How to Enhance the Value of Your Landscaping Firm
These 5 tips can help you increase the value of your landscaping firm, even if you’re not ready to sell.
If you are the proud owner of a landscaping business, chances are, you are reading this because you are curious about what buyers are looking for when they evaluate a business in your industry. At Viking Mergers & Acquisitions, we have experience selling landscaping companies and we can advise you on what steps to take now so that when you ultimately decide to sell, you are able to maximize your value.
According to statistics there are approximately 426,000 landscaping businesses in America today. The economy is bouncing back and Americans are spending more money than ever on their yards. According to the Professional Landcare Network, 81% of people with a yard believe that the upkeep of their yard is important to the look of their home. The landscaping services industry accounts for $74 billion dollars in revenue annually and is projected to account for $80 billion in 2015.
If you’ve been in the business for a few years, you may have an idea of what your business would sell for. Oftentimes, business owners believe their businesses will sell for far more than it’s actually worth so it is wise to prepare yourself with formulas and tips to form a more educated idea of your business’s worth. While only a business broker can tell you the true value of your business, these formulas can help you get an idea of where you currently stand.
- 45-50% of annual revenues + inventory.
- 5x SDE, plus fixtures, equipment & inventory.
- 2-6x EBITDA
Now that you know partially of what goes into calculating the sales price for a landscaping business, you can begin taking steps to ensure your sales price is on the higher end of these multiples. Based on our experience, below are 5 key areas of focus that will help you to rise above your competition, excel in your day to day operations, and provide you with the highest valuation when it comes time to sell.
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Branding
One of the most important things you can do as the owner of a landscaping business is to budget for establishing and marketing your brand. Everyone knows to cover the basic outlets such as your website and all forms of social media. However, perhaps even more valuable to a landscaping firm is the free advertising that you benefit from as a mobile contractor. You have an advantage that many businesses do not have as you are in the community working on well-traveled streets and thoroughfares. Your service vans, trucks, tractors, and equipment should be rolling billboards. Don’t forget your crews need to be fully outfitted with t-shirts, hats, and collared shirts for the leadership team. Finally, consider sponsoring local sports teams or high schools to further get your name out there. Effective branding and marketing will expose your company to thousands of potential customers, in addition to, building a reputation in the community as a company that values contributions and giving back.
Bidding Software
Identify and utilize a budget friendly software package for bidding, estimation work and tracking customers. Included among the many features of a competent bidding software package is the ability to create professional proposals and provide accurate estimates, track ongoing bids, manage a customer database, run reports and organize AR/AP. You look more professional in the eyes of the consumer thus giving you a leg up on your competition. When it comes time to sell, this software package is a valuable asset that will transfer to the new owner.
By utilizing modern software to organize your bids and estimates, you are not only more capable of winning bids now, but you also have good documentation to show buyers when you are ready to sell. Systems such as iBid Plus and Sage 100 Contractor provide reporting systems so that you can show buyers everything they want to know about your current bids and your won deals. These programs can show future buyers profit margins, major wins, cost analysis and trends. In our experience working with sellers, we recommend these two programs:
Equipment
As a landscaping firm, your ability to effectively and efficiently stay on track with your projects is only as solid as your equipment. You don’t have to purchase the latest and greatest equipment on the market. Get the best that you can afford and take care of it. Everything should be in good working order with regular servicing. Regular routine servicing is imperative to avoid expensive repairs down the road. Keep good records of this service for your own personal tracking and as a means for documenting the life of the equipment when it comes time to transfer to this asset to a new owner at time of sale.
Organizational Structure
Do not neglect your staffing needs and structure. Larger businesses have the luxury of multiple crews and crew leadership positions, interoffice staff, full design teams, and outside sales representatives. Smaller firms manage operations through an owner and a group of employees who multitask to bring it all together. Regardless of your budgetary position, you need structure. A project leader or leaders need to be in place and visible to the customer…even if that is you as the owner (it will be in the beginning!). Think about the future and how you are going to add members to your team as you grow and increase service offerings. Identify an employee that can take on additional duties and start to develop that person. Like all businesses, your employees and your organizational structure are two of the most important pieces to the puzzle, and when the time is right, to a successful sale. A new owner will desire to come on board and expand on what is already in place. If that new owner has to come in and fill a gap or void in your current structure then your value has taken a hit.
Licensing
Do you offer services that require a General Contractors license? Do you install irrigation systems? Who carries the licensing associated with your firm? If the answer is you then start thinking of a backup plan. It is never a bad idea to get a key employee licensed or hire a key employee with the licensing that is vital to your business. Doing so allows you to step out at the time of sale, vacation, sickness, etc. and know that operations will continue. In addition, it’s good for business. Investing in your employees will empower them to feel vested in the business and important contributors to its operations and growth.
Someday you will decide to explore your options for a sale and hopefully, these 5 tips can help you prepare. By understanding the monetary and operational aspects of your business, you can begin to see where you are succeeding and where you may need some improvement to reach your ultimate goals.. Viking Mergers & Acquisitions can help you to understand where you stand today and how far you need to go. We offer a no-cost, no-obligation valuation for business owners. Valuations are a priceless tool that all business owners should equip themselves with and we are here to help when you are ready.