All Essentials to Know on How to Sell a Landscaping Business

“Selling anything is not just solely about selling, it is about identifying the buyers, understanding their wants, and tailoring your marketing efforts as well as a sales pitch that caters to the buyer’s concerns.”

You require a combination of skills, knowledge, and strategy to successfully pitch your sale. Selling a product, service, or landscaping business is no different. You cannot sell them within the blink of an eye or all over in one night. It requires the right approach and guidance to ensure a smooth and profitable sale. 

Reports stated that it takes 8-10 months on an average, to sell your landscaping business. Here in this blog, we will educate you on all the essentials of how to sell a landscaping business within which you can take a profitable exit from your landscaping business.

Evaluate the Value of Your Landscaping Business

Evaluating the landscape business is the first and foremost task to conduct. You should know the worth of your landscaping or lawn care business. Potential buyers will want to know how much your business is worth and will base their offers on that value. 

If you are finding it difficult to calculate the worth of your landscaping company, it is preferable to hire a business appraiser. 

Who is a business appraiser?

Business appraisers are professionals who give a fair opinion of the value of a business after considering various factors such as analyzing the company financials, trends, and consistency of the sales as well as determining the efficiency of business operations. 

Here are the three common methods highly accepted by all, when it comes to valuing landscaping companies:

• Multiple of Revenue: Simply multiplying your annual revenue by an industry modifier helps you get an estimated value. It is the fastest and most common way to get the estimated business value.

  Note: Industry modifier is nothing but the expected percentage of your industry’s growth in the next year.

  The formula to calculate the estimated business value is given here;

  “Estimated business value = Annual Revenue x Industry Modifier”
  Suppose the annual revenue of your business is $600,000 last year before taxes and the industry growth rate range between 2-4%, then your EBV (estimated business value) will be $1.2M-$2.4M.

  The industry modifier is variable and may change depending on multiple factors such as industry trends, competition, profitability, and growth potential.

• SDE (Seller’s Discretionary Earnings): The simplest and easiest way while conducting the landscaping business valuation is through this method. Multiplication of SDE (Seller’s discretionary earnings) with that of industry multiplier will give you an estimated business value.

  The SDE that will be considered while estimating the business value is the summation of various factors. Have a look:

  SDE (Seller’s Discretionary Earnings) = ([Net pre-tax earnings + your salary + expenses] – debts)”

  Estimated Business Value = Seller’s discretionary earnings x Industry Modifier

  Let’s take an example where your net pre-tax earnings are $1,50,000 and the salary you received is $50,000 along with the business expense incurred of $25,000. You also have $10,000 as outstanding debt which you will need to pay off before selling your lawn care company. The industry modifier is 4%

  Let’s calculate SDE first and then estimated business value,

  SDE (Seller’s Discretionary Earnings) =  $1,50,000 + $50,000 + $25,000 – $10,000 = $2,15,000

  Estimated business value = $2,15,000*4 = $8,16,000

  Landscaping professionals find this method easy, accurate, and effective as they get a clear idea of how much the business is actually earning and what is worthy of the business after paying off all the debts. There are higher chances of getting an accurate business profitability picture. 

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): All the landscaping businesses usually prefer valuing business using this method. Generally, larger businesses over the value of $5M along with those focusing on getting a clear picture of their cash flow statement and business profitability use this method.

  EBITDA is a method that adds up your net income, taxes, and interest expense to get the business’s net profit. After arriving at the business net profit add depreciation and amortization expense, and then multiply those summations with the industry modifier to get the business worth. 

Business profit = Net income earned + Taxes + Interest expense

EBITDA = Business profit + Depreciation + Amortization 

Business value = EBITDA x Industry Modifier 

Let’s understand this better with an example,

Suppose you have learned $7M last year, and your equipment is depreciating $50,000 per year because of the standard wear and tear. The industry modifier is 4%

Here business value will be $30,00,000

Recommended: Read this blog post to ensure that you are not missing out on any landscape expenses while calculating the business value

Identify the Potential Buyers

Determining the business is not enough, lending your landscaping business to the right hands is essential if you are willing to get what you are worth. Hence, to identify those right hands, here are some essential points to take care of:

• Analyze the existing people around you: Look around your network which may include the existing customers, suppliers, and competitors. There may be a time when they have expressed interest in buying or may know someone who is interested in buying a landscaping business. 

Recommended: Get inspired by the unique landscaping website to improvise yours. Remember that a strong online presence through a professional & attractive website can help you get recognized easily. 

Get Your Landscaping Business Prepared for Sale

Now that you have all the ingredients, it’s time to make the final dish. After determining your landscaping business value and identifying potential buyers, it is time to get prepared for the sale. Strategically planning your sale and taking the right steps at the right time, can make all the difference in achieving a successful sale. 

Here are the essentials to take care of:

• Review your books

  Your financials will be the core matter of interest for the potential buyers. Hence, it is very much essential to examine your books and make sure they’re accurate and current. The balance sheets, income, and account statements with the cash flow statements fall under the category of books. Also, it is crucial that you clear your accounts receivable and consider following up any unpaid invoices.

  InvoiceOwl helps you sync your landscaping estimates and invoices with Quickbooks online so that you can get simplified bookkeeping processes. 

• Trim Your Client List

  Trimming your client list is essential so that you can attract potential buyers at the time of your sale. Cutting down the unprofitable clients can help you present a more appealing profitable picture before potential buyers. Potential buyers will find it luring to see your commercial client base instead of residential ones. On top of that, commercial clients are more money-makers than residential ones. 

• Encourage independence

  Never rely significantly on personal involvement. Make sure your company can function independently. 

• Update and maintain equipment

  Finally, make sure your equipment is up-to-date, well-maintained, and in good working condition. This can help improve your business’s efficiency and reduce the risk of costly breakdowns or repairs. Up-to-date equipment can also be a selling point for potential buyers.

• Improve your invoicing

  Efficient and organized invoicing can help improve your cash flow and make your business more attractive to buyers. Make sure your invoices are accurate, professional, and timely. You may want to consider investing in invoicing software to help streamline the process.

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  Marketing your Landscaping Business

  B2B marketing is completely different from B2C marketing. You can not market the sale of your landscape business through flyers or door hangers. These practices are more suited for B2C marketing. Ads in local publications for entrepreneurs, or spreading the word through business relationships are some of the effective marketing ways for your landscaping business sale.

  Go for a more targeted approach and start promoting the operational parts of the business that help you stand out from others. Examples of these are:

  • Draft your landscaping or lawn care business plan effectively
  • Mention what type of clients you have and how many
  • What are the types of landscaping services you offer and what tools and equipment you use in your day-to-day operations
  • Enlist the name, designation, and roles of your key employees, what their experience is
  • What processes you follow at your business place that keeps your operations running smoothly
  • What is the unique selling proposition that sets you apart

  Remember, the key to successfully marketing your landscaping business is to showcase your business’s strengths, expertise, and unique selling points. By doing so, you can attract potential buyers who see the value in your business and are willing to pay a fair price for it.

  Start Negotiating the Sales of Your Landscaping Business

  Negotiations will need to be conducted once a potential vendor makes you an offer. A business broker will conduct the negotiations on your behalf if you are dealing with them. However, the following advice will help you close the transaction if you are acting on your own behalf:

  • Speak loud about your asking price with assurance; you are aware of what your company is worth. So be confident about what you desire to get paid.
  • Keep a level mind and abstain from deciding things based on feelings.
  • Make sure the purchaser will appreciate the effort you have put in and is a good fit for your company.
  • Work with a lawyer to create or revise the purchase agreement.
  • To ensure that your bookkeeper is ready for tax season, keep them updated.

  
  After you have identified the right buyer for your landscaping business and agreed upon the initial terms, it’s time to start negotiating the sale. Negotiating is a crucial step in selling your landscaping business, as it determines the final sale price and the terms of the agreement.

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  Frequently Asked Questions

  1. What can be the ideal time to sell a landscaping business?

     The time when your landscaping business is thriving and profitable, with consistent revenue and a strong client base can be considered an ideal time to sell a landscaping business. However, personal factors such as retirement, health issues, or a desire to pursue other opportunities can also play a role in the timing of the sale.

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  2. How do I determine the value of my landscaping business?

     Typically there are three methods to determine the value of your landscaping business. These methods are

     • Multiple revenue method
     • Seller’s discretionary earnings (SDE),
     • Earnings before interest, taxes, depreciation, and amortization (EBITDA).

     These methods can give you near to accurate business value, however it is recommended to consult with a professional business appraiser to know the exact value of your business.

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  3. What documents are required to sell a landscaping business?

     The essential documents required to sell a landscaping business include

     • Financial statements
     • Tax returns
     • Client contracts
     • Employee agreements
     • Any necessary licenses and permits.

     It is important to ensure that all the necessary documents are up-to-date and accurate before starting the sales process.

  Conclusion

  With this comprehensive guide on how to profitably sell your landscaping business, you must be acknowledged with all the essentials. Remember that selling a landscaping business requires special planning and execution. With the right approach and the right team in place, you can successfully sell your landscaping business and achieve a rewarding experience.