Selling Your Landscaping Business: What Private Equity Buyers Look For
What landscaping owners should know about selling to private equity, what buyers look for, and how to tell whether your business is ready.
Key Takeaways
- Private equity firms are buying landscaping businesses because the cash flow is steady, the work can’t be automated, and the industry is full of small companies waiting to be combined.
- Small operators usually sell their routes and equipment. Larger ones sell enterprise value. Which one you are changes everything.
- In our experience, landscaping businesses start getting serious private equity attention at roughly $500,000 in net profit.
- Buyers want recurring maintenance revenue, high renewal rates, tight route density, clean books, and a management team that can run things without you.
- In our experience, roughly 4% of landscaping businesses check every box, and many deals get done with about 75% of them checked. Most of the rest can get closer with time.
- Whether you ever sell or not, private equity is already changing your market.
When you think of private equity firms and the companies they buy, a landscaping business probably isn’t the first thing that comes to mind. It should be.
If you own a landscaping business, you need to understand what’s happening in your industry, whether you ever sell to private equity or not! In a lot of markets, one of your competitors may already be private equity backed. That changes how they price, how they hire, and how fast they grow.
Many landscaping owners are shocked when they find out what their business might be worth to the right buyer, and how much interest there really is.
How do I sell my landscaping business?
The short answer: get your books in order, keep it quiet, figure out which kind of buyer you’re a fit for, and talk to someone who works with those buyers. Here’s how that breaks down:
- Get your books clean. Three years of financials that match your tax returns, with personal expenses separated out.
- Keep it quiet. If your crew leads hear you’re selling before you’re ready to tell them, some of them will start looking, and the customers they service may follow them. Customers and competitors talk too.
- Know which buyer you fit. Smaller operators usually sell their routes and equipment to another operator. In our experience, once you’re at roughly $500,000 in net profit, private equity starts paying attention. Size decides which conversation you’re in.
- Fix what you can first. Getting maintenance customers on written agreements and building crew leads who can run things without you can both make a real difference.
- Pick your timing. A buyer is going to look at your last twelve months. In a seasonal business, going to market off a strong season matters.
- Talk to someone who works with buyers. They’ll tell you how a buyer will see your business before a buyer does.
Why are private equity firms buying landscaping businesses?
Because landscaping has almost everything a private equity firm looks for in an industry. Here’s why:
- Reliable, positive cash flow. Grass grows whether the economy is up or down.
- Revenue usually isn’t concentrated in a few accounts. Hundreds of customers is a lot safer than five big ones.
- It scales. A crew model that works in one zip code can work in ten.
- It isn’t threatened by technology. Robots won’t be cutting, trimming and planting anytime soon.
- A larger owner can add efficiencies. Accounting, insurance, purchasing, marketing and fleet costs all get cheaper at scale.
- It’s fragmented. Most markets have lots of small companies and no dominant brand, which is exactly what a buyer looking to consolidate wants to see.
- It rolls up easily. Landscaping businesses can be combined into a platform, a larger company built specifically to acquire other businesses in the same industry, with relative ease.
Has The Exit Group worked on landscaping transactions?
Yes. The Exit Group has advised on landscaping, lawn care, tree care and snow management transactions. Many of the buyers are private equity-backed platforms that keep adding companies in new markets. You can see examples on our transactions page.
Is my landscaping business big enough for private equity?
Maybe not yet, and that’s normal. In our experience, landscaping businesses start getting serious private equity attention at roughly $500,000 in net profit.
Below that line, most landscaping sales look very different. Small operators often sell their routes and equipment to another small operator. That’s closer to a liquidation than the sale of a business. BizBuySell’s published data puts the typical small landscaping sale at about 2.5 times the owner’s earnings, with a median sale price around $450,000. Larger businesses can go much higher. In our experience, we’ve seen deals reach double-digit multiples.
Above that line, you need to start thinking in terms of enterprise value. Your business is no longer a collection of trucks and customer lists. It’s a company that a larger strategic buyer or private equity firm might want to own and grow, and they value it very differently.
What does private equity look for in a landscaping business?
They look for a business that will keep running and keep growing without the current owner in the middle of everything. The vast majority of landscaping businesses aren’t actionable for private equity yet. Here’s a partial list of what a buyer wants to see, and why it matters to them.
The numbers
- Sufficient size. In our experience, roughly $500,000 or more in net profit.
- Steady, healthy growth on both the top and bottom line.
- Consistent profitability. At least three years of it.
- Clean books. A good balance sheet, orderly receivables, and financial statements that match your tax returns. Messy books don’t just lower the price. They can end the conversation.
The revenue
- A heavy focus on maintenance. Recurring maintenance revenue is worth more to a buyer than enhancement, design or one-off project work, because it comes back every year.
- Solid customer agreements. Written contracts beat handshakes.
- High year-to-year renewal rates. This tells a buyer your customers are happy and staying.
- Revenue not concentrated in a few accounts. If one HOA or municipal contract is a big piece of your business, a buyer will price in the risk of losing it.
- A diversification of services. Not mandatory, but multiple revenue streams such as irrigation, tree care and enhancements can be a positive.
The operation
- Strong route density. Crews that drive less and work more make more money. Buyers notice.
- A performing management team. If the business can’t run without you, a buyer is buying a job, not a company.
The market
- A fragmented, unconsolidated market with real upside. In short, a market looking for a leader.
- A location that fits the buyer’s geographic strategy. You can’t change this one, but it explains why one buyer calls and another doesn’t.
How many landscaping businesses actually check every box?
Very few. In our experience, roughly 4% of landscaping businesses check all of them.
So what if you check the top five? You should talk to an M&A advisory firm, whether you plan to sell or not. If they’re good and in touch with the landscaping market, you’ll learn a lot about how to grow the value of your business over time. You may also find out that one of your competitors is already private equity backed, and what that could mean for your market. Remember, there are very few businesses that check every box, and many deals are done with 75% of the boxes checked.
One way or another, your landscaping business will be impacted by private equity.
What if my landscaping business doesn’t check every box?
Then you’re like almost everyone else, and you probably have time to do something about it. Some of the boxes above can be checked quickly. Cleaning up your books or getting customer agreements in writing can happen in months. Others, like building a management team or shifting your revenue toward maintenance, take years.
That might be the biggest reason to bring in some M&A expertise a few years before you think about selling, or at least sooner than later.
When should a landscaping owner start preparing to sell?
Earlier than you think. In our landscaping experience:
- Roughly 85% of owners who aren’t ready to sell yet aren’t using that time to make their business more valuable and easier to sell.
- Roughly 30% of the time, owners who are ready to sell have businesses that aren’t.
The time before a sale is the cheapest time to fix things. Once a buyer is at the table, every problem becomes a negotiation.
Not sure where you stand? Work through our pre-sale checklist: Questions to Ask Before Selling Your Landscaping Business.
What does a buy-side M&A advisor do for a landscaping owner?
A buy-side advisor works with the buyers, usually private equity firms and larger strategic companies, and helps owners understand how those buyers will see their business. In most cases you can talk to The Exit Group without cost or obligation. After a conversation focused on getting to know you and your business, an advisor can usually give you:
- An assessment of how private equity eligible your business is
- A sense of how a buyer would look at your business
- What, if anything, could be done to make it more sellable and more valuable
- Which next steps make the most sense, including waiting
Mark WagnerCo-founder, The Exit Group
Is your landscaping business on private equity’s radar?
A short, no-obligation conversation with Mark Wagner, co-founder of The Exit Group, can tell you where you stand.
Frequently asked questions
Is private equity really buying landscaping companies?
Yes. Landscaping has steady cash flow, lots of recurring maintenance revenue, and a fragmented market with no dominant brand in most areas. That combination is exactly what private equity firms look for when they build a larger company by acquiring smaller ones.
Has The Exit Group worked on landscaping transactions?
Yes. The Exit Group has advised on landscaping, lawn care, tree care and snow management transactions. You can see examples on our transactions page.
How big does a landscaping business need to be to interest private equity?
In our experience, landscaping businesses start getting serious private equity attention at roughly $500,000 in net profit. Below that, most sales are to individual buyers or other small operators, and they often look more like a sale of routes and equipment than a sale of a business.
Why does maintenance revenue matter more than design or enhancement work?
Because it comes back every year. A buyer can count on maintenance contracts that renew. Design and enhancement work is valuable, but it has to be sold again every time, so buyers treat it as less predictable.
What is route density and why do buyers care?
Route density is how close together your jobs are. Tight routes mean crews spend more time working and less time driving, which means better margins. It also tells a buyer how easily your routes would fit alongside theirs.
Can I sell my landscaping business if I’m still the one running everything?
Yes. How long you stay and in what role can be part of the terms. To get the most value, you won’t want the business overly dependent on you, but owners staying on in key roles is common.
Should I tell my employees I’m thinking about selling?
In most cases, not until there’s a real deal to talk about. News travels fast, and good crew leads have options. Most owners bring in key managers first, closer to the finish line, and tell the rest of the team once things are settled.
Does it cost anything to talk to The Exit Group?
Every engagement is scoped differently, but in most cases we are retained by the acquirer, not the owner, and that is confirmed in writing before any process begins. A first conversation is a chance to understand where your business stands, with no obligation.
About the author
Mark Wagner is co-founder of The Exit Group, a buy-side M&A advisory firm that has advised on 200+ transactions. He has built and sold businesses himself.
The Exit Group is a buy-side M&A advisory firm. Nothing on this page is a valuation, an offer, or legal, tax, or financial advice. Observations reflect our experience working with acquirers in the landscaping industry and third-party data where cited. Every business and every transaction is different.
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Mark WagnerCo-founder, The Exit Group
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