How to Sell a Landscaping Company

RockHaven Capital

What you are selling

When a landscaping company changes hands, the buyer is not paying for last summer’s mowing. He is paying for work that is already under contract and likely to renew, with crews who can run those routes at a known labor cost.

That is why two companies with the same revenue can sell for very different prices. A business built on recurring maintenance with tight routes and signed agreements gives a buyer something he can verify account by account. A business built on one-off installs and verbal promises asks him to take next season on faith, and he will price that risk into the offer or walk away from it.

Most sales follow the same order. You get the financials and the route book in shape first, then speak with a buyer in confidence. Price and terms go into a written agreement before the buyer starts verification, and closing follows once the books and contracts check out.

What buyers look at

A buyer works through the company in a predictable order, starting with the work itself and ending with the people and equipment that deliver it. If any one of those pieces cannot be verified, the conversation usually stalls there until it can.

• Mix of work. Recurring maintenance is the part a buyer can forecast, because the same accounts bill again each month under agreement. Installs and enhancements help the year, but they have to be sold again next season.
• Residential and commercial split. Neither mix is automatically better, but they behave differently when ownership changes. Commercial accounts tend to run on longer written terms and rebid on a cycle, while residential books turn on service quality and how well the routes are kept.
• Route density. A route where crews spend the day cutting instead of driving produces more billed work per labor hour. Buyers look at stops per route and drive time between them, because windshield time is payroll that brings in nothing.
• Agreements on paper. Signed terms let a buyer confirm scope and price and renewal dates account by account. Verbal arrangements are discounted for a practical reason, which is that the customer never agreed to stay with anyone.
• Fleet and equipment. A buyer prices the fleet on age and condition and on the likelihood it finishes the season without major repair. A current list with hours and service records answers most of those questions in one pass.
• Crew leads. Buyers ask early who runs each route when the owner is not there. If a lead holds the schedule and the quality standard and the customer relationships, the book is far more likely to survive a change of owner intact.
• The slow months. Buyers want the full year, not just April through October. Snow work or leaf cleanup can fill the gap in northern markets. In southern markets buyers look at how much of the maintenance book keeps billing through winter.

What your company is worth

Price is built from seller discretionary earnings, usually called SDE. It starts with the profit on the tax return and adds back the owner’s salary and the personal expenses the business pays for the owner, provided those addbacks can be documented.

That figure is then multiplied to get to price. Landscaping and other service companies commonly change hands at roughly 2.5x to 4x SDE, and that range is general market information rather than an offer or a promise from any buyer.

Where a company lands inside the range depends mostly on the quality of the book. A maintenance-heavy book with signed agreements and low customer concentration supports the upper end, because the buyer is paying for revenue he can reasonably expect to keep. A project-heavy book or a book that depends on a handful of large accounts sits lower, since losing one account changes the earnings the price was based on.

The arithmetic is straightforward. Take $300,000 of SDE at 3x and the price is $900,000. At 2.5x the same earnings produce $750,000. That $150,000 difference is usually decided by records and retention, not by negotiation skill alone.

Equipment is normally included in that total rather than added on top of it. A clean list helps a buyer confirm the fleet can do the work the price assumes, which is the real role the equipment plays in the deal.

Getting ready

Most of the work before a sale is getting records into a form a buyer can test. Owners who do that work a season early tend to hold their price better, because nothing in the file looks assembled for the sale.

• Put the route book in one place. List each account with its monthly or seasonal price and the service it covers, and note the agreement and renewal date behind it. If your routes already live in scheduling software, an export from that system carries more weight than a spreadsheet built for the occasion.
• Service the fleet and keep the paperwork. Catch up deferred maintenance on the trucks and mowers you expect a buyer to rely on, and file the invoices where they can be found. A buyer who can see recent work on a high-hour mower worries less about what else has been skipped.
• Let your lead run the routes in the open. Have the crew lead handle the schedule and customer calls for a full season while you step back from daily dispatch. That record matters at closing, because it shows the routes do not depend on you being in the truck.
• Separate personal spending from the business. Run personal truck costs and insurance and family expenses out of the company well before you sell, or be ready to document each one as an addback. Mixed books force a buyer to guess at real earnings, and buyers guess low.

None of this requires changing how the company runs day to day. It is mostly writing down what you already know, so a buyer is not asked to take your word for any of it.

Selling directly to RockHaven

RockHaven Capital buys landscaping companies directly for our own account. We are not brokers and we do not list companies for sale, so there is no public posting and no process where your crews or competitors hear about it from someone else.

Sellers pay us no fees. The first conversation is confidential and it stays that way unless you decide otherwise, and you choose who inside the company is told and at what point they are told.

1. First conversation. A private call about the company, why you are thinking about selling, and what you want life after the sale to look like. No financials are needed for that call.
2. An early read on value. Once we see SDE and the route book, we give you a straight range and explain what is holding it up or holding it down. If the fit is not there, we will say so on that call rather than stretch the process out.
3. Written terms. Price and payment structure go into a signed letter of intent in plain language, along with the target closing date. How the price is paid and what happens with prepaid work are spelled out there, not left for closing week.
4. Verification, then closing. We check tax returns against the books and sample the agreements behind the largest accounts, and we walk the fleet with you. Most sellers find this part takes four to eight weeks once terms are signed, depending on how quickly records come together.

Timing the close around the season comes up in almost every landscaping deal, and a close before spring or after the fall cleanup can both work if the contracts and crews transfer cleanly.

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