equipment that the buyer did not need or desire.
  • In such cases, the seller is usually better off selling off unneeded equipment before the sale so that the asking price more equates to fair value.

Quality of Landscaping Company’s Customers Very Important to Purchase Price

The quality of the customers greatly affects the multiple of earnings in which most buyers are willing to pay for the existing route and customers. Remember a landscaping route’s value primarily depends on its customer list. Without a good customer list (and hence route), no buyer would want the equipment anyway.

Two Major Factors Affecting Customer Quality for Landscaping Companies

  • Customer’s longevity with the landscaping company being sold
  • Customer’s payment history.

Professional Business Brokers Conveys Key Information Properly To the Buyer

At Five Business Brokers of South Florida, every landscaping route being sold identifies how long the company has been established, and the buyer will have access during formal during diligence to a customer’s account and billing history. In short, buyers may be afraid that customers who were recently signed up by the seller may not stick around as customers after the closing.

Problematic Customers Less Valuable

This is because such customers do not have a track record of sticking with one company (at least not yet) or being reliable with their payment history (most long term customers have no problematic payment history!). Moreover, if the customers being acquired (or route) is viewed as ‘tight’ and being in the same small geographic region then the asking price should reflect this strength and will be conversely reduced if the route is spread out over too large of an area.

Determine the Best Asking Price for Your Landscaping Company

Martin at Five Star Business Brokers has sold dozens of residential and commercial landscaping routes. Determine the best asking price is the first step in selling your route. Give Martin at Five Star Business Brokers of Palm Beach County a call today with questions about valuing your landscaping company.

 

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