If you’re considering selling your lawn or landscape business, you’re also hoping to get the maximum value from an offer. The good news is that the factors that help buyers make higher bids are within your control. Here are some of the steps you can take to create more value in your business.
Make your company more profitable. What buyers want comes down to one thing: how much profit your company pulls in each month. There are several ways to improve profitability. The first is to make sure your operation is run as efficiently as possible. Make sure your crews have the right equipment to do the job efficiently. Help them work smarter, not harder.
One owner I know tightened his operation by redesigning his customer base. His crews were spending too much time driving to customers with less profitable jobs. He let those far-flung customers go and raised the rates on the customers that were closer to his base of operations. His crews now spend less time going to the job and more time on the job. He has fewer customers, but his revenue has stayed the same while his profitability increased dramatically. Think about what that might look like in your lawn business.
Another way to increase profitability is to upsell extras during the slower growing months. Many owners tend to take their foot off the gas pedal after the busy summer season, but there is plenty of work that your crews could be doing: mulching, trimming, light landscaping. The more recurring revenue you have during slower seasons, the more attractive your company will be to a potential buyer.
Make sure your books are clean and up to date. You’re probably using QuickBooks or some other software that tracks your revenue and expenses. Make sure you’re making timely entries and that you’re running all your revenue through your business account. Keep personal and business expenses separate by using two credit cards, so there’s no mingling of funds.
Make sure you’re documenting and paying your employees properly. If your crew members work exclusively for you every day, using your equipment, and following your instructions, they should be paid as W-2 employees and not 1099 contractors. Here’s a link to the IRS instructions on employment status, if you have questions. You should also have clear documentation on the citizenship status of your employees and that they’re legally able to work in the U.S. No buyer wants to worry that they’ll be inheriting payroll problems when they buy your business.
Hire good staff and train them well, including a second-in-command who can take on more responsibility when needed. A good team lead is a valuable asset that attracts buyers to your business. Having someone who understands the business, has relationships with customers, and can provide continuity after you sell is important for any buyer.
A good second-in-command also allows you to take time off if needed. That gives you (and the new owner) time to work on the business rather than in the business. This is an important factor in valuing a company.
Start getting signed agreements with your customers. Signed agreements accomplish a couple of important goals. They provide a document that states terms, outlines quality standards, and eliminates many misunderstandings and quality complaints. They also provide documentation of future recurring revenue, something a buyer will be concerned about. If your customers have agreements with the company, they’re less likely to cancel their business if a new owner takes over. It’s another way to reduce owner dependence and prove to a buyer that the company will be profitable for the foreseeable future.
Buyers want to purchase companies that have expectation of continued revenues and potential for growth. Taking these steps before you get ready to sell will increase your company’s value and attract better offers.
You should always consider bringing in an experienced business broker to guide you through the process of putting your business up for sale. A broker with knowledge and experience in the lawn and landscape industry can help you create more value for your business and actively market your business to his pool of motivated and qualified buyers.
An experienced business broker will be an invaluable partner, helping you avoid pitfalls and get the most value for your years of investment and hard work.
About the author: Jim Parker
Jim Parker is an experienced business broker specializing in lawn and landscape businesses. The Lawn Boss is based in Clermont, Florida. As an industry leader he has served as the past president of the Business Brokers of Florida. Jim is a sought-after speaker, where he teaches others in his industry best practices in ethics, closing transactions, and finding qualified buyers. He consistently is a million-dollar award winner and is among the top 50 in sales of all business brokers.
He is a Certified Business Intermediary (CBI) and is a Mergers & Acquisitions Master Intermediary (M&AMI). To contact Jim, visit thelawnboss.com or call (407) 927-8999.