Two questions I often get asked is: How do you sell a lawn service? and How do you value a lawn service? As I have discussed in several other blog posts and podcasts there are many ways of valuing a business and ultimately the value of any business is what the market dictates.
Here are three things people need to consider when valuing lawn services or for that matter any service business:
1. More accounts are better than fewer accounts. Having a strong service revenue base with no revenue concentration makes buyers and banks feel more and more comfortable because it hedges risk and risk is the biggest what if. So have no concentration of revenue
. The target is less than 20% of your gross revenue from anyone relationship or customer.
2. Service over Install: Anyone in the landscaping industry knows the margin opportunity that lays in installation and enhancements. That however is not what attracts buyers. Most buyers are not in the business (indeed the best buyer is not in the industry) and discount install and enhancements as they do not see them as “guaranteed”. So as much as you hate it….drive your service revenue and keep it simple.
3. Equipment Simplicity and Practicality: The equipment adds no value to your business. Lawn Care is one of the businesses that are capital intensive and equipment is eaten up quickly. As mentioned earlier install is not as attractive to the best buyers (non-industry) and as such trenching, skid loaders, etc are a mystery. Invest in practical equipment that is service-oriented and rent the balance on demand
As Orlando Florida’s #1 business broker we have sold hundreds of lawn services and can provide valuable insight into not just the industry but how to maximize your value when you buy or sell a lawn service.
Transworld’s Michael Shea may be reached at 321-287-0349 or email him at mike@tworld.com .