How to Sell A Landscaping Company

Landscape Companies for Sale in South Florida

Commercial or residential landscaping companies seem to be everywhere in South Florida. Competition is fierce but profits can be very high for many companies with a large enough route that is run properly. Many buyers of landscaping companies are existing competitors wishing to enlarge themselves, local entrepreneurs just starting out in the industry, overseas buyers seeking to obtain an E2 VISA, or buyers from out of the area wanting to establish a successful business. Some landscaping companies for sale are operated by the owner with perhaps only one other helper while others have several crews with many employees.

Three Key Factors When Evaluating Landscaping Company for Sale:

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

Regular Monthly Billing 

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.

Determine Adjusted Owner Benefit

A professional business broker should compute the adjusted owner  benefit once the regular monthly billing is known. Without including any extras, an experienced business broker may simply take the regular monthly billing and deduct the operational costs of the landscaping route such as its payroll, fuel, vehicle costs, and supplies. The adjusted owner benefit includes the owner’s salary, unrecorded cash (if it can be proven), and any personal expenses that flow through the financial statement.

‘Extra Services’ 

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.

Equipment Value of Physical Assets

  • 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, it is the quality and profitability of the route that most greatly affects the valuation of the landscaping company.
  • 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).
  • There may be cases where the seller has too much equipment that the buyer does not need or desire.
  • In such instances the seller is usually better off selling off unneeded equipment before the sale.

Quality of Landscaping Company’s Customers 

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 the goodwill generated from its customer list. Without a good customer list (and hence route), few buyers would want the equipment anyway. The primary components of a quality customer list is how long the customers have been with the route and the customer’s payment history.

Problematic Customers Reduce Value of Landscaping Route

Problematic customers in a landscaping route do not have a track record of sticking with the company (at least not yet) or being reliable with their payment history (most long term customers have no problematic payment history!). Many buyers of landscaping routes will review the payment history of customers during the formal due diligence process, and will reduce their valuation of the route if there is a significant amount of problematic customers.

Determine the Best Asking Price 

The best asking price of a landscaping route comes down to the amount and quality of the regular service route as well as the value of the included physical equipment. If the seller is willing to give a non-compete and facilitate a smooth transition after the sale, then that will increase the valuation. Always be sure to consult a professional business broker and receive the highest possible price for your landscaping route.

Give Martin at Five Star Business Brokers of Palm Beach County a call today with questions about valuing your landscaping company.