HOW TO SELL A LANDSCAPING BUSINESS
Landscaping businesses are one of the most highly sought after
businesses for entrepeneur’s to purchase in today’s commercial
business market. If you are thinking about selling your landscaping
business, this is a great time to get it listed with an army of buyers
out there looking to buy a business just like yours.
But, you don’t want to just take the first offer that walks in your door when you
start talking about selling your business because it is probably worth a lot more
than you think it may be due the high demand from potential buyers. When you
are ready to make that decision to sell, these important tips below can help you
prepare to sell your landscaping business as fast as possible, while getting the
best price possible so you make the most money.
For your landscaping business to have become a success, you have had to pour a
lot of time, energy, and money into building it and making it successful. This is
why there is so much value for someone else to buy your business, so they can
hit the ground running and have a profitable business on day one. There is also
value in the equipment, supplies, the service contracts, and the client base. I
f you have a website, this also adds value to the price of the business. There is
value in the business name, the reputation that you have built as you have built a
loyal customer base that knows your company does great work building
landscape designs, maintaining their landscaping, and keeping the weeds at bay.
Most importantly, there is value in the income and profits that you have that you
can prove on paper that will be carried forward with the new owners of your
landscaping business.
7 Steps To Take When Selling Your Landscaping Business
Whether your landscape business has lawn mowing, weed management, full
landscaping for residential or commercial, high end landscape design and
construction, the selling process is relatively similar and straightforward. Take the
following seven steps into consideration as you begin to prep your business so
that you can get it sold.
1.
Plan Your Exit
2.
Get Your Business Ready to Sell
3.
Gather and Organize Your Documents
4.
Hire a Business Broker
5.
Get a Business Valuation
6.
Set Your Landscape Business Selling Price
7.
List Your Business For Sale
Plan Your Exit From Your Landscaping Business
The first thing to start working on is to plan for your exit from your Landscaping
Business. The first thing that a potential buyer will be thinking about is what they
will have to do, or what role they will have to step in and do for them to continue
to run your business once they buy it. Start setting up how your busineess can
run without you being part of it. Answering these questions will help get you
started in thinking about the right things to help you get organized and ready to
sell your landscaping business.
Some questions to think about:
1.
When do you plan on leaving your business?
2.
Will your current team members stay with your business?
3.
Do your tools and equipment need any maintenance, or need to be replaced?
4.
How long are you willing to provide training to the new owner?
Get Your Landscaping Business Ready To Sell
When you are ready to sell your landscaping business, you should do some work
to get it ready for potential buyers to take a look at it. A new owner will want to
walk right into the business and have everything working, have happy customers
that they will be proud to show that they are the new owner that will be providing
the great products and services that they will continue to enjoy. You will want to
make your business stand out from other businesses so that it will sell quickly
and get you the highest dollar amount for your business.
Some good things to work on are:
1.
Fix anything that needs to be upgraded or repaired.
2.
Apply a new coat of paint, or a good cleanup on your gear, tools, vehicles, and
equipment.
3.
Get more engaged on your social media to continue to grow your customer
base.
4.
Expand or fine tune your service offerings to show the most profit for new
and future work.
5.
Encourage customers to write positive reviews online to show others how
great your service is.
6.
Look for new money making opportunities and identify additional sources of
revenue.
7.
This would also be a good time to try to collect any open accounts receivables
that are past due to close out those old invoices.
Get your Documents Organized
Now it’s time to start preparing your business paperwork to make sure you can
show that your business is making a profit, and you have your paperwork in
order. Any potential buyer will want to see your financial documents that will
show them that there is value in the business and it is worth what you are selling
it for. They will want to see your tax returns, your monthly and yearly cash flow,
income statements, and balance sheets.
A potential buyer for your business will want to see that the value is there to
make it worth while for them to invest in buying your business. Some business
sellers will engage their accountant to help them with this piece if you have some
complicated financials, or if you already work with an accountant that can easily
pull this information together from the information and details that they already
have.
Documents you may want to gather:
1.
One to three years of profit and loss statements.
2.
One to three years worth of balance sheets.
3.
One to three years of full tax returns.
4.
Inventory list of landscaping equipment.
5.
Inventory list of landscaping products and supplies.
6.
Pink Slip or loan details for any vehicles or large equipment.
7.
Any service or product contracts that you may have.
8.
Any licensing or permits that the new buyer will need to be able to continue
your business.
9.
Any Lease contracts or agreements.
It may also be a good idea to consider asking your employees if they would be
willing to sign a non-compete agreement, after consulting with your attorney to
see whether this is a good idea for your type of business or not. A potential buyer
would be concerned that some of your top employees may leave and start their
own company once they buy your business, leaving them high and dry.
List of Landscaping Equipment
You will need to provide an estimate for the value of all of your equipment in an
itemized list. You should include any information or paperwork that you have that
would back up the estimated value for the equipment as well. This includes any
vehicles, any landscaping equipment, supplies, products, tools, and anything else
that helps to add to the value of your landscaping business.
Other documentation may be needed as well, so it is good to pull those together
if you can so that you have them ready. The more documentation that you have,
the easier it is to show any potential buyers that your business is stable,
profitable, and a good investment opportunity. You may need to provide any
insurance policies, employment agreements, supplier contracts, documentation
for any trademarked or copyrighted products that you have created, equipment
leases, bank statements, business loans, agreements with property owners, etc.
The more paperwork that you have ready to go, the better. Gather what you can
quickly and easily, so that you can provide some information to your business
broker. You don’t have to provide everything right up front. It may take six or nine
months or more to sell your business, so you still have plenty of time. You can
come up with more documentation as you move forward in the process. You
don’t have to be worried about sharing information with potential buyers,
because your business broker can have any potential buyers provide proof of
funds to buy the business, and sign a Non-Disclosure Agreement (NDA), so they
won’t be able to share your information with anyone else.
Hire A Business Broker To Sell Your Landscaping Business
If you’re looking to buy or sell your landscaping business you
should use an experience professional who understands the
market and can save you time and money. For more information,
contact Michelle Mendenhall as she is a Certified Business
Broker that is a member of the IBBA (International Business
Brokers Association), and a Commercial Real Estate Specialist.
Michelle Mendenhall
Professional Business Broker, IBBA
Commercial Real Estate Sales & Leasing Associate
Phone: 916.459.7526 DRE #02116152
LocalGirlGoesCommercial.com
michelle.mendenhall@localgirlgoescommercial.com
michelle.mendenhall@expcommercial.com
Get an Accurate Business Valuation
Now that you have hired a business broker to sell your landscaping business, they
will work with you to determine the value of your business. It’s good to think
about what you think you want to sell the business for, to give your business
broker a good place to start from. You know your business best, but there are
several ways to go about valuing your landscape businesses. Having a qualified
and certified business broker will help you come up with a good selling price for
your business that will attract the right buyers. A business broker does not
typically charge you anything unless your business is sold. Though, this is a
conversation they will have with you so that you fully understand what they will
charge for their services.
Your business broker will consider the value of your vehicles, buildings,
equipment, tools, contracts, the net income of your business, as well as any other
assets, or liabilities that you have with the business. If your is really profitable, you
will want to showcase that because it will increase the value of your business
quite a bit.
Set Your Landscape Business Selling Price
Picking the right price to sell your landscaping business is important. This price
point is what will attract buyers to make the decision to look into buying your
business or not. To sell it quickly, the best thing you can do is set the price a little
lower than the going rate so that you can attract more buyers. You might get
lucky and have multiple buyers offer you more than your asking price so that they
can buy it. Setting a price that is too high can scare away potential buyers
because they will think that the business is not a good investment for them, or
that you are not serious about selling it.
List Your Landscaping Business For Sale
Now is the exciting part, listing your business for sale. There are a lot of places
that you can advertise your business for sale, and your business broker will
handle all of this for you. If you hire the right business broker, they will create
advertising material, and send it to you for your approval of the content, and how
it looks. Once you approve of the advertisement, they will get your business listed
for sale. A professional business broker has access to advertising streams that are
full of potential buyers that are looking to buy a business, to give your business
for sale listing the highest level of visibility.
If you are ready to sell your landscaping business, you should consider partnering
with Michelle Mendenhall with Local Girl Goes Commercial. She is a Certified
Business Broker that has years of commercial real estate experience, and access
to a pool of potential buyers as she is a member of many different business
selling websites to give your business for sale listing the right exposure to get it
sold. Get in touch with Michelle and get started today!
How to Value Your Landscaping Business
The most accurate way to value your landscaping compay is to use the multiple of
earnings method. To understand this you need to understand two key terms, SDE
and EBITDA.
SDE stands for Sellers Discretionary Earnings, and represents the total financial
benefit the owner can expect to receive from their business. You take the
expenses such as officer’s or owners salary, benefits, depreciation, and other
items like rent, utilities, and other one time expenses back into your net profit
before taxes to show the total financial benefit your company can provide an
owner operator.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and
Amortization, and it is similar to SDE, but it is usually used to value larger
businesses with over three million in revenue. The real difference between
EBITDA and SDE is that EBITDA assumes that the new buyer will not be an owner
operator. Instead, EBITDA factors in a market value officer’s salary. Businesses
that are priced based on EBITDA will often pull a higher multiple because they are
not owner operated.
Business Valuation Formula: 2 to 4 times SDE, or 5 to 7 times EBITDA
Factors That Impact Business Value
Owner Involvement
The more involved an owner is in the production of revenue, the less valuable the
company is. Though it may not be possible to pull yourself out of all day to day
operations, it is a good idea to try to minimize how much the business needs you
to carry a large load. Consider taking a look at your management team, or hiring
or designating some managers to take over some of the tasks that you have to do
on a daily basis.
Keeping Your Books Up To Date and Accurate
It is a huge benefit to the value of the business to make sure you are keeping your
books up to date, and clean. Many business owners pull some cash out of their
business, and when they do that, they are dropping about two to three dollars
from their business value for every dollar they pull out of the business.
Avoid Customer Concentration Issues
You will want to try to diversify your earning among both large and small clients,
instead of just focusing on a few large clients to show a new buyer that your
whole business won’t fall apart if a large client walks away. This would be a high
risk for any buyer, and though it may lower the value of the business to them, but
they may still be interested in purchasing your business.
Reduce Working Capital Requirement
When a new owner steps in, they may have to fill the role of putting forward the
funds to be able to make payroll, pay vendors, and keep the lights on before any
revenue comes in. If you extend credit to your customers for longer than 30 days,
it can make it difficult for the buyer to use the SBA 7(a) small business loan
program. If you go in and clean up your accounts receivable for anything that is
more than 30 days old, you will increase the value by attracting more potential
buyers so that they can use this loan program, or others. Plus it shows that you
are on top of your office accounting, which increases the confidence in the
business to the new owner.
Company Size
Some lenders will shy away from smaller businesses with a value of less than
$350k. It is difficult to get anything below that financed through the SBA or other
loan sources. If you business can grow to above this level, it will definitely add
more value, and give a new owner better chances at great loan opportunities. If
you can’t increase the value by building up the business easily, you may want to
think about whether you would consider providing seller financing, to take this
concern away from any potential buyer.
Service Contracts
Any potential buyers love to see long term contracts, which will protect the
business from any financial concerns, and will help them to be able to predict the
revenue and earnings for current and future years. This also helps you to plan for
your routes for your landscaping crews. It’s easy to invest in employee expansion
and equipment when these long term contracts are on the books.
Commercial Clients
Many landscaping companies focus strictly on residential customers because they
are easier to get. Commercial clients are seen as less volatile in the industry
overall. If you can add some commercial clients in yearly or multi-year contracts,
this will add value to your business. Landscaping businesses that focus on
commercial clients sell for higher multiples than strictly residential companies.
Business Reputation
One of the most important measures for business success is their reputation. A
good reputation gives you client loyalty to maintain your service contracts year
over year. You should ask your customers to review your services on Google, and
Yelp. You may also consider asking some of your clients if you can make a quick
video of a customer testimonial that you can add to your website, and social
media, or if they will provide you a letter that you can publish on your website.
Digital Marketing
Most potential customers will research companies or products online before
making a decision on what to buy, or what service to sign up for. You should take
this time to develop a social media presence, or add to the ones you already have
and keep them current. Invest in a nice website, and put some time into
improving your search engine optimization. Add some logos to tshirts for your
employess, and your best customers. Put some logos or an advertisement on
your vehicles. When you get a new customer, or upgrade the landscaping on an
existing client, ask them if you can put a small yard sign for a few weeks to
advertise your business and spread your business name around.
Reliable Employees
One of the biggest challenges for any business is labor. Especially for good
manual labor. If you have a trustworthy crew that works hard, this will add value
to your business. It’s important to have a good hiring process, and offer
incentives and rewards to keep them happy and hard working.
Installations and Design Work
Service contracts are important to focus on. New installations are a higher risk
because of the upfront investment that add risk to the income of the business.
For your installations, when it comes to selling your business, it is important to
have the designs developed by employees or third parties, instead of just the
owner of the business. The new owner may not be able to step into this role, and
this may impact a purchasing decision. If you can contract that out, or train some
of your existing employees to do the design work, this will give the new owner
peace of mind.
Undocumented Employees
Finding employees can be difficult, but hiring undocumented immigrant workers
can be a huge risk to a company in the terms of penalties and liabilities. Penalties
can range from a few hundred dollars up to thousands of dollars. This is a risk
that can scare potential buyers away from both a cost perspective, and an
unknown area of expertise or something they are not familiar with. It is important
to do your due diligence when hiring new employees.
Selling Your Landscaping Business to a Competitor
A good place to look for a potential buyer for your business is to sell your
business to one of your competitors. If business is good, they may want to grow
and expand by buying your business. Give their contact information to your
Business Broker, or talk to your business broker to have them reach out to them
on their own to have the conversation.
Selling Your Landscaping Business to an Individual
Selling your business to an individual buyer will typically give you a higher selling
price because they will need to purchase every aspect of your company as it is
running today in order to keep running your business.
Selling Your Landscaping Business to a Strategic Buyer
A strategic buyer is a business that operates in an industry related to your
business so that buying your business will complement their existence business.
For a landscaping company, you may think about selling your business to a
property management company, an irrigation services company, another
landscaping company outside of your service area, or a construction company.
You may want to think about your client list and decide if any of them could
benefit if they purchased your landscaping business.
Selling Your Landscaping Business to a Private Equity Group
Selling your business to a private equity group (PEG) can be a lucrative deal,
though it is not very common that a PEG will purchase a landscaping company.
Selling to a private equity group is more like bringing in a money partner. Private
equity groups do like to buy businesses where the owners want to stay on, but
they want to sell or bring in an investor that can help them take the company to
the next level. Another good option similar to this may be to add an investor by
revenue sharing.
Selling Your Landscaping Business to An Existing Employee
If you have an employee that you think may be interested in buying your
business, you should have a discussion on what it would take to make that
happen with your Business Broker. One commonly used way to sell your business
to one of your employees is to do owner financing so they can qualify for the
loan. Typical loan methods can also work, but owner financing is a quick way to
let them take the business over and you have comfort in knowing that your
valued and trusted employee will run the business like you have in your vision for
your company.
How Long Will it Take to Sell Your Landscaping Business?
Over half of the business owners that sell their business feel that it will only take
about five months to sell their business. However, a market analysis across the
United States shows that it may take six or eight months to sell your business.
The main factor is the business climate in your area, whether there is a strong
pool of entrepeneurs, and the price point you choose to list your business at. The
size of your business is also an important factor because if your business is very
large, with a very high price, the number of qualified buyers is much smaller.
How Much Does A Business Broker Charge?
A business broker usually charges ten to fifteen percent for their services during
the sale. If you business does not sell, they do not typically charge a fee. They will
provide this information to you as you start your conversations with them. This is
a fair price for them to earn a living, and cover their expensive advertising and
marketing costs as they work to find the right buyer for your business.
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