Maximize Your Profits: How To Value And Sell Your Landscaping Business?

Regardless of the underlying reason, deciding to sell your landscaping company is big!!!

Whether you want to retire or step into new ventures, ensuring that your landscaping business gets the best payout it deserves is more than just finding a buyer and walking away with a closing deal. Ideally, a winning sale speaks to your hard work, reputation, and the business growth that you’ve spent building over the years. 

Navigating a sale can be overwhelming, but with the right strategies, you can position your business for a successful exit. The first step in this process is accurately evaluating its value. 

In this comprehensive guide, we shall look at the different ways to accurately value your landscaping business and how to ensure a profitable exit. 

Assessing Your Landscaping Business’s Value

There are multiple ways to accurately measure your business’s worth, and the method chosen changes with company size, circumstances, and personal preferences. So, how do you value your business? Here’s how.

Asset-Based Valuation

Asset-based valuation is one of the simplest ways of calculating the actual worth of your landscaping business. For this calculation method, you add the market value of all your physical assets, including your trucks, utility vehicles, transporting trailers for crews and equipment, etc. 

Here is a quick checklist for your physical assets: 

• Equipment and tools: Essential landscaping equipment includes blowers, lawnmowers, trimmers, rakes, edgers, chainsaws, specialized gardening equipment, and more. 
• Inventories: Add plants, trees, shrubs, fertilizers, mulches, soil, pesticides, and other landscaping supplies.
• Office furniture and materials: This includes your chairs, work desks, computers, and other administrative supplies for office purposes.
• Heavy machinery: Large-scale project requirements like dozers, excavators, wheel loaders, backhoe loaders, skid steer loaders, etc.
• Vehicles: If the company has trucks, salt-spreaders, and passenger vans for transporting crew members from one location to another.
• Maintenance facilities: Warehouses where equipment and other supplies are stored safely. 
• Land properties: If your landscaping company owns any land that provides maintenance services, storage areas for equipment and other materials, etc.

Note: This method works best for small companies.

Valuation By Comparables

Looking at what similar businesses have sold for can give you a reality check, but it’s not always foolproof. Companies usually look for similar-sized businesses catering to the same market in terms of services and work capitalization. Though comparable valuation is a popular method followed during business exits among landscaping businesses, it is not the best method. The valuation might not always be accurate, and you may not always find a similar-sized company that has been sold out recently.

Seller’s Discretionary Earnings (SDE) In Multiple Folds 

Seller’s discretionary earnings in multiples is one of the best ways to assess your landscaping company’s accurate worth. 

What are the seller’s discretionary earnings?  It is a financial metric used to calculate the owner's profit raised from the company. Here’s a quick formula:

Quick glossary for you:

Net Income: Total amount of money left after paying taxes, interest, crew paychecks, and other expenses from the revenue generated. 

Interest Expense: Amount paid as a charge for borrowing money from money lending entities. 

Depreciation Expense: It’s a non-cash expense denoting the decreased value of the assets. 

Amortization Expense: Total amount spent on long-term assets like computers, landscaping equipment, company vehicles, etc.

Owner’s Salary: A preset amount of money allocated to the owner as a monthly salary for all the hard work he puts into running the landscaping business. 

Discretionary Expenses:  These are non-essential expenses that can be quoted as wants and not as needs to run a company. 

Non-Recurring Expenses: These are expenses that are not likely to occur frequently. 

In short, SDE clarifies to the buyer the company's earning potential if they take over. 

The SDE method of calculating the value of the landscaping company works best for a small company, as the owner is usually closely involved in the company’s operations. The owner’s salary is one of the components included in the calculation. Two to four times the SDE value is often referred to as a profitable business exit. 

For example, a small landscaping company with a net income of $100,000 adds back the owner's salary of $50,000, equipment depreciation of $10,000, and $5,000 in one-time expenses, which makes the SDE $165,000. With typical landscaping company valuations ranging from 2 to 4 times SDE, the business could be worth between $330,000 and $660,000. This method helps the buyer with the company’s true earning potential.

Earnings  Before Interest, Tax, Depreciation, And Amortization (EBITDA) In Multiple Folds

EBITDA is similar to SDE but assumes the business isn’t owner-operated and factors in a market-rated salary. Use this for medium—to large-sized companies.

Due to the possible massive difference in salary rates, higher multiples of EBITDA are calculated in this case. 

‍Quick glossary for you:

Earnings (net): Company’s earnings after deducting all the expenses required for running the business, like taxes, crew paychecks, material costs, etc.

Interest: Amount paid as a charge for borrowing money from money lending entities. 

Tax: Mandatory charges enforced by the government for running the business. The taxable amount varies with the type and size of the business.

Depreciation: Monetary reduction in the overall value of the assets.

Amortization: Costs of intangible assets over a period of time. 

The EBITDA valuation method can be used if your company is medium—to large-sized. The calculation depicts the company’s cash flow potential, which can be a highlight for buyers who wish to seek investments to expand their business. A practical suggested profitable exit will be 5-7 times your EBITDA.

For instance, a medium-sized landscaping company with net earnings of $150,000 adds back $10,000 in interest, $15,000 in taxes, $20,000 in depreciation, and $5,000 in amortization, resulting in an EBITDA of $200,000. With typical landscaping businesses valued at 5 to 7 times EBITDA, this company could be worth between $1 million and $1.4 million. This method portrays the company’s cash flow potential, making it attractive for buyers looking to scale and expand the business.

Additional Read: How to Choose the Right Revenue Recognition Method for Your Business

What are the various factors that affect your business value?

Owner Engagement

The more dependent the landscaping business is on its owner, the less attractive the company becomes to potential buyers. Buyers want businesses that run smoothly without owner intervention.  As a first step in making this right, consider stepping back and monitoring the team and operations to implement the strategy.

A well-drafted and comprehensive Standard Operating Procedure (SOP) also helps streamline tasks and assign clear roles without much of your (owner’s) involvement. 

Mismanaged Financial Records

Foolproof financial records are a must when selling your landscaping company. Every dollar unrecorded in papers is multiple dollars off the sale price. Buyers always want to see reliable financial records to understand and analyze the actual potential of your landscaping company to get business for them. Additionally, transparency builds trust for potential buyers, and there is no reason you want to do it the other way. 

Company Size

The size of your landscaping company significantly impacts your sales due to adjoining factors like stable revenue streams, an established customer base, well-defined operational systems, and more. Buyers tend to express interest in larger companies for reduced risk factors and potential scope of growth in the future due to the already existing business stability. 

On the other hand, smaller companies are more likely to be owner-dependent. This might lead the buyer to suspect a higher risk of instability if the key management team decides to leave after the sale.

Type of services offered

The range and value of services your landscaping company provides will directly impact its sale price. High-demand services like commercial landscaping maintenance, irrigation management, snow removal, and large-scale installations add considerable value. Focus on showcasing services with strong market demand and future growth potential. 

Buyers are particularly drawn to scalable services with recurring revenue potential, so highlight any unique offerings that set you apart from competitors. Document service performance data and customer testimonials to illustrate value-added services and their profitability.

Type Of Existing Contracts

Long-term contracts are gold when selling a landscaping business. They provide predictable revenue streams, reduce financial risks, and stabilize business operations. To boost your company’s appeal, showcase contracts with solid, reputable clients and highlight recurring service agreements (e.g., multi-year commercial maintenance deals). 

Buyers appreciate this built-in stability as it reduces the need for immediate client acquisition. Having clear, renewable contracts in place enhances the perceived value of your company and eases the buyer's transition, allowing them to focus on scaling instead of scrambling to maintain revenue.

Marketing

A strong marketing strategy for your landscaping company elevates visibility, attracts more clients, and increases brand recognition, making the business more appealing to potential buyers. For example, a landscaping company with a substantial online presence and positive reviews will naturally have a higher exit value than one with limited outreach. 

Targeted digital marketing, especially through local SEO and paid ads, builds visibility and drives leads, increasing your business’s profitability and potential for growth.

Meanwhile, a company with poor marketing may struggle to attract clients, impacting revenue and lowering its overall sales value. Effective marketing directly influences the perception of future growth and profitability.

How To Sell Your Landscaping Business?

The first step towards selling your landscaping business is understanding your ideal customer. This is followed by exploring business sales platforms and other provisions to find them and close a deal. Let’s understand them in detail. 

Understanding The Type Of Buyers

Finding the right buyer for your landscaping business starts with knowing your revenue and market value. If your revenue is under $1 million, focus on individual buyers or small business owners. Larger firms and private equity buyers target businesses with solid earnings, typically over $1 million, to expand or consolidate operations. Identify your target buyer early to shape your pitch and valuation accordingly.

The next type of buyer is private equity firms, which mainly target landscaping businesses to consolidate operations and do bulk purchasing. They usually buy a group of businesses, improve their efficiencies, and sell them within 5-7 years. These buyers focus on companies with strong financials and significant growth potential.

Leverage Online Business Sale Platforms

Selling your landscaping business can be complex, but leveraging online business sale platforms can simplify and speed up the journey. BizBuySell, BusinessBroker.net, and Acquire are online business platforms for buying and selling business enterprises that can help you find your ideal buyer. Listing your landscaping business on these sites enhances your visibility to a broader audience of potential buyers, leading to better competitive offers.

Here is a list of reliable online business platforms to consider:

Acquire: Formerly known as MicroAcquire is an online marketplace for small and medium businesses, including landscaping companies. It simplifies the selling process by offering a wide-reaching network of buyers and sellers and providing an easy-to-use yet powerful platform to reach potential buyers.

Axial: Its online platform connects middle-market businesses like landscaping companies with buyers and investors. The platform's algorithm is well-tuned to understand the user’s pain points and strategically connect buyers and sellers with matching portfolios.

BizBuySell: This online marketplace for buying and selling businesses has many users, including landscaping companies. It is best suited for business owners who want an easy-to-navigate platform to quickly connect with buyers. 

BuyAndSellABusiness is the best choice for small business owners who prefer user-friendly processes for selling their company. This platform is great for quick and easy-to-coordinate sales.

Empire Flippers: It offers a smooth, curated, and hassle-free buying and selling experience. Their technically sound platforms ensure your business is presented as the best with commendable outreach.

PrivSource: The platform is ideal for owners who want a confidential, targeted sales process that focuses on finding serious, private buyers without broad public listings.

Approach professional business brokers

Another strategy to consider while selling your landscaping business is partnering with a professional broker, which can significantly enhance the selling process. While brokers charge a commission (often 10%), their expertise ensures your landscaping company isn’t undervalued. Brokers handle pricing, negotiations, and connecting you with the right buyers, making the process smoother and more profitable.

Additionally, their access to a broad network of buyers, including individual investors, strategic buyers, and private equity firms, increases your chances of finding the right match for your business.

Besides pricing and networking, professional business brokers also help you prepare marketing materials for listing the landscaping company and other records to effectively handle negotiations with supportive data. As intermediaries, brokers maintain confidentiality, facilitating communication while protecting your business’s reputation. They also provide guidance on the legal and financial aspects of the transaction, ensuring all necessary documents are prepared and regulations are followed. 

Explore classified Ads

Using classified ads can be an effective strategy for selling your landscaping business, as they help you reach a broader audience. Publishing ads in business and landscaping-specific magazines and websites, newspapers, and other online platforms can help you connect potential buyers who may be actively searching for landscaping businesses in your area.

In addition to reaching a wider audience, classified ads are cost-effective, as many online platforms offer free or low-cost ad placements. 

Smart Negotiation

A good and tactical negotiation ensures the buyer and seller are happy with the closing deal. When quoting a price, ensure that it is reasonable and that you have strong financial and market data to back it up. If lumpsum payments are difficult, consider options like seller financing, earn-outs, or installment payments. Be flexible when discussing payment plans and transition periods and assisting with the sale. 

While negotiating, remembering and following the 5Cs of negotiation is the key:

• Collaboration: You are not working against the buyer but with the second party to find a mutually beneficial solution.
• Creativity: Think of innovative solutions in terms of payment structure, final sealed payment, and more for a smoother process.
• Compromise: Find a middle ground by making concessions that satisfy both parties.
• Communication: Ensure that communication is transparent and that you express your needs, concerns, and expectations to the second party. Similarly, you need to be a good listener. 
• Credibility: Build trust through honesty and reliability to strengthen the negotiation process.

Always document every other agreed-upon term with the help of a lawyer and review drafts and contracts transparently. 

Recap

Selling your landscaping business isn’t just about finding a buyer; it’s about ensuring you get the best payout for your years of hard work. A successful sale reflects your business’s reputation and the growth you’ve built. Before you start searching for a buyer, evaluating your business's worth accurately is crucial. Asset-based valuation, Comparables Method, Seller’s Discretionary Earnings (SDE), and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) are a few popular evaluation methods. 

Key factors affecting your business value are owner engagement, financial records, company size, and the services offered. Usually, buyers prefer companies that can operate independently, have clear financial records, and provide stable revenue through long-term contracts.

Understanding the ideal type of buyer for your landscaping company can also help you pitch in better. The motivations and interests of your potential buyers depend on the revenue you generate from your landscaping company. Additionally, using online business sale platforms can help you reach a wider audience, and partnering with professional brokers can simplify the process, from pricing to negotiations. Lastly, do not underestimate the power of classified ads and tactical negotiations, as they can help you seal a happy exit deal for both parties.  

Happy selling!

Frequently Asked Questions

Is there a formula for valuing business?

A business can be valued in multiple ways depending on its size, nature, growth potential, and many other factors. The most common method of valuing a business is Total Value = Resale value of the assets mentioned above - Liabilities

How is EBITDA calculated?

EBITDA = Earnings (net) + Interest + Tax + Depreciation + Amortization 

Where abbreviations represent: 

• Earnings (net): Company’s earnings after deducting all the expenses required for running the business.
• Interest: Amount paid as a charge for borrowing money from money lending entities. 
• Tax: Mandatory charges enforced by the government for running the business. 
• Depreciation: Monetary reduction in the overall value of the assets.
• Amortization: Costs of intangible assets over a period of time. 

How do I calculate SDE?

SDE = Net Income + interest expense + depreciation expense + amortization expense + owner’s salary + taxes + discretionary expenses + non-recurring expenses 

Where abbreviations represent:

• Net Income: Total amount of money left after paying taxes, interest, crew paychecks, and other expenses from the revenue generated. 
• Interest Expense: Amount paid as a charge for borrowing money from money lending entities. 
• Depreciation Expense: It’s a non-cash expense denoting the decreased value of the assets. 
• Amortization Expense: Total amount spent on long-term assets like computers, landscaping equipment, company vehicles, etc.
• Owner’s Salary: A preset amount of money allocated to the owner as a monthly salary.
• Discretionary Expenses: These are non-essential expenses that can be quoted as wants and not as needs to run a company. 
• Non-Recurring Expenses: These are expenses that are not likely to occur frequently. 

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