Sellers, do you have a buyer? Don’t assume the answer is yes.
And, if you don’t, what can you do about it?
Even in “Seller’s Markets,” there are some landscape companies that won’t be able to sell to a third party. Don’t let this be a surprise to you. It’s always a good idea to have a benchmark for the value of your company on the open market and to check with your CPA to find out what your net after-tax results might be if you did sell the business for that price. We hope that we are educating business owners of all sizes days to plan for a successful exit from their business.
Following are a few of the many reasons (all of them actual examples) of why you might not have a buyer when you are ready to sell. I’ve also made suggestions for actions to take to “right the ship” so you could find a potential buyer after showing several years of improvements.
Your company is very small in a very small marketplace.
Your revenues are less than $400,000 per year and you are the biggest company of your kind in the area. There isn’t a market for your services within a 50-mile radius that would support a growing landscaping business.
As the CEO, you are keeping your eye on the economy in your area. You need to update your information about trends at least annually, if not more frequently by participating in local advisory boards, Chamber Meetings, etc. What differences has COVID made in your county? New and different homebuyers? New construction? If you aren’t a new mini-boom area, are there other products or services that you could add to your existing lineup while you are already at a client’s property? (Mosquito control, pet waste removal, exterior power washing?) Or, if you really are in a declining area with no other prospects, how much can you harvest from the business between now and the time you plan to retire?
You have been operating on a strictly cash and carry basis.
You don’t have financial statements, employment records, client contracts, or market standard insurance policies. You don’t have books and records that support the future cash flows from the business. You may not even have tax returns.
Get your books and records in order and have them (reviewed or otherwise informally audited) on some frequency. Do not succumb to skipping the paperwork for employees and the business. If you do, you will not be able to sell the entity.
Your customers and your employees are all aging and you have not replaced them.
If you haven’t been adding new accounts, managing existing ones, and hiring and recruiting new employees to move up the ranks, you may not have a future cash flow to sell once your influence is gone.
Suggestion: If you aren’t selling, why not? Are you too busy? Do you have someone who would be thrilled to have more responsibility for doing something you are doing now so that you can be free to add new clients? Eventually, you will want to start training or bring in a salesperson. It’s hard to make the leap into additional expense without a corresponding “guaranteed” response. You may invest in a person who doesn’t work out. That’s part of the cost of doing business. Ideally, you will make a good hire and train those people so they can be effective.
Your number two person is a hothead and has threatened employees and customers.
The potential of a lawsuit from an employee, a client, and/or the number 2 person himself is a huge red flag to any buyer.
As hard as it may be, you must terminate that person responsibly (call Steve Cesare for how). Your entire company will be better for it, your other employees will be relieved and so will your customers. Don’t be held hostage by any one person, regardless of their perceived “irreplaceability.” We all know that anyone can be replaced at any time.
You have very low gross margins and little or no net income even when you adjust the books for personal expenses and one-time events.
Very few buyers are going to pay for a company that makes no money.
Figure out why you are not making money and make corrections. Are you charging too little for your work? Are you providing premium service to customers who only want basic level service and won’t/can’t pay any more than they currently are? If so, find out what those customers want and are willing to pay for. If you don’t want to be in that business, maybe you need some new customers who will pay for your level of care.
You have a poor reputation for work completed and your Yelp reviews are bad.
You’ve had such a difficult time getting employees that even people who don’t really know the ropes have been working for you. Retaining walls have collapsed, injuries have occurred, and things just haven’t been done according to best practices. Worse, you can’t even make the time to correct your best customer’s issues.
We are all having problems getting and keeping the best people, but if you can’t do the work well with the people you have, you should not tell customers that you can and then fail. Scale back to what you can do, making sure it is the highest and best use of your time and your team’s time. And be real about this—if you personally need to step up to fill gaps for a temporary period, do so. It may be better than having to resell customers who have been reading the reviews. If you can’t make time to correct your best customer’s issues, are you sure your focus is on the right things? That customer sounds like a big rock, A level priority to me. I’ve observed owners and managers spending time on things that may seem important to them but aren’t necessary in the scheme of things. How the parking lot is striped is not important compared to losing your best customer.
Hopefully, you’re not facing any of these issues, and you have been planning for your graceful exit for several years. If so, please give me a call if you’d like to move on to selling or otherwise transitioning the business.
If you need to correct some things now so you’ll be saleable in the future, let’s talk about that too!
I can be reached via email: [email protected] or phone a: 224-688-8838.
We’re here to help you Harvest Your Potential!