Owning a landscaping business often leads to steady profits. However, starting a lawn care business from scratch can pose lots of challenges. You have to buy equipment, establish a customer base, hire employees, and perform a variety of other functions.
What if there was a way to get the benefits of owning a lawn care business without having to put in all the time and work needed to get start a landscaping business? Well, the good news is that’s possible. Buying an existing landscaping business is often an easier alternative to starting one on your own.
However, you don’t want to buy just any lawn care company you find for sale. Here’s a complete guide to buying a landscaping business, including how to properly evaluate its worth, avoid potential pitfalls, and everything else you need to know:
Why Should You Buy a Lawn Care Business?
Owning a lawn care business, especially an established company created by someone else, has a variety of benefits. Here’s a quick breakdown of the pros:
Grass never stops growing. Once you have an established customer base, it’s relatively easy to maintain a consistent income level by providing weekly services.
Opportunities for Expansion
A basic lawn care company provides a solid foundation for growth. An established company can easily expand services offered to include fertilizing, pest control, and more.
Most of these additions involve consumables, which are products that need repeated applications. Consumables are often highly profitable because customers need to order services regularly.
Do you want to get out in the sun and perform landscaping services yourself? You absolutely can. Many successful lawn care companies are one-person operations. Working by yourself is absolutely an option.
On the other hand, you can also take a more hands-off approach. Do you want to sit in an office and focus on marketing? That’s another path to success. Owning a lawn care service is a rewarding business, even if you have no interest in the actual on-the-ground work.
Owning a lawn care business doesn’t have to be a full-time job. You can still earn a tidy profit each year even if you only offer services during the summer. It’s a great business to own if you’re a teacher, student, or anyone else who is free during the summer but works throughout the rest of the year.
Of course, if you want to operate your business all year long, that’s also an option. Many lawn care companies offer winter services such as snow removal to help increase profits during the off-season.
Analyzing the Profits and Losses of the Business You Plan to Buy
The current owner of the business might be an amazing person. The equipment might be top-of-the-line. Existing customers are a solid mix of residential and commercial clients. Everything about the business, at least superficially, appears excellent.
However, you’re still not ready to buy. Before buying a lawn care business, you want to take an in-depth look at its financial records.
What financial records do you want to see? The more, the better. There aren’t any records that are worthless to you. After all, you’re trying to assess the entire health of the business.
At a minimum, you’ll want the following:
- Tax returns
- Billing records
- Expenses accounts
- Company bank statements
As a general rule, you want at least five years of financial records. If the company has been operating for significantly longer than five years, but are only willing to provide five years of records, that’s a red flag. Likewise, if the company hasn’t even been in business for five years, that’s another sign you might not want to buy the business.
Don’t worry if financial matters aren’t exactly in your wheelhouse. You’re not expected to know it all. Most people hire either an accountant or attorney to check over the records of the business beforehand. Spending money up-front to hire a professional can help prevent unpleasant financial surprises down the road.
Why Is the Previous Owner Selling This Mowing Business?
Is lawn care a good business? As detailed above, owning a lawn care business has many benefits. However, there’s an important caveat: Not every lawn care business will succeed in every location.
Ask the owner why they’re selling the business. Now, you’re not just making conversation here. It’s important that you know why they don’t want to own their business anymore.
Ideally, they’re retiring. They’ve created a successful business, want to retire, and have no heirs to pass along the business to. Typically, this is the best type of business to buy. It’s in great shape, but the owner wants to move on to a new stage of life.
In most cases, the owner wants to sell to someone interested in continuing the success they’ve created. You can often earn favor with this type of owner by expressing your desire to continue operating under the original name and business philosophy, as a way to honor their legacy.
Personal Financial Issues
Another acceptable answer is that the owner has run into personal financial problems and needs a large influx of cash. Their business is profitable, but the income generated isn’t sufficient to cover a financial issue such as a medical bill or personal debt.
In some cases, you can get a good deal if someone is forced to sell a business quickly. However, make sure their financial issues are truly unrelated to their business. If the previous owner has barely been able to earn a living, buying a business on the assumption you can increase profits is a big risk.
Analyze the Competition
Before buying a landscaping company, check out the competition. What other companies operate in the same area?
The best way to determine the competition is to act like a customer. Search online for lawn care in your area. What businesses show up on the search results?
Also, do some old-fashioned legwork. Drive around neighborhoods looking for lawn care pros at work. Do you notice one or two companies that seem to show up everywhere?
Determining the identity of any long-standing companies in an area is usually fairly straightforward, but identifying new companies in the area gets trickier.
Watch Out for This Potential Pitfall
Here’s an all-too-common scenario that you need to watch out for when buying a business: A new company has moved into the area. They have top-of-the-line equipment, experienced employees, and loads of capital for advertising and other expenses.
An existing company recognizes that they can’t compete with this new company. They’d need to purchase new equipment, hire additional crew, and otherwise implement significant upgrades.
Note that the new company hasn’t cut into the profits of the old company… yet. However, the writing is on the wall. As a result, the owner of the old company decides to sell.
You won’t notice anything in the company’s financial records indicating any of this. Also, it’s unlikely the owner of the old company will explain the situation if you ask why he wants to sell. The only way to identify the potential problem is to research the lawn care companies operating in the area thoroughly.
How to Investigate the Reputation of the Company You Plan to Buy
A company might look great on paper. However, their reputation in the community could be atrocious. You want to take a close look at how customers and potential customers perceive the company.
First, check the company’s reputation online. Read through reviews on Yelp, Google, and similar sites that display customer feedback. Note that practically any business will have some negative reviews. You’re looking for consistent issues as opposed to a few complaints here and there.
Also, look for how the company handles complaints. Do they respond professionally and promptly? If so, they can still maintain a good reputation among most of their customers. However, you don’t want to inherit a company known as combative or rude.
Better Business Bureau
The Better Business Bureau is a national organization, divided into local chapters, dedicated to reviews and impartial information about a company.
Truthfully, the BBB has lost a lot of influence over the years as customers turn to alternatives such as Yelp. But the BBB is by no means irrelevant. Check with the BBB for any information about the lawn care business you plan to buy. Most likely, you won’t find anything particularly noteworthy. However, if you see numerous complaints, that’s a fairly major sign lots of people have problems with the company.
The company should provide you with a variety of financial records, including service records. You want to “read between the lines” to identify any trends.
Check out the company’s customer records. Generally speaking, do their customers stay with them for a long time? That’s a sign of excellent service.
However, watch out if the company seems to have a revolving door of customers. They might have an excellent marketing plan in place that attracts new customers, but their poor quality service doesn’t retain these new clients for long.
Also, review their employee records. As a seasonal industry, even a top-tier lawn care company can experience a fairly substantial annual turnover. However, excessive turnover is a red flag that people don’t like to work there.
You want to buy a company where upper management remains reasonably stable. Also, seasonal workers who return year after year are also a sign the company treats their employees well.
Finally, check out employee-rating sites like Glassdoor for additional information about working conditions and employee satisfaction.
Inventory of Equipment
The new owner should provide a clear list of the inventory that you’ll receive when you purchase the business.
The inventory list should contain plenty of detail. Ideally, you should know when the equipment was purchased and roughly how often it’s used. Also, you want any information related to warranties and other service plans.
Also, you’ll want to create a separate list of all the equipment you’ll need to run a lawn care company. This isn’t necessarily equipment you have or will receive when you buy the business. Instead, it’s a theoretical list of what you need to operate a company the size you’re planning to buy.
As detailed in How to Start a Successful Lawn Care Business, you’ll need the following:
- Hand tools such as rakes, shovels, and buckets
- Motorized equipment including lawnmowers, trimmers, and more
- Company uniforms and safety gear including gloves and goggles
- Field management software such as Lawn Care Business Software from WorkWave.
Now you’ll need to compare the list of equipment included with the business to the list of must-haves. If any significant equipment is missing, you might try to have the owner buy it and include it with the sale.
Guarantees from the Current Business Owner
Just because a business was successful for the previous owner doesn’t necessarily mean that success will continue when you take over. However, you can take some steps to help protect yourself.
The biggest unknown is generally customer retention. Will customers want to stay under your new ownership, or did they feel a personal connection to the previous owner that will be difficult to replicate?
Ask the owner his opinion on what percentage of current customers will likely discontinue service. If he’s close to his customer base, he’ll probably know who is likely to stay and who will leave. If he doesn’t know his customers too well, that’s actually a good sign that they’re more loyal to the company than they are to the individual owner.
Running an existing lawn care and landscape company is often far easier than starting one from nothing. If you want an easy way to own a landscaping company, it is a good idea to own an existing operation. Although it does require thorough research, it’s possible to buy a turnkey business that can start earning for you right away.
Once you’ve purchased a lawn care business, use lawn care business software to help manage all aspects of daily operations, including scheduling, payroll, marketing, and more. Contact WorkWave today to schedule a free demo to learn more.