Should You Buy a Landscaping Business in 2024?
In this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.
Video Transcript:
Alright so, in the series of would I buy this business, we have today a luxury landscape architectural design-build company. Interestingly we’ve had actually a handful of clients recently buy these kinds of businesses as well, so I’ve done a decent amount of looking into them. And I think a nice thing about this kind of business is it’s not gonna be replaced in six months or 12 months by Amazon or AI isn’t gonna show up and cut your lawn. It’s still gonna be the kind of thing that needs people to show up locally and provide the service. So from that standpoint I think these kinds of businesses have a lot of life in them.
This one has an asking price of 5.4 million against an EBITDA of 962,000. so yeah it’s about a 18% profit margin, which for this kind of business is honestly a little bit on the lower side. It depends if it’s the kind of business where they’re doing a lot of one-off projects, right, renovating someone’s backyard, putting in pavers, and sprinklers and trees and vegetation and cool looking flowers. Or it’s the kind of business where, you know, you come in every week and mow the lawn and trim the hedges and everything. You got more of a recurring base based on it. Saying landscape architectural design and build, it sounds like it’s more of the former and less of the latter. And that can have less of an impact – are an impact on making margins a little bit lower. It’s also less attractive to me in that you don’t have that guaranteed income of contracts that you’re gonna go out there every week and every month and mow and hedge trim and do everything else. These projects are big and expensive but once they’re over they tend to be over and you’re always in the cycle looking for new business. So from that standpoint, I’d rather buy a commercial landscape business that has recurring revenue instead of one-at-a-time revenue.
One of the things that catches my eye with this one is they’re saying there’s 2.75 million dollars worth of furniture fixtures and equipment. I could see a business like this having a handful of trucks maybe some Bobcats maybe a dump truck. But $2.7 million worth of equipment seems like a big number. Most of the other businesses I’ve looked at similar size had somewhere around 400 – 500 thousand dollars worth of equipment, which seems much more in line with the size of business. So I’d be interested to know what those assets are and if I could get rid of some of them or they could keep some and we could bring the selling price down to something I think would be more in line. Like let me have $500,000 worth of the assets, you sell the rest, and we’ll make the selling price 3 million or 3.5 million. That to me would make this deal much more interesting. But it’s something I would consider. It probably wouldn’t be the top of my list but it’s definitely something that could make a good business for the right fit.
